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Your IP Address Could Get You Sued

                       Careful Before You Threaten Litigation

                                      Hell Hath No Fury Like....

Tanya Andersen is the feature player in a great article in the 5/5/2008 issue of BusinessWeek (see "Does She Look Like a Music Pirate?"). The gist of the story is that a number of recording industry players put a ton of pressure on a woman to settle for supposedly downloading recorded music illegally. Apparently, the industry had the wrong person and all because someone spoofed this woman's IP address.

The errant IP address triggered a cascade of arm-twisting, legal threats, attempts to collect a financial settlement and, eventually, a lawsuit from the recording industry. When Ms. Andersen got a good lawyer and some insight into who spoofed her IP address, things changed. The industry lawsuit was ruled in her favor and now she's suing back.

While I commiserate with the industry and its loss of revenues to illegal file sharing, I cannot abide strong-armed, inflexible techniques that lack appropriate discovery and due process protections. From what was written in this article, the industry used a blame first, collect second and thoroughly investigate third as its process. I think they got a few steps out of order.

There are currently a number of technology lawsuits pending these days that are relying on the identification of persons via IP addresses. Defense counsels will no doubt want to look at this case and see if similar mistakes were made in their situations.

Misappropriation of Trade Secrets

                 When to Trust Big Firms (Short Answer: Never)

Bloomberg News reported that Google is being sued by LimitNone LLC for alleging misappropriating trade secrets. A damages claim of $950 million is being sought.

In this case, the plaintiffs are apparently claiming that they shared confidential copies of the product with Google and were assured that Google would not develop a competing product. Approximately eight months later, Google apparently did just that.

Small technology firms are often flattered whenever a larger firm takes an interest in their products. The prospect of the large firm acting as a distribution channel for the product could be an enormous windfall for the small firm.

Unfortunately, I've seen large firms invite one or more smaller firms to form alliances/partnerships/distribution agreements with them only to study each firm's products and eventually create their own comparable or superior product. The smaller firms get cut loose only to face a larger, better funded competitor. In other situations, I've seen larger firms intentionally wait and see if smaller firms can develop a market for a new technology. Once they do, the larger firms acquire or create their own solution. Again, the smaller firms perish or languish.

Large firms, often correctly, surmise that small firms lack the capital to fund a protracted legal challenge. Large firms can survey the space and cherry-pick what they like while feeling fairly confident that small firms will not sue them. Patents could be effective here if they didn't take so long to be granted and weren't so expensive to enforce. Litigation, again, is often needed to enforce patent infringement and litigation is expensive.

I have seen this activity many times and quite up close. In one case, I saw a firm mimic another's functionality within a week. Worse, they even appropriated the smaller firm's product names and descriptions, too.

Venture Capitalists will often tell you that no one ever has a truly new product or idea. They'll tell you that they've heard of several other firms pitching the same idea. That may be true but the rapid imitation of another firm's product is still misappropriation.

This case will be an interesting one to watch. I suspect Google will attempt to drag it out for years and force a premature, lop-sided settlement if not an outright abandonment of the claim. Still, it could be a good one to watch.

Softscape - SuccessFactors: New Litigation

                                               Civil Suit Now Filed

Suit Alleges Misappropriation of Trade Secrets, Tortious Interference and Unfair Competition

On 6/4/08, Softscape, Inc. filed a civil suit against HR software rival SuccessFactors, Inc., alleging misappropriation of trade secrets, tortious interference and unfair competition. Softscape is asking for treble damages on some of these claims plus whatever else the judge/jury deem appropriate.

The lawsuit filing contains some interesting new claims and data points previously not disclosed in prior legal actions this year. Specifically, the document alleges that:

• SuccessFactors hired former Softscape employees even when those persons were subject to 1-year non-compete agreements and were subject to non-disclosure agreements that would have prohibited them from sharing information about Softscape products with SuccessFactors
• These actions precipitated an earlier court action and agreement called a mutual non-solicitation agreement that would prevent either party from soliciting for hire the other firm's employees for a period of 6 months starting June 12, 2007. Softscape alleges that SuccessFactors violated that agreement and continued to hire away its employees during that 6 month window.
• Former Softscape employees are alleged to have provided demonstration software data to SuccessFactors after their employment with Softscape was concluded
• Softscape further alleges that SuccessFactors' new Ultra product line contains functionality whose design was part of earlier Softscape products. They further contend that former Softscape employees helped SuccessFactors design/develop these product capabilities.

Other aspects of the filing repeat earlier claims by Softscape. See this Softscape press release for their take.

In another HR software case involving theft of trade secrets, the plaintiffs had a really tough time proving theft of trade secrets because so many aspects of many HR systems are:

• common to every other HR solution in the market- In other words, these 'proprietary' ideas aren't so new, novel or innovative.
• logical and reasonable (like requesting an employee's name, address and social security number for payroll master file records)

This case may be different because the ideas that were allegedly misappropriated may not have come from two different firms that coincidentally and independently developed similar ideas - that does happen more than you think. I would suspect that Softscape's lawyers will push the interaction between SuccessFactors and former Softscape employees as the conduit for the exchange of business secrets. Other sales tactics and actions by SuccessFactors employees or executives, if true, only help Softscape's case.

Softscape is opting for a jury trial. That's probably a smart move on their part. Lawyers can choose to argue the law or the facts. If you're weak on one, argue the other. (If you're weak on both, then argue before the press/public). Softscape appears to have some interesting facts, some legal standing and is trying this via a jury trial (and very publicly).

Several things are clear:

• There appears to be long-standing competition, if not outright animosity, between these two firms
• Softscape is intent to punish SuccessFactors
• Customers and prospects of each firm could be collateral damage in all this hostility. When management teams are focused on litigation, then product development, customer service, sales, etc. may suffer from a lack of complete attention

If even some of the allegations that Softscape has made are true, then Softscape not only has the right to pursue litigation, it owes its shareholders and employees an aggressive response and greater protection of its intellectual property.

This one's not going away. I guess we'll all have front row seats to this spectacular.

Please see other posts in this blog on the Softscape SuccessFactors Dustup

SAP, Oracle, TomorrowNow

A Settlement? Not until... Tomorrow, Tomorrow, We'll Settle - Tomorrow

InformationWeek reported that SAP's CFO doesn't believe the company will settle with Oracle any time soon re: the TomorrowNow litigation.

This story feels like the Groundhog Day reporting of Punxsutawney Phil: we've got at least six more months of litigation left to run on this one.

Dell and Fraud

                               Court Rules Against Dell

In a case that's been grinding through the courts for a while, Dell was found guilty of fraud yesterday by a New York court. To read more on the story see this ComputerWorld story. 

This case popped up around the time of the famous burning battery situation although the two events are connected. If you're a New York resident and a Dell user, watch for details on whether you'll be part of any restitution as a result of this case.