Saturday, June 15, 2024

Software Spies and Software Lies

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Lawsuits between competing software vendors are relatively rare, and the public disclosure of what really happened is even rarer still. It’s not just that no one likes bad publicity, it’s that there’s one major problem with proving who harmed whom in cases that involve such issues as misappropriation of trade secrets.

The only way to really assess the damages is to talk to customers and try, if possible, to determine if vendor A’s “theft” of trade secrets allowed it to win customers away from vendor B. Only a customer can really answer the question, and if you ever want to see apoplexy in extremis, just suggest to some software execs that they should drag their customers through the legal system.

So the dirty little habit of trade secret and intellectual property theft between software rivals largely remains hidden from view. And even when such cases do make it into the public eye, many of the key details remain buried in confidential settlements. One recent case involving Informatica and its number one rival, Ascential, is an excellent case in point.

While it seems clear from the settlement that Informatica was harmed — Ascential is paying Informatica over $1 million, having its systems audited to make sure that Informatica’s proprietary information isn’t still floating around Ascential, and holding off hiring recent Informatica employees — the extent of the true damage to Informatica
will never be known.

The details in the case are rather straightforward, according to Informatica. (Ascential refused to be interviewed or comment on this matter.) Two former Informatica employees, both of whom had been hired by Ascential, disclosed key Informatica data — product information, customer names, project details, even price quotes — to a number of Ascential employees. The information was stolen from Informatica by the former employees in clear violation of their employment contracts and the laws governing trade secrets. That information was used to attack Informatica accounts in the all-important mid-Atlantic region, which includes financial services, telco, and pharmaceutical prospects in the New York area.

The suit originally started as a civil suit between Informatica and the former employee who went to work for Ascential, but it was quickly expanded to include Ascential and the second employee. According to Informatica, the breadth of the settlement reflects Ascential’s culpability in the distribution of Informatica’s trade secrets throughout Ascential.

No one likes to accentuate the negative, so it’s not surprising that Ascential Software made virtually no public comment regarding the settlement. Part of the reason for their silence is that Ascential is busy gobbling up its latest acquisition, Mercator, and it seemed like the wrong moment to admit wrong-doing. There was a minor comment made during the company’s recent quarterly conference call, which most likely fulfilled its legal obligation to disclose the settlement to its shareholders.

Ultimately, the problem with these suits is that, absent the ability to depose customers and truly determine harm, settlements like the one between Informatica and Ascential don’t necessarily provide enough of a disincentive to keep bitter rivalries from crossing over into illegality. The financial side of the settlement — $1.6 million — was written off by Ascential without the slightest blip in its share price or public image. No publication wrote it up, no stock analyst commented. There was, as far as can be determined, no real impact on Ascential. And absent an impact, what incentive is there at Ascential to not transgress again?

Worse than that, by refusing to comment at all on the suit, the real question regarding the settlement remains unanswered: Does Ascential realize that what it did is not only illegal but, dare I say, profoundly immoral as well? Or was the settlement — equivalent to the value of five average deals — just chalked up as the cost of doing business, however illicitly?

Stealing from your rivals is just plain wrong, so wrong it should never happen in the first place. And it shouldn’t be up to customers to prove how much harm actually occurred. But until another legal yardstick emerges, or until companies become better at policing themselves and their employees, cases like Informatica v. Ascential will continue to describe a problem for which we have no real solution. To the detriment of the entire industry.

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