UNICOM Loses in Court, Forces SoftLanding Customers to Upgrade

Published: April 26, 2010

by Alex Woodie

A U.K. court ruled against UNICOM Systems in February in a lawsuit it brought against a former SoftLanding business partner that developed components of the TurnOver change management tool critical to BPCS environments. Following the loss of its lawsuit and a countersuit filed by the partner, UNICOM unveiled a new version of TurnOver and announced that SoftLanding customers must upgrade to the new release or risk losing technical support. UNICOM is appealing the decision.

The case between UNICOM/SoftLanding and KDP Software Limited involved two software products that KDP developed and supported for SoftLanding. Specifically, it involved SET/TURN and Documentor, two components of SoftLanding's TurnOver suite of change management tools for OS/400 and i/OS. SET/TURN helps TurnOver integrate with the old AS/SET CASE tool that was used to customize BPCS ERP systems from SSA (now Infor), while Documentor provided cross-referencing and documentation for AS/SET-developed products.

KDP developed the products in the late 1990s specifically for SoftLanding. As part of a 1995 agreement between the two companies, SoftLanding licensed the KDP products to customers as part of TurnOver, but KDP personnel provided the technical support. The contract between KDP and SoftLanding officially ended in 1998, but the two companies continued to work together under the original terms of the deal. This was the genesis of the "implied" contract that caused so much trouble down the line.

Things started to fall apart for KDP and SoftLanding following the acquisition of SoftLanding by UNICOM Systems in late 2006, which we now learn was valued at $17 million. Following the acquisition, KDP continued to provide support to SoftLanding customers just as it did before. However, at some point, there were misunderstandings concerning KDP's obligations to support SoftLanding customers.

UNICOM stopped paying KDP what its owners, Kevin Passey and his wife, Jane Passey, felt they were due, according to a copy of the official judgment of the Construction and Technology Court division of the Royal Courts of Justice in the United Kingdom, which can be accessed via the British and Irish Legal Information Institute's Web site at www.bailii.org/ew/cases/EWHC/TCC/2010/326.html. The Passeys also requested documents concerning user licenses and the overall fees that UNICOM was charging, which they were due under the 1998 contract, but they did not receive them, according to the court documents.

At some point, KDP stopped providing support for SoftLanding customers for whom it had not been paid. According to emails submitted as evidence during the hearings, the two sides squabbled back and forth as to payments, who was caught up on maintenance, and the possibility of setting up a new contract between KDP and UNICOM, or having UNICOM buy the products from KDP outright.

Talks broke down, and KDP signaled its intention to no longer provide support. At that point, UNICOM demanded that, under the original 1995 contract, KDP would be required to continue providing maintenance for six months (until July 2008), and also that it would need to hand over the source code to the products (per the terms of the 1995 agreement), so that it could continue to support and maintain them.

In late 2008, SoftLanding sued KDP in the English court for breach of contract and copyright violations (with UNICOM as a named third party). SoftLanding/UNICOM was actually granted an interim injunction that forced KDP to provide source code to its products to SoftLanding/UNICOM.

While it lost the injunction, KDP continued to fight UNICOM/SoftLanding, and KDP filed a counter lawsuit alleging copyright infringement against UNICOM and SoftLanding. At that point, things started turning in favor of KDP.

In a decision rendered February 26, 2010, Judge David Wilcox threw out UNICOM and SoftLanding's lawsuit against KDP, and ruled in favor of KDP in its countersuit against the two companies. What's more, the judge awarded KDP injunctive relief permitting the company 100 percent of the proceeds of UNICOM's sale of its products going back to 2007, not the 50 percent to 75 percent that it had been getting under the original 1995 contract. Wilcox also ordered SoftLanding, UNICOM, and its agents to stop distributing SET/TURN and Documenter.

In late March, SoftLanding/UNICOM announced a new release of the TurnOver suite, called Version 100, that the company says contains "many enhancements." On the same day, UNICOM announced that customers must upgrade to the new Version 100 releases of the TurnOver products. Customers on the Version 5.4 release of TurnOver--the last release of the product since UNICOM bought SoftLanding--have one year to upgrade or face losing technical support. Version 100 is the first release of TurnOver that SoftLanding has publicly announced since being acquired by UNICOM.

A UNICOM/SoftLanding spokesman confirms that the V100 releases of TurnOver do not contain the DOCUMENTOR and SET/TURN components. He also stated that the new V100 products "were unrelated to the litigation in the U.K."

UNICOM also released this statement: "The Court decision has been appealed in its entirety in the English court system and therefore the matter is still pending. UNICOM….contends that the decision is based on findings not supported by the evidence as well as a misreading of the applicable laws, particularly as they apply to copyright."

Much of Judge Wilcox's decision rested on the division between UNICOM and SoftLanding, and what legal obligations the entities held, or jointly held. A key point in the proceedings was a legal agreement between UNICOM and SoftLanding Systems dated January 1, 2007, just after the acquisition. According to the court, the document said that 100 percent of the revenue obtained for licenses, maintenance, and upgrades (except for tax, royalties to KDP, and commissions to agents) belonged to UNICOM.

The agreement had been requested in court for the earlier proceeding in 2008, but was not turned over to the court until prior to the recent hearings in November and December 2009. The agreement was important to the case, because it showed that UNICOM was conducting all of SoftLanding's business, and since SoftLanding no longer collected money, it couldn't have suffered harm from KDP's actions--even if the claims against KDP were upheld (which they were not). However, because UNICOM and KDP did not enter into a new agreement following the acquisition, KDP was not bound by the requirement in the original 1995 contract to continue providing maintenance for six months and hand over source code to the product if it ceased providing support to SoftLanding.

The existence of the January 1, 2007, document was only confirmed through a passing comment by UNICOM chief financial officer Eden Watt during questioning by lawyers, and Wilcox was furious that UNICOM executives withheld a key piece of evidence during the earlier hearing.

"It is inconceivable that SoftLanding, Inc., and Unicom Systems, Inc., had not carefully considered the financial and legal consequences of the agreement, and had elected with a degree of recklessness or worse to advance the case that Unicom was merely acting as SoftLanding's agent and merely holding the revenue for SoftLanding," Wilcox stated in his judgment.

Wilcox railed against the "raw and ruthless way in which SoftLanding and UNICOM…were willing to further their commercial interests." Speaking of Watt, who is registered with the State Bar of California, Wilcox said: "It is conduct by a practising attorney that sits uneasily with the wholly unjustified allegations which are tantamount to fraud against [KDP], the bogus allegation of an agreement to change from alleged fixed fees to percentage royalties, and a specious and time-wasting case as to the genesis of written agreements concluded in 1995."

Wilcox ruled that "SoftLanding enabled Unicom to wrongfully represent that it had the right to grant licences and enter into maintenance agreements worldwide in respect of SET/TURN and DOCUMENTOR after 1st January 2007." Further, he went on to say that "SoftLanding clearly colluded in the failures throughout to furnish end user details" to [KDP].

UNICOM and SoftLanding were ordered to pay damages to KDP. The exact damages will be determined during the forthcoming quantum trial. As mentioned earlier, UNICOM is appealing the initial ruling as well.

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