• The Four Hundred
  • Subscribe
  • Media Kit
  • Contributors
  • About Us
  • Contact
Menu
  • The Four Hundred
  • Subscribe
  • Media Kit
  • Contributors
  • About Us
  • Contact
  • Infor Battles Customers in Court Over License Fees

    March 9, 2009 Alex Woodie

    ERP software giant Infor is taking legal action against customers as it seeks to recoup license fees it claims it is owed. The company reached an out-of-court settlement last week with a BPCS customer, Vaughan & Bushnell, regarding a dispute over an AS/400 upgrade performed in the 1990s. While the parties avoided a trial, Infor is still pursuing similar lawsuits against two other customers for license fees it claims the companies avoided paying following server upgrades.

    The terms of the settlement between Infor and Vaughan & Bushnell, a tool manufacturer based in Hebron, Illinois, that has used BPCS since 1987, are not public record. An attorney for the tool company, which sued Infor in this case, confirmed that his client paid Infor something. But it wasn’t the $1 million-plus in past due license fees that Infor’s license management group had been seeking from the company.

    Some details of the dispute, however, are public record, and were included in the 25-page claim that Vaughan & Bushnell filed February 2 in U.S. District Court in Illinois.

    A Disputed AS/400 Upgrade

    Vaughan & Bushnell says it was contacted last summer by Infor’s audit coordinator. The manufacturer declined to participate in the audit, but that did not stop Infor from threatening to take legal action regarding the past due license fees it said it was owed as a result of server upgrades that Infor learned the manufacturer performed a decade ago.

    The manufacturer says it moved its BPCS software twice since purchasing rights to the software and the source code from System Software Associates (SSA) for $87,000 in 1987. First it moved from a System/38 Model 5380 to an AS/400 in the early 1990s. Several years later, it upgraded from the AS/400 to an AS/400 Model 720.

    According to Infor, those server upgrades violated the terms of the original license agreement. The list price for an upgrade to the AS/400 Model 720 should have cost the company $1,034,000, Infor told the company. That “constituted a violation of the license grant and breach of the software license agreement which must be cured” by February 13, Infor told Vaughan & Bushnell in a letter included in the lawsuit.

    Vaughan & Bushnell maintained that they owed Infor nothing, and were acting within the rights granted to it through the original license agreement. That agreement, a copy of which the company included in its complaint, stated that Vaughan & Bushnell had the right ” . . . to use the software, only on the computer specified in schedule A or on any computer that is a direct and single replacement for it….” Because of the two other lawsuits involving Infor and its customers, Vaughan & Bushnell decided to preemptively sue Infor before the February 13 deadline.

    However, Infor maintained that Vaughan & Bushnell were beholden to different terms, which were included in a subsequent license agreement that was drawn up by SSA sometime in the 1990s, according to the lawsuit. That agreement states that the company has the right “to use the software, only on the computer specified in schedule A or an identical computer that is a direct and single replacement for it. . . .” (Emphasis added.)

    But Vaughan & Bushnell–which was not on maintenance and never paid SSA beyond the original license fee–did not sign and return that modified agreement that SSA mailed to them, it claims in the lawsuit. At one point during the 1990s, SSA had tried to collect additional license fees from Vaughan & Bushnell, but the company ignored the request, according to the suit.

    In this case, it appears Vaughan & Bushnell got favorable terms in the original license agreement, and intended to keep them. But that’s not always the case.

    Diff’rent Licensing Terms for Diff’rent Folks

    Infor has two other active lawsuits that bear similarities to the Vaughan & Bushnell case, the least important of which is that all of the original license agreements were originally signed way back in 1987.

    In the case against Hanover Foods, Infor maintains that the Pennsylvania food producer is improperly running its BPCS software on an iSeries Model 510. In that lawsuit, which Infor filed December 11 in U.S. District Court in Georgia, Infor is trying to enforce its customer’s responsibility to only run the ERP system on the original server “or an identical computer that is a direct and single replacement.” Hanover Foods, which has annual revenues estimated at about $290 million, is pursuing a defense of that lawsuit that, at least in early proceedings, appears to calls into question Infor’s actual ownership of SSA assets. (Infor acquired SSA in 2006 for $1.6 billion.)

    In its case against ITT, which was filed May 16 in U.S. District Court in Georgia, Infor claims the $9 billion industrial giant violated the terms of its original license agreement by exceeding the original MIPS limitation on the IBM mainframe used to run its Cullinet ERP system (acquired by Infor via SSA’s 2002 deal with CA) and also by moving the mainframe from its original location in Illinois to Sweden. In its response to Infor’s claim, ITT denies that it violated any terms of the license agreement. The case is still pending.

    Infor has been involved in several other lawsuits against customers recently, most of which have settled out of court:

    • In October 2008, the Carver Pump Company sued Infor in U.S. District Court in Iowa over a disputed $451,000 invoice Infor sent Carver in August 2008 for allegedly using the Maxim ERP package without a license since 2000. Carver says it received a perpetual license from CA (which acquired Maxim’s original developer, NCA) in 1998 as part of a Y2K upgrade, and claims it stopped using Maxim anyway in 2006. The companies settled out of court in November.
    • In August 2008, Infor sued Porter Memorial Hospital in U.S. District Court in Tennessee for allegedly exceeding the tier-level of its System 2000 (Infinium) software by installing it on a System i Model 550. The lawsuit is continuing.
    • In April 2008, Infor sued Ayrshire Electronics in U.S. District Court in Kentucky for allegedly exceeding the 25-user limit for its PRMS software, which it originally licensed from CA in 2001. The companies reached an out-of-court settlement in January of this year.
    • In November 2006, the Western Textile Company sued Infor in U.S. District Court in Missouri over allegations by Infor that the company owed it more than $100,000 for exceeding the number of sessions in its license agreement; Western Textile claims its original license with CA was measured by concurrent users, not sessions. They settled in March 2007.
    • In October 2006, Scientific Components sued Infor in U.S. District Court in New York over a dispute concerning temporary license fees needed to access MAPICS running on a secondary iSeries server connected via iTera’s high availability software. The companies settled in December 2006.

    ‘New’ Revenue Streams or Honest Audit?

    Every large software company is going to vigorously defend its intellectual property in court, so it’s not surprising to see Infor involved in litigation. “Infor, like most business software companies, has a team that is dedicated to maintaining license compliance,” an Infor spokesperson says in an e-mail response to questions from IT Jungle. “This team helps ensure that Infor’s intellectual property is protected and the software is used in a manner consistent with the licensing agreement.”

    Infor enforces its IP rights by doing occasional audits, the spokesperson says. “Not all customers should expect to be audited within any given time period,” the spokesman continues. “Infor has a large customer base and uses certain selection criteria to identify audit candidates. Infor’s software has a strong legacy, and so it is not uncommon to audit customers who have used the software for many years.”

    But questions have been raised about Infor’s motives, especially in light of the poor economy and reduced level of spending on big ERP projects. (Infor is privately held, so it’s difficult to judge how hard it’s been hit by the economic downturn.) A Vaughan & Bushnell attorney hinted that increased revenue flow–not protection of IP rights–is behind the recent round of litigation.

    “I think any company, including Infor, is looking for additional streams of revenue,” the attorney, Richard Assmus, was quoted as saying in a NetworkWorld story (which you can read here). “Contacting old customers about allegedly overdue fees is one way of doing that.”

    Infor denies any such claim. “Infor has not accelerated audits due to the economy,” Infor’s spokesperson says. “For the current fiscal year, Infor will have audited a very small percentage of its entire customer base. Of this percentage audited, the majority is found to be compliant. Of those found to be non-compliant, Infor works collaboratively to help bring them back into compliance.”

    RELATED STORIES

    Infor Carves Out a Dedicated System i Division

    Infor Shows Flexibility as Reseller Channel Evolves

    Infor Begins North American VAR Recruitment Drive

    Infor CEO Preaches Business Darwinism, Prepares for Hyper Business Future

    Infor Upgrades XA with Query, Inventory Enhancements

    Infor Launches EMEA Channel Recruitment Drive

    Infor Provides Details on SOA Roadmap

    In Formation: Q&A with Infor Chairman Jim Schaper

    Infor Tells Channel Partners to Focus on Infor Products



                         Post this story to del.icio.us
                   Post this story to Digg
        Post this story to Slashdot

    Share this:

    • Reddit
    • Facebook
    • LinkedIn
    • Twitter
    • Email

    Tags: Tags: mtfh_rc, Volume 18, Number 10 -- March 9, 2009

    Sponsored by
    Chilli IT

    Chilli is one of the UKs leading IBM support and management providers with 20 years’ experience in the power and storage industry. Our bespoke solutions for maintenance, security and infrastructure delivers a service which is cost effective, increases productivity and enhances efficiency. Our ethical approach and unrivalled knowledge has secured business partnerships with blue-chip companies in the technology, retail, banking and travel sectors.

    As an IBM Business Partner, we provide you with the peace of mind that you are working in partnership with a company accredited to the highest standard. Our team of experts have worked together for many years and deliver projects which include consolidation, High Availability, Operating System upgrades; and backup and recovery installations.

    Contact us to see how we can help your business with IBM support and management.

    www.chilli-it.co.uk

    info@chilli–it.co.uk

    Share this:

    • Reddit
    • Facebook
    • LinkedIn
    • Twitter
    • Email

    Admin Alert: Things I Learned About IBM Maintenance Contracts DB2/400 Storage Engine for MySQL Now Available as Public Beta

    Leave a Reply Cancel reply

TFH Volume: 18 Issue: 10

This Issue Sponsored By

    Table of Contents

    • Getting Dizzy from Dynamic Infrastructure
    • The Economy Gives the Server Biz a Flat Tire in Q4
    • Infor Battles Customers in Court Over License Fees
    • As I See It: Isolation
    • Global IT Spending Barely Ahead of 2008; Some Regions Showing Strength
    • Have IT Vendors Been Hit Harder Than IT Departments?
    • CFMUG Downshifts from Monthly to Two Yearly Meetings
    • IBM to Bid for Satyam? Rumors All Over the Place
    • MKS Weathers the Economic Storm in Fiscal Q3
    • Overworked, Underpaid, and No Free Donuts and Coffee

    Content archive

    • The Four Hundred
    • Four Hundred Stuff
    • Four Hundred Guru

    Recent Posts

    • IBM i 7.3 TR12: The Non-TR Tech Refresh
    • IBM i Integration Elevates Operational Query and Analytics
    • Simplified IBM i Stack Bundling Ahead Of Subscription Pricing
    • More Price Hikes From IBM, Now For High End Storage
    • Big Blue Readies Power10 And IBM i 7.5 Training for Partners
    • IBM Delivers More Out-of-the-Box Security with IBM i 7.5
    • Groundhog Day For Malware
    • IBM i Community Reacts to IBM i 7.5
    • Four Hundred Monitor, May 11
    • IBM i PTF Guide, Volume 24, Number 19

    Subscribe

    To get news from IT Jungle sent to your inbox every week, subscribe to our newsletter.

    Pages

    • About Us
    • Contact
    • Contributors
    • Four Hundred Monitor
    • IBM i PTF Guide
    • Media Kit
    • Subscribe

    Search

    Copyright © 2022 IT Jungle

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.