UNICOM Loses Appeal of SoftLanding Lawsuit
November 8, 2010 Alex Woodie
UNICOM Systems last month lost its appeal of a United Kingdom court’s earlier decision in favor of a former SoftLanding Systems business partner who developed components of the TurnOver change management suite. The ruling should put an end to the lawsuits between SoftLanding and KDP Software.
Disagreement over royalty payments, technical support obligations, and ownership of source code between SoftLanding and UK-based KDP began soon after UNICOM acquired SoftLanding for $17 million four years ago. In response to not being paid what they felt they were due, the owners of KDP, Jane and Kevin Passey, decided to stop providing technical support to SoftLanding customers for the two products, SET/TURN and Documentor, that KDP developed and that SoftLanding had been reselling as components of TurnOver for over a decade.
As a result, in 2008, SoftLanding and UNICOM filed suit against KDP in a U.K. court in an attempt to force KDP to continue to support the products and also to obtain the products’ source code so the company could maintain and update them. SoftLanding and UNICOM were granted an injunction that forced KDP to hand over the source code. After that, KDP countersued, alleging copyright infringement against UNICOM and SoftLanding.
As we previously reported, KDP won a legal victory in February, as the Construction and Technology Court division of the Royal Courts of Justice in the United Kingdom ruled for KDP and against UNICOM and SoftLanding on all matters. The court 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 of the proceeds that KDP had been getting under the original 1995 contract with SoftLanding.
UNICOM and SoftLanding appealed that ruling, and in mid-October the England and Wales Court of Appeal handed down its decision in favor of KDP. The decision can be read online at www.bailii.org/ew/cases/EWCA/Civ/2010/1172.html.
The judges in the appeals court rejected the arguments by UNICOM and SoftLanding that the judge in the first trial had made mistakes in determining whether the 1995 contract had been breached by SoftLanding and UNICOM.
The lawyers for UNICOM and SoftLanding argued three main points: that SoftLanding had no obligation to provide KDP detailed information on software sales; that KDP had not identified the information they were looking for before June 6, 2008 (the date KDP wrote a letter stating that UNICOM and SoftLanding were in breach of the contract), and that there couldn’t have been a breach of contract before then; and that failing to provide the information did not constitute a material breach of the 1995 contract.
In rejecting the first argument, Justice David Kitchin writes: “In my judgment, the information to which KDP was entitled included details of SLS’s [SoftLanding Systems’] pricing policy, the license and maintenance fees actually paid by end users, and any deductions made by way of costs and expenses incurred by agents or distributors.”
In rejecting the second argument, Justice Kitchin writes: “SLS was obliged to provide full information every six months. . . . In so far as it failed to do so, it was in breach. It is irrelevant whether or not the information had previously been identified or requested.”
He rejected the third argument by writing: “In my judgment, the obligation to provide full information was an essential stipulation going directly to the substance of the 1995 Agreements and fundamental to the confidence of the relationship between the parties. I have no doubt that it constituted a material obligation.”
There was one other interesting bit from the appeals process. The lawyers for UNICOM and SoftLanding argued that, before the legal trouble began, KDP had agreed with SoftLanding to change the royalty calculation from a percentage of gross software sales (75 percent for SET/TURN and 50 percent for Documentor) to a flat fee of $6,469 per deal and $844 for maintenance renewals, according to the ruling.
The lawyers for UNICOM and SoftLanding brought a couple of pieces of evidence to support this claim. This included a letter from Kevin Passey in which he stated the 1995 contract had been “informally changed” over the years, as well as an email from Jane Passey to SoftLanding in which she stated that SoftLanding had complete control over pricing and that she had “no idea” what SoftLanding was charging its end users.
However, the court ruled that these statements from the Passeys did not support the claim of UNICOM and SoftLanding that there was a fixed-fee deal in place. “Indeed, it suggests the opposite, that the fees were based upon the end user prices,” Justice Kitchin wrote.
Meanwhile, business is returning to normal for KDP. The company has resumed sales of to SET/TURN and Documentor and supporting its clients. “All KDP ever wanted was to be paid correctly,” Kevin Passey tells IT Jungle via email. “Needless to say we are happy it is all over.”
A representative for UNICOM and SoftLanding declined to comment for this article.