Maxava Widens Vision Lawsuit, Sues Sirius
December 6, 2010 Alex Woodie
Maxava recently amended its false-advertising lawsuit against Vision Solutions to include more accusations, including interfering with a Maxava prospect and abusing its monopoly of the market for IBM i high availability and disaster recovery software. The New Zealand software maker, which won a temporary injunction against Vision six month ago, also listed a Vision business partner, the reseller Sirius Computer Solutions, as a defendant in its latest court filing.
A lot has transpired in this case since we first covered it in June, when Judge George Wu approved Maxava’s request for a temporary injunction and ordered Vision to stop distributing the marketing materials that Maxava claims were violations of the Lanham Act prohibiting false or misleading advertising and violations of state laws as well.
In August, the two companies engaged in court-ordered mediation. Those talks did not go anywhere and the case is currently in the discovery phase. If the two sides cannot reach an out-of-court compromise–which seems unlikely considering that 90 percent of cases settle out of court–it could go to trial as early as July. Maxava has requested a jury trial.
Meanwhile, Maxava is ratcheting up the legal battle against its much larger competitor. The latest volley of accusations is contained in its second amended complaint, which Maxava filed in October in the U.S. District Court Central District of California Western Division, which is based in Los Angeles.
According to the latest filing, Maxava accuses Irvine, California-based Vision of the following new transgressions: “trade libel, interfering with prospective economic advantage, and anti-competitive, monopolistic behavior in violation of the Sherman Act.” These items were not included in the first complaint because some of them had yet to occur, says Maxava’s San Francisco-based attorney, Micah Jacobs. “The unfair competitive acts seem to be far broader than we initially anticipated,” Jacobs says.
Vision denies Maxava’s allegations. “Since the lawsuit was originally filed, Vision Solutions has consistently stated that it believes that Maxava’s suit is without merit,” Vision spokesperson Jennifer Cumbee says. “Vision Solutions continues to stand by this position, and further believes that Maxava’s claims in its recent amendment to its complaint are without merit as well, and as such, has filed a motion to dismiss these claims.”
In Maxava’s second amended complaint, Vision is accused of using its dominant marketing position to hurt its competitor’s business. Maxava claims it was unable to form a reseller agreement with Progressive Technology after Vision threatened to sever its own ties with the Island Park, New York, reseller if it decided to offer Maxava products. Maxava claims Vision has done similar things with other potential Maxava partners to protect its monopoly on the market for IBM i high availability software. Maxava says it has 5 percent of the market, Vision controlling 90 percent.
Maxava also included Sirius in its latest complaint. Maxava says the large IBM i reseller, which also sells Vision products, showed some of the false marketing materials to a prospective Vision customer, the Huntington Beach, California-based Cleveland Golf, in September 2009.
It wasn’t the first time in this case that Maxava tried to sue Sirius, which has Vision’s owner, the private equity firm Thoma Bravo, as an investor. The Texas-based reseller was listed as a defendant in an amended complaint that Maxava filed in July. In August, Judge Wu dismissed Maxava’s complaint against Sirius for lack of evidence, but left the door open for Maxava to re-file the complaint. Jacobs, Maxava’s attorney, says it was forced to take Sirius off the July complaint due to “technical defects in the claim,” and that the new complaint satisfies the legal requirements to sue Sirius.
The allegedly misleading statements, which concern Maxava’s operations and products, were contained in several pieces of marketing material that Vision allegedly gave to direct-sale prospects for its iTera Echo2 software, and provided for resellers like Sirius to use with their prospects. Maxava says it believes the materials were used from the middle of 2007, and perhaps earlier. It didn’t discover them until late 2009, the company says in its filing.
Vision has rebutted Maxava’s claims several times, most recently in a December 2 filing in support of its latest motion to dismiss Maxava’s suit. In that document, Vision argues that Maxava has failed to prove numerous allegations, including whether Vision’s alleged actions had a “significant adverse effect” on Maxava’s business. By Maxava’s own admission, Vision argues, Maxava’s market share has grown while Vision’s has eroded.
Vision also questions Maxava’s assertions surrounding the attempted partnership with Progressive. “Even this sort of exclusive dealing arrangement is not unlawful per se,” Vision states in its rebuttal. In citing the Colgate doctrine (from the Supreme Court case US v Colgate & Co.), Vision states that a “manufacturer…generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently.”
In its December 2 rebuttal, Vision takes Maxava to task for alleging that other resellers have been scared away from carrying Maxava’s products, but not naming them or providing any supporting evidence:
“The various statements throughout the opposition that Vision has ‘barred various independent resellers from selling Maximum’s products’ or ‘has shut the door to customers by shutting Maximum out of the independent reseller market’ are not merely unsupported by any well-pled facts in the SAC, but quite frankly, are outrageous.”
Maxava should not be able to use the discovery process to build its case, Vision’s lawyers say. “It is ludicrous for Maximum to continue to take the position that it needs discovery to figure out the extent it has been harmed,” the December 2 rebuttal reads. “Maximum knows which customers and resellers it has called on, and knows which customers and resellers decided not to purchase or sell its products. It strains credulity that it simply has no idea whether there exist any more customers or resellers that refused to do business with it, or the reasons for that refusal.”
Also included in Maxava’s suit are three Vision employees, including Bill Hammond and Chris “CT” Thomas, who work in marketing and allegedly wrote the marketing materials in question, and Eva Succi, who works in direct sales. Maxava alleges that in April Succi showed some of the materials to a potential Maxava customer, the Panda Restaurant Group, which was at the time a Vision customer.
Maxava is seeking a permanent injunction prohibiting Vision from using marketing materials that are false or misleading. It’s also seeking treble (triple) damages, attorney’s fees, and the names of customers who may have seen the marketing material. A hearing is scheduled for Judge Wu’s courtroom December 16.