Should You Factor Patent Litigation Into Vendor Decisions?

Here's a small world story. In between herding five-year-olds at my older son's birthday party the other day at a miniature golf course, I was talking to a neighborhood mom who also happens to be in-house counsel at a well known Chicago company. She approached me and said that someone on her team received a call from an Ariba sales rep -- who they were in discussion with -- who pointed them to a Spend Matters blog post (Google "Emptoris Ariba Patent" if you're curious).

What was the purpose of this suggestion? Quite simply, to spread fear, uncertainty and doubt (FUD) about working with a "small private company" that is in litigation against a larger public entity. To paraphrase the rep, "Why would you expose yourself to the risk of working with Emptoris given the litigation?" As background, this company was evaluating Ariba and Emptoris, among other providers in the Spend Management world.

Personally, I abhor sales strategies like this. If the Ariba rep that did this was on my team, I'd be disappointed to say the least. My friend -- a Harvard trained lawyer who can spot used car salesman tactics when she sees it -- felt the same way and was taken aback by it. And I'm sure she's counseling her procurement team not only to factor it into consideration, but to think about whether or not they want to work with a rep who stoops to this level. Moreover from a sales standpoint, not only do approaches like this degrade our industry, they can backfire.

It turns out that those who are following the suit closely also know that Emptoris is countersuing Ariba. The educated software buyer knows that given that both companies have decent patent portfolios, it could end up just as ugly for Ariba as it could for Emptoris. Who will win? I haven't a clue, but I do know that both vendors have deep pockets and the chances of either going out of business over this are virtually nil.

Companies should first judge vendors like Emptoris and Ariba on their own merits -- without regard to pending patent litigation. Ultimately, if the litigation becomes a concern and they want to work with the vendor who they have legal worries over, then they should negotiate the contract in such a way that they are protected. For all of us, the world of litigation is not a black and white place. Just as ePlus won a ridiculous suit against Ariba by convincing an uneducated jury that a general process patent (e.g., transacting over the Internet) should stand, anything in the litigation world is possible.

Still, there are ways of protecting yourself from a contractual perspective. But first, figure out who is the best software partner. And then bring in counsel to stick in the T&Cs that protect you.

- Jason Busch

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