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Business Objects Objects Again

Written By: M. Reed
Published On: May 30 2000

Business Objects Objects Again
M. Reed - May 30, 2000

Event Summary

Software developer Cognos Inc. said on May 9 that it will fight vigorously a patent infringement lawsuit filed by arch-rival Business Objects SA, a suit that it says is without merit.

Ottawa-based Cognos, one of the largest vendors of business intelligence software used to access and analyze corporate data, said the patent is "invalid" and "unenforceable". "I don't consider this to be a huge concern," said Brandon Osten, analyst at Sprott Securities. "Most of these lawsuits don't go too far...patents are very difficult to defend in technology."

France-based Business Objects filed suit on Friday in the northern district court in California. Cognos, which has retained law firms in both Canada and the U.S. for representation, said it believes its market leadership is a factor in the litigation. "Unfortunately, some technology companies use litigation in an attempt to achieve in the courtroom what they may find difficult in the marketplace," said Cognos chief executive Ron Zambonini in a statement. "This lawsuit is without merit and seeks to deflect attention from the fact that Business Objects has been unable to dislodge Cognos from its leadership."

The patent refers to the process in which data is retrieved from a database in answer to a query or question, said Cognos vice-president and general counsel John Jussup. Business Objects filed a similar patent action against California competitor Brio Technology Inc., which was settled in September, he added. "The speculation was rife in the market that we would be next on their list and since that time we've been preparing," Jussup said. "The fundament of our defense is that we were there before...it's essentially the been there, done that defense."

Market Impact

Brio Technology was forced to acknowledge the validity of Business Objects patent (U.S. Patent 5,555,403) and settle with Business Objects (for more information see Business Objects Outguns Brio Technology in Patent Dispute, September 13, 1999). Brio's 10Q statement included the following: "On September 9, 1999 Brio and Business Objects, S.A. executed a memorandum of understanding settling Business Objects' pending patent litigation against Brio involving patent number 5,555,403 for $10.0 million. Settlement costs of $9.1 million, which represent the net present value of the 10 quarterly payments, are included in non-recurring operating expenses for the nine months ended December 31, 1999. The remaining $900,000 represents interest and will be recognized over the payment term using the effective interest rate method."

Cognos will likely be forced to recognize the patent also, and will have to take a charge against earnings in order to pay the fines. Business Objects can argue that it holds the patents on the technology and Cognos has infringed on them. In addition, management at Cognos will undoubtedly be distracted for a time in dealing with the legal issues.

User Recommendations

Customers evaluating business intelligence solutions should still include Cognos solutions in their selection list. Regardless of the outcome of the lawsuit, the company will continue to be a leader in query, OLAP, and many other data warehouse solution areas. Prices should be negotiated early in the process in case Cognos increases its price points due to the need to pay for litigation and damages in this suit, although this event is fairly unlikely.

 
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