Business Objects Outguns Brio Technology in Patent Dispute

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Event Summary

"SAN JOSE, Sept 13 /Business Wire/ -- Business Objects (NASDAQ: BOBJ) and Brio Technology (NASDAQ: BRYO) today announced the settlement of their pending patent litigation involving Business Objects' United States patent number 5,555,403 entitled "Relational Database Access System Using Semantically Dynamic Objects." Under the agreement, the detailed terms of which are confidential: -- Brio acknowledges the validity of Business Objects' US patent number 5,555,403 -- Brio will pay an undisclosed sum of money to Business Objects for rights to use the Business Objects' US patent 5,555,403. In addition, Brio will dismiss its pending lawsuit against Business Objects alleging infringement of Brio's US patent number 5,915,257."

Market Impact

Business Objects and Brio Technology are two of the top three vendors in the Business Intelligence marketplace. This finding of law means that Brio Technology will be forced to license key technology for their major product from one of their largest rivals. (The "semantic" layer in a query tool is a very important market differentiator. It allows users to issue queries that return accurate results without knowing the Structured Query Language (SQL) which must be generated to actually retrieve the data.)

Since the terms of the agreement were undisclosed, it is unknown what the duration of the license granted to Brio by Business Objects will be. Given that Business Objects has had much larger revenues over the past three years, and that Brio Technology reports an accumulated deficit of $18.8 million USD as of 3/31/99, this finding has a very negative impact on Brio's business model. (Business Objects ended FY 1998 with $71 million in cash and equivalents and no long-term debt).

User Recommendations

Prospective customers considering Brio Technology's products should press for answers on the duration of the license granted to Brio for the use of the patented technology. It is an unfortunate situation when one vendor has to rely on a rival in the same market space for required technology. If the license expires and Brio is not prepared with replacement technology, future releases of the product could be significantly delayed.

Customers should also ask Brio to explain how this finding will affect their pricing model. Brio will incur increased costs whether they decide to replace the patented technology, or pay Business Objects to license it. It is likely that this price increase would be passed on to the customer.

Finally, all potential customers should investigate the long-term financial viability of Brio Technology given their current financial situation, and use the result of the lawsuit as a lever in product negotiations.

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