Lawsuit Pits Copyrights Against Third Parties

BOSTON (06/02/2000) - An obscure 6-year old lawsuit that moved into the verdict phase this week starkly highlights the challenges - and costly options - corporations face in maintaining aging enterprise software.

At issue is the question of how far third-party service providers can go to maintain legacy software packages for their customers without violating the copyright of the original software vendor.

Involved in the dispute are two relatively unknown software vendors:

Toronto-based Geac Computer Corp., and Parsippany, New Jersey-based mainframe consultancy Grace Holdings Inc. Both have been slugging it out in a federal court in New Jersey since 1994.

Geac claims that Grace broke copyright laws by modifying Geac's mainframe software while providing third-party software maintenance services to customers.

In the suit, Geac claims that the code modifications made by Grace and its customers went well beyond the standard tweaks often performed by companies that want to customize mainframe software to their environments.

Grace, which specializes in maintaining legacy software, in turn claimed that Geac was illegally using its copyright to prevent customers from hiring less-expensive third parties to service Geac software.

The dispute illustrates the kind of tangle users can get into when dealing with aging enterprise software in the absence of long-term contractual safeguards, said David Ochroch, a consultant at Reiner Associates Inc. in San Rafael, California.

"The ability for a company to bring in [an outside consultant] to modify a vendor's source code has to be negotiated up front," Ochroch cautioned.

Otherwise "software modification by third parties brings up copyright and derivative work issues," he said.

Aging Software in Dispute

The software in dispute was aging mainframe accounting packages originally sold by a company called McCormack & Dodge and then later by Dun & Bradstreet Software. It was D&B Software that first filed suit against Grace Consulting in 1994. D&B Software was acquired by Geac in 1997.

Medical Economics Co. decided to sign up with Grace because its services were far cheaper than those of D&B Software, said Nick Sanghvi, an accounts manager at the Montvale, New Jersey-based company.

"We were paying between $50,000 to $60,000 a year in maintenance fees to D&B, and we weren't getting anything back in terms of new functionality," recalled Sanghvi. In contrast, Grace offered better service and functionality at around $20,000, he claimed.

Atlantic City Electric Co. - now part of Conectiv, a $3.1 billion utility in Wilmington, Delaware - moved off D&B maintenance when it discovered that getting new functionality would mean a disruptive upgrade to a new version of the software, said Burt Lopez, an account manager for planning and performance at Conectiv.

The company didn't want to pay for a reinstallation and decided to maintain the software it had through Grace because it was cheaper, Lopez said.

A Geac spokesman said the company only would comment after the verdict was announced.

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