Epicor suit claims services firm hijacked its ERP software

Epicor is suing IT service provider Alternative Technology Solutions, claiming the company illegally used its ERP (enterprise resource planning) software in order to develop and sell add-ons and services, in a case that has parallels to tussles over third-party software maintenance.

Alternative is not an authorized partner of Epicor, yet sells implementation, training and tech support services and develops add-ons for the company's software, according to Epicor's suit, which was filed last week in U.S. District Court for the Central District of California.

These "bolt-on" products can't be developed without access to Epicor's software, but Epicor has never licensed its software to Alternative or authorized a third party to give Alternative access to it, according to the suit.

Alternative has "duplicated" Epicor's software or gained unauthorized access to it, "all in direct violations of not only Epicor's copyrights and trade secret rights, but also the Software License Agreements between Epicor and Epicor customers," the suit alleges.

Alternative consultants, many of whom used to work at Epicor, remotely use an imaged copy of Epicor 9 software, according to the suit.

The company's actions amount to "hijacking" Epicor's software and are stealing away application customization work from Epicor, the suit alleges.

In addition, Alternative uses Epicor trademarks on "a wide assortment" of marketing materials, giving "wrongful insinuations of an authorized partnership with Epicor."

Authorized partners are subject to guidelines and obligations that protect customers, giving them "an added measure of assurance" the partner can handle the job, according to the suit. In addition, authorized partners get licensed access to Epicor software.

Alternative is headed by Vivian Keena, who previously served in a number of roles at Epicor, including as its vice president of consulting services for the Americas.

Keena's senior role meant she had access to Epicor trade secrets, as well as its list of customers, suppliers and vendors, the suit adds. While working there, Keena signed an agreement pledging not to reveal any of that sensitive information, according to the suit.

Her employment at Epicor ended in December 2008 and she subsequently signed an agreement that required her to give back any company documents pertaining to proprietary or confidential information, maintain the confidentiality of the data, and refrain from recruiting Epicor employees.

Another former Epicor employee, Donna Barnett, serves as Alternative's CTO. Barnett also signed a confidentiality agreement, according to the suit.

Barnett had served as director of business and technology services at Epicor, giving her deep knowledge of how its software works, according to the suit.

She was also "notably" responsible for giving consultants imaged copies of Epicor software on external hard drives, which they could use for troubleshooting and other purposes "without fear of damaging, or otherwise altering, the configuration of a customer installation," the suit adds.

Epicor is suing Alternative on a number of grounds, including trademark and copyright infringement, intentional interference, false advertising, unjust enrichment and fraudulent and unlawful business practices. The vendor is seeking assorted damages as well as orders barring Alternative from continuing with its alleged unlawful actions.

Alternative hadn't filed a response to Epicor's allegations as of Wednesday, and the company didn't respond to requests for comment.

The lawsuit could reflect some bad blood between Epicor's management team and Alternative, said analyst Ray Wang, CEO of Constellation Research. "These things don't happen overnight," he said of the lawsuit. "One could speculate that they could not come to an agreement."

Of broader interest to customers is the dispute's parallel to the third-party software maintenance debate.

Software vendors derive huge profits from annual maintenance payments and are no doubt loath to see a major market for third-party providers spring up.

Oracle famously sued SAP and its former subsidiary, TomorrowNow, which provided lower-cost support for Oracle software. In 2010, SAP admitted liability for wrongdoing, including the illegal downloading of Oracle software, on the part of TomorrowNow employees, but the case is still tied up in appeals by both parties.

Oracle is also suing Rimini Street, which is led by a TomorrowNow co-founder. Rimini Street has denied any wrongdoing on its part, saying it acts within the bounds of its customers' license agreements with Oracle. The company has also countersued Oracle, claiming it is trying to stymie the third-party support market.

Third-party support advocates have offered analogies to explain why customers should be able to use such services, such as when a person buys a car and then goes to an independent mechanic for repairs, rather than an authorized dealer.

But the picture is arguably made murkier in the case of enterprise software. That's because customers typically can't purchase it outright, instead buying perpetual software licenses, and end up subject to terms that restrict certain activities.

For example, Epicor bars its customers from providing access to its software and documentation to a competitor without written permission, according to its suit.

However, last year Europe's highest court ruled that it was legal to resell used software licenses, a landmark decision that boosted software customers' rights.

Overall, software customers should be able to go to any third-party provider that doesn't violate intellectual property laws for support and help, whether they are officially authorized by a vendor or not, according to Wang.

Hence, like Oracle's suit against Rimini Street, the outcome of Epicor's dispute with Alternative will have implications for the rest of the software industry, he said.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com