Lawsuit alleges cloak-and-dagger conspiracy by Software AG

Software AG and two systems integrators are accused of an elaborate scheme to steal RFID trade secrets

Middleware giant Software AG conducted an elaborate corporate espionage scheme replete with "sex, lies and an audiotape," according to allegations in a lawsuit filed by RFID (radio frequency identification) vendor GlobeRanger.

GlobeRanger, of Richardson, Texas, "poured a decade of work and tens of millions of dollars into developing technology that is truly transformative and promised to exponentially facilitate the flow of goods and information throughout the world," according to its complaint, which was originally filed in a Dallas County, Texas, court in December and moved to federal court this month.

Software AG, which dwarfs GlobeRanger in size, "had an irresistible motive," the complaint adds. "It stood to make hundreds of millions of dollars from stealing GlobeRanger's technology and attaching it to a product already deployed in tens of thousands of companies worldwide."

RFID technology is not new, GlobeRanger's complaint notes. But its platform is "a true chameleon" that can be deployed in any enterprise within two to three months, it claims.

Its products are used to track crime scene evidence in Holland and monitor the removal of hazardous materials from a Tennessee nuclear site, the complaint states. It even "knows just where 'your dollop of Daisy' sour cream is between farm and market."

GlobeRanger has also won contracts making it "the enterprise standard" for the U.S. Defense Logistics Agency and the U.S. Air Force, according to the complaint.

Software AG's April 2007 purchase of middleware vendor WebMethods for US$546 million is at the root of the conspiracy alleged in GlobeRanger's filing.

"WebMethods was worth so much because it is literally everywhere -- in every industry, every sized enterprise," the complaint states. An integration between RFID technology and WebMethods would constitute a "holy grail" and a "massive home run" for Software AG, it adds.

However, WebMethods was not developed with RFID in mind, according to the complaint.

Now with WebMethods in hand, it would be years before Software AG could develop a viable RFID product, leading the company to make a brazen move, according to the complaint.

"Software AG had just spent a half a billion dollars. It had to show returns on this investment," it states. "Software AG decided that it would develop an RFID Solution through corporate espionage."

GlobeRanger's complaint also names two systems integrators it had worked with, Main Sail and Naniq Systems, as defendants.

A director at Naniq, Kim Gray, "was unusually successful" at winning contracts from the Navy's Automatic Identification Technology Office, according to the complaint, which said, "She was also having an improper relationship with Bob Bacon, the married head of Navy AIT." Gray was also "involved with a man at Software AG," it alleges.

The Navy AIT was planning to implement an ERP (enterprise resource planning) system and therefore the RFID implementation needed to be re-architected, according to GlobeRanger. The company spent some months working up a proposal on the new architecture and gave it to Bacon as well as two contractors for the Navy, it adds.

A week later, Gray and Jack Rhyne of Main Sail "were inexplicably in possession of an RFID system Architecture for one of the most complex enterprises in the world -- the United States Navy," it states.

"Despite the fact that GlobeRanger was deployed with massive success across the DOD, Naniq and Main Sail, with the knowledge and consent of Bob Bacon, instead turned to Software AG, who did not even have a commercial RFID Solution at the time, to build the system under 'their' Architecture," it adds.

In May 2009, Software AG "stepped from the shadows to pursue a contract from Navy AIT to develop an RFID solution for the Navy, with Naniq and Main Sail's support," the complaint states.

Despite the fact that Software AG "was not even close" to developing its own RFID platform at the time, Bacon nonetheless issued a purchase order to Software AG," it adds.

However, this was only the opening move in Software AG's plan, GlobeRanger alleged. "It was more about the opportunity to be gained -- an opportunity to commit the theft of GlobeRanger's RFID solution."

Bacon set up a lab at Navy AIT's quarters in Mechanicsburg, Pennsylvania, where Software AG, Naniq and Main Sail began working together, according to the complaint.

"Software AG was at point zero" with RFID technology, it states. "It had taken GlobeRanger a decade to develop the GlobeRanger RFID Solution. Yet Software AG had, incredibly, agreed to develop its own in a matter of months. Software AG thought it could make this timeline because it had already agreed with Naniq, Main Sail, and Bob Bacon to steal the GlobeRanger RFID Solution."

Via "a series of lies," Software AG obtained what it needed, according to the complaint. For one, Bacon asked GlobeRanger for some product license keys, "ostensibly for support of existing Navy-GlobeRanger sites."

The defendants used the license keys to circumvent security protections GlobeRanger had in place on its products, according to the complaint. They could now "peer at the Business Processes, see the solution's architecture and see how it was deployed at a specific site," it states.

Later, Bacon asked for GlobeRanger's data dictionary, "again ostensibly for support of GlobeRanger sites," it adds.

The defendants used the purloined assets to begin testing "a Software AG Navy solution that included WebMethods middleware," the complaint alleges.

At an April 2010 conference, Bacon was asked how WebMethods could be trusted to work, given "the absence of any track record for Software AG" regarding RFID and the middleware.

"We had a jump-start because we had already ... implemented [the other sites] using GlobeRanger servers on every site," Bacon allegedly answered. "So, we sort of had that in our hip pockets, which helped us jump-start WebMethods because we just reverse-engineered code from GlobeRanger."

Bacon and others laughed after that statement, according to the complaint.

A person at the meeting handed a recording of the exchange over to GlobeRanger, it adds.

Software AG filed a motion to dismiss the case on March 4.

GlobeRanger's "unnecessarily salacious petition," despite being "filled with sensational language ... fails to assert any viable claims, as the state law claims it raises are preempted by federal law or are insufficiently pleaded," Software AG's lawyers said in a brief supporting the motion.

Software AG, Rhyne, Bacon and Gray did not immediately respond to requests for comment on Friday.

Meanwhile, Software AG once found itself in somewhat of a reversal of the spy-movie-like scenario painted by GlobeRanger.

In 1982, then-President of Software AG North America John Maguire testified before the U.S. Senate's Permanent Subcommittee on Investigations about how spies from the former Soviet Union attempted to steal the source code for the company's ADABAS database software.

"One might consider ADABAS as the 'Coca-Cola formula' of the computer software industry," Maguire testified, according to a transcript. "It is, deservedly, a closely guarded secret."

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

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