Infor ERP software user fights 'absurd' demand for $400,000

A customer's software license rights after a merger or acquisition are at issue in the case

A customer of ERP (enterprise-resource-planning) vendor Infor has filed suit in hopes of warding off the company's demand for roughly US$400,000 in additional license fees, which it calls an "absurdity."

Speciality metals manufacturer ATI Ladish brought the action last week in U.S. District Court for the Eastern District of Wisconsin. A predecessor company to ATI Ladish, Ladish Co. Inc., signed a license agreement with Infor in November 2005 at an initial fee of $82,000, the suit states.

Ladish merged with a subsidiary of fellow metals manufacturer Allegheny Technologies Inc. in May of this year, and the combined entity was merged with another ATI division, resulting in ATI Ladish, it adds.

ATI Ladish "owns all the properties, rights, privileges, powers, and franchises of the predecessor entities, as well as all the debts, liabilities, and duties thereof," the suit claims.

But in July, an Infor account manager contacted ATI Ladish and suggested that because of the mergers, this was not the case, it states. Infor's legal department subsequently told ATI Ladish that it was in violation of the license agreement and required to pay additional money, according to the suit.

A series of meetings and e-mail exchanges ensued, culminating in an Aug. 22 demand by Infor that ATI Ladish pay it nearly $400,000 in "assignment fees."

"Given the absurdity of Infor's proposed assignment fees, which are well over four times the initial purchase cost, it is clear that no commercial resolution is possible," ATI Ladish said in its suit.

Infor has "adopted a business model in which it makes frivolous breach of contract claims based on various software license agreements and demands sizeable additional license fees to cure the alleged breach," it added.

The suit seeks declaratory judgments stating ATI Ladish isn't liable for any additional fees, as well as for attorney costs and "such other relief as the court deems proper under the circumstances."

ATI Ladish "is a valued customer and we are working privately to bring this matter to a speedy and satisfactory resolution," an Infor spokesman said in a brief statement Tuesday, which did not address the company's specific allegations.

ATI overall is one of the world's largest speciality metals manufacturers, with more than 11,000 employees and about $4.7 billion in revenue during the past year, according to its website.

Infor is facing a similar action from another customer, textiles manufacturer BMP America. That company sued Infor in February, saying it was not obligated to pay some $150,000 in license fees Infor demanded after performing a license audit.

As for ATI, "you should always take into account mergers and divestitures in software license contracts," said analyst Ray Wang, CEO of Constellation Research, who has worked on thousands of software deals for clients. "You need to determine up front who owns the software and what happens [in the event of a merger], because these are a part of corporate life."

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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Chris Kanaracus

IDG News Service
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