Ariba and Emptoris Continued -- Judge Finds Emptoris is not in Contempt of Court

In the latest round of the Emptoris / Ariba patent soap opera, Ariba argued before the court that the "now-patched Emptoris software" violated the court's injunction and argued for Emptoris to be held in contempt of court. A week ago today, the judge released his finding that "The court finds that the non-patched Emptoris software is more than colorably different than the enjoined software products and denies Ariba's motion". Even though it feels to me like there's a typo in that sentence (i.e., "non" should be "now", per Ariba's complaint), the point is the same. Needless to say Emptoris appears satisfied with the ruling, putting out its own press release yesterday claiming victory noting that "the Federal District Court for the Eastern District of Texas denied Ariba's motion regarding the release of Emptoris' new proprietary software patch. The ruling effectively concludes the Ariba v. Emptoris trial; although Emptoris will be appealing the Court's original ruling."

I reached out to Ariba for their view on the finding and David Middler, Senior Vice President and General Counsel, noted that "other than the facts that the permanent injunction remains in place, the willful infringement finding has been confirmed by the court and Emptoris owes Ariba approximately $7M, we have no comment." Of course the commentary on both the Emptoris and Ariba fronts is lawyerly enough, but if you dig below the surface of the finding, it's actually somewhat interesting. Or at least it was last night after a New Glarus IPA. BTW...stop reading here if you don't want to get into the technical and legal arguments of the case.

In the finding itself, the judge noted in the Analysis section that "The patched Emptoris software allows the bidder, generally the supplier or seller in a downward auction, to place an initial bid greater than the 'preliminary bid'. No longer does the 'preliminary' bid limit the initial bid, as it previously did. The bidder may bid the 'preliminary,' bid an amount larger, an amount smaller, or not bid at all ... Ariba argues that because a bidder can still choose to apply the 'preliminary bid' and use it as an 'individual bid ceiling,' the Emptoris software still infringes". So why didn't Ariba prevail in their findings? "Ariba cannot now change its argument that a bidder's opening bid subjects herself to an 'individual bid ceiling' and infringes the '018 patent," the court filing notes.

In other words, Ariba, in the court's eyes, attempted to change its argument midstream in the case after Emptoris created what now seems like a rather shrewd patch, which becomes all the more apparent towards the end of the filing. To wit, "Based on the submission of the parties, it appears to the court that it may be possible that after a full trial ... a finder of fact might conclude that the new product infringes. However, these issues are not appropriately addressed in a contempt hearing. The patched Emptoris software is more than colorably different than the non-patched Emptoris software (versions 5.2, 6.0, 6.1 and 7.0) which the court enjoined. IT IS THEREFORE ORDERED that Ariba's Motion for Order to Show Cause is DENIED."

Touche! So just as Ariba won at least part of its original case on a technicality -- based on the testimony of former GE employees that prior art existed that was then tossed out based on the contradictory testimony of another former GE employee, a possible Senate candidate in the coming years (guess who), that prior art did not -- Emptoris avoids being held in contempt in this particular case. Which is further proof that Emptoris customers, prospects and the market in general should file this case away for good. It's over. Now it's time to let products compete on their own merits. I suspect that both Ariba and Emptoris will continue to win their fair share of deals in the market without needing to resort to FUD marketing strategies.

Jason Busch