Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Software provider allegedly terminated license agreement to gain licensee’s business, (Nov 4, 2015)

By Linda O’Brien, J.D., LL.M.

A leading provider of customer engagement software solutions has illegally terminated the license agreement with one of its authorized reseller and service providers in order to capture the reseller’s business and goodwill, according to a complaint filed in the federal district court in Trenton, New Jersey. The termination without cause allegedly violated the New Jersey Franchise Practices Act (VortalSoft, Inc. v. Aspect Software, Inc., November 3, 2015).

Aspect Software provides cloud-based consumer engagement, workforce optimization, and back office solutions. To increase its market share, Aspect uses its AspectPRO channel and partner program, which is comprised of sales, service, and technology providers, including licensed cloud partners and value added resellers (VARs), who are represented to be authorized Aspect software resellers and providers. VortalSoft, Inc. is an information technology solutions firm that provides general IT consulting services as well as contact center software management solutions.

The complaint states that, for 13 years, VortalSoft has built its business as a licensed, authorized channel partner and value-added reseller of software and cloud-based software-as-a-service (SaaS) developed by Aspect, and as an authorized servicer of Aspect software. VortalSoft has 30 employees and generates over $8 million in annual sales per year. VortalSoft almost exclusively sells Aspect software to its customers and has received multiple awards from Aspect for its partnership success.

Aspect’s finances have been in decline since it was acquired in a private equity transaction and its annual sales revenue has decreased from $750 million to $350 million per year. The combination of new management and declining revenue motivated Aspect to try to leverage its superior bargaining position to take advantage of the goodwill and revenue built up by VortalSoft as a loyal licensed VAR over 13 years, the complaint alleges.

According to the complaint, as part of this scheme, in January 2015, Aspect took advantage of its disproportionate bargaining power and compelled VortalSoft to accept a new license agreement on a take-it-or-leave-it basis that purports to allow Aspect to terminate VortalSoft’s license for convenience and no cause. In October 2015, Aspect notified VortalSoft that it was terminating its VAR relationship for convenience. Aspect also notified each VortalSoft customer that its relationship with VortalSoft was terminated and to contact Aspect directly or another channel partner to maintain uninterrupted access to the licensed software and services.

Aspect’s notification wrongly implies that, even if Aspect legally terminated VortalSoft’s resale license, VortalSoft could not continue to provide the same services it had been providing. Additionally, Aspect and other Aspect partners called VortalSoft customers to falsely state that VortalSoft could not offer the services it had been providing to customers, the complaint states.

The complaint also alleges that Aspect’s motivation for the purported termination of its relationship with VortalSoft was to capture the business and goodwill that VortalSoft developed over 13 years as a loyal and successful licensed reseller of Aspect products. Aspect’s purported termination of VortalSoft’s license for convenience will unquestionably cause irreparable harm to VortalSoft’s business and goodwill. VortalSoft has spent considerable time, effort, and money to build up its business as a VAR and its customers’ substantial investments in software solutions make it unlikely that VortalSoft will retain them unless Aspect’s illegal termination is enjoined.

VortalSoft asserts claims for tortious interference with contract, unfair competition, commercial disparagement, and violations of the New Jersey Franchise Practices Act. The action seeks injunctive relief, punitive damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:15-cv-07855-MAS-DEA.

Attorneys: David C. Kistler and Daniel E. Rhynhart (Blank Rome LLP) for VortalSoft, Inc.

Companies: VortalSoft, Inc.; Aspect Software, Inc.

News: FranchisingDistribution NewJerseyNews