Software firms settle corporate espionage feud
Goleta-based Yardi Systems appears to have scored a victory in the settlement of a corporate espionage lawsuit filed against its largest competitor.
Yardi makes software used by property owners and managers to run apartment complexes and corporate office buildings. It is likely the largest player in its industry, with 7 million residential units and 7 billion square feet of commercial space managed under its platforms. The closely held company is also a major tri-county employer, with more than 400 workers at its Goleta headquarters.
In January 2011, Yardi sued Texas-based RealPage, a competitor that had launched a cloud-hosted program to compete with Yardi and had recently gone public.
Yardi appears to have won deep sanctions against RealPage and a $2 million license fee from RealPage in the suit. It is not clear, however, whether Yardi paid any fees because the company is not public and is not required to disclose financial information.
In the lead-up to the lawsuit, RealPage had offered to clients to set up, maintain and host Yardi’s software in its own cloud.
In its lawsuit, Yardi alleged that RealPage had purchased a consulting firm that specialized in setting up Yardi’s software for large clients. Yardi claimed that RealPage used those consultants to glean passwords that allowed RealPage to infiltrate Yardi’s sensitive support network, where trade secrets about its pricing schemes and the keys to how its software work were held. Yardi said it had evidence that “the Vault” – its innermost sanctum of corporate information – was accessed from IP addresses belonging to RealPage offices.
RealPage, which did not return requests for comment for this story, fired back with espionage allegations of its own. It claimed that Yardi hired away its chief information officer to build out Yardi’s own cloud-hosted system and that Yardi tried to strong-arm clients into sticking with it rather than defecting for newcomer RealPage. RealPage was forced to walk back many of those allegations before the two sides began settlement talks.
Those talks started earlier this year but then dragged on into summer, suggesting the settlement negotiations heated up in recent weeks. The final deal, announced July 3, appears to favor Yardi, which said that the terms of the settlement prevented it from commenting for this story.
Under the deal, RealPage must immediately stop offering to host Yardi software on RealPage servers for new customers. RealPage will also stop offering to set up and support Yardi’s software for its customers. Existing RealPage customers who have Yardi software hosted in the RealPage cloud can keep the service for five years. The companies granted each other licenses to their standard interfaces to make it easier for clients to use both platforms at once.
At least one stock analyst for RealPage called the settlement a “significant positive” because it would end potentially expensive litigation. RealPage said in public filings that it expected the litigation to cost between $8 million and $10 million, in addition to a $2 million license fee. It is not clear whether Yardi had to pay a license fee to RealPage.
Steve Sereboff, an intellectual property attorney with SoCal IP Law Group in Westlake Village, said the two may have settled because both firms were ready to move on with their businesses. Since the lawsuit was filed, Yardi has started to offer its own cloud-hosted version of its software and has acquired a host of smaller companies to make itself a more compelling one-stop-shop for property owners.