Comshare Inc waited until the opening day of Arbor Software Corp’s annual international user conference a couple of weeks ago (CI No 3,012) to issue a counterclaim against Arbor, the Sunnyvale, California-based on-line analytical processing pioneer. Comshare’s suit was claiming defamation, unfair competition, interference with economic relationships and breach of contract. Arbor originally filed against Comshare – the largest reseller of its products – at the beginning of October (CI No 3,012), claiming the Ann Arbor, Michigan-based company systematically underpaid or failed to report royalties, due under their two-year old agreement and would look to scrap the pairs’ existing two-year old distribution agreement for a new arrangement. Arbor specifically doesn’t want Comshare to distribute its Essbase multi-dimensional database server anymore, Comshare believes, and Arbor says Comshare’s case simply doesn’t stand up. It’s true that a Price Waterhouse audit report maintains that the shortfall in reported royalties to Arbor from Comshare is a paltry $450,000. But that’s only the royalty due on what Arbor claims is 10% of the $14.4m revenue Comshare has made on Essbase. It claims it is owed royalties in excess of ten times the auditor’s sum. The root of the problem is that each company has a different interpretation of what royalties are due on Comshare’s Essbase sales. Comshare can sell limited-use or full- use versions of Essbase. The limited-use version is a restricted license that permits a customer to use Essbase only in conjunction with the Comshare decision support product line. The limited-use version is 40% cheaper than the full-use version. Morgan Stanley & Co analysts tell us that Comshare has been classifying almost all its sales of Essbase as limited-use when, according to Arbor, most Comshare products are using Essbase in full-use mode and using the product to develop non-Comshare applications routinely. In many cases, Arbor believes, customers do not realize that they have a limited-use license and are violating Arbor’s licensing arrangement with Comshare. Comshare calls Arbor’s writ scare tactics and has also asked the court to dismiss Arbor’s fraud claim and to issue a preliminary injunction prohibiting Arbor from disseminating information that suggests Arbor has any basis for its claim. Comshare points out that on September 18, just 11 days before Arbor filed its suit, the OLAPer had described their relationship as wildly successful. Any publicity is not necessarily good publicity in this case as the spat is going to hurt both companies: don’t bite the hand that feeds you more properly applies to both. Comshare’s sickly first quarter – the company recently reported a loss of $4.9m compared with a profit of $1.5m for the same period last year, on revenuer down 30% at $20m from $28.7m before – already means there are fewer Essbase sales and a weaker royalty stream due. Arbor says it wants to continue the relationship with Comshare but has been working for some time to reduce its dependency on its largest reseller – Comshare has accounted for as much as 27% of its revenue to date. Arbor says its suit only concerns underpaid royalties and that there is nothing darker to its actions – such as taking Essbase out of Comshare’s hands – as Comshare seems to believe. Comshare says it has paid all that it owes and it will not change its position. Now Arbor Software says it wishes to settle things out of court.
