Editorial: Family Feud?

Hot on the heels of Unisys reporting its second-quarter net income of $119.7 million, TeamQuest Corporation announced a multi-count complaint in federal court against Unisys Corporation, charging breach of the terms of a TeamQuest software licensing agreement. Unisys, with 34,000 employees and customers in 100 countries, contends it has satisfied its obligation and then some.

In papers filed in the U.S. District Court for the Northern District of Iowa, Central Division, TeamQuest seeks to recover damages in excess of $65 million for the period of 1991 to 1997.

TeamQuest, originally the software development division of Unisys, was spun-off from its parent company in 1991 and became an independent corporation, while maintaining ownership of all developed software. At that time, TeamQuest entered an agreement with Unisys to continue to develop software for Unisys hardware and to support the existing software. TeamQuest would then collect royalties from Unisys’ sales of the software.

Issues arose within the first year of the arrangement, when TeamQuest became aware that its royalties were less than anticipated. TeamQuest initially contracted to allow Unisys to license TeamQuest products through its sales force and pay TeamQuest royalties based on a fixed price-per-unit of software sold. The numbers were inaccurate, so they switched to revenue-based royalties.

But TeamQuest felt inaccuracies still arose: Specifically, Unisys discounted or did not even charge for TeamQuest software. Conversations then went on for over two years, in which Unisys would rectify the situation, if needed. Unisys’ response was that any claim to damages by TeamQuest has been offset by a voluntary payment of $3,241,840 from Unisys to TeamQuest in September 1998, satisfying the royalties issue.

In an exclusive interview with Unisphere, TeamQuest’s representing Lead Counsel Stuart Smith, a partner in the Chicago law firm of Gordon & Glickson, LLC, which specializes in technology legal issues, told me that, "This is a standard procedure for how Unisys [deals with licensing contracts] … hoping that everybody will just accept the reports as they are spit out by the system."

TeamQuest charges that Unisys knew that its computer systems were incapable of maintaining accurate records of units sold and revenue received, but did not disclose this to TeamQuest. Smith states that his client has specific evidence, but was not ready to detail it for Unisphere, as it is not yet part of the official record.

In addition, TeamQuest says Unisys "extended licenses for customers without charge, in a concerted effort to deprive TeamQuest of rightful royalties." The suit further claims Unisys gave away TeamQuest software. According to the complaint, TeamQuest discovered data "showing delivery of hundreds of units of TeamQuest software with no corresponding entries for revenue received."

TeamQuest alleges that Unisys engaged in accounting practices that minimized its ability to account for royalties owed to TeamQuest. The suit also charges that "Unisys management was fully aware that its databases were set up such that it was not possible to track software distribution and correlate the distributions with the revenues received." In addition to damages, TeamQuest seeks to recover attorney’s fees and to receive punitive damages for Unisys’ alleged wrongful conduct.

Unisys responded with a counter claim, which maintains that not only does it not owe TeamQuest additional money, but it actually overpaid the firm for duplicative record payments or for TeamQuest software that it didn’t even include in sales. Smith cites that, either way, this demonstrates that Unisys has inadequate accounting practices.

TeamQuest offers its users peace of mind by indicating that no user should be affected by this dispute. According to TeamQuest, any user of its products having difficulty obtaining software, keys, maintenance or technical support will get the help they need by calling TeamQuest at (800) 551-8326.

Smith hopes that once the dispute is resolved, both parties can continue in their mutually beneficial partnership. "No party should be upset that someone is seeking to verify payments … or [wanting] what it was entitled to in an agreement."