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August 20 2018

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38 The Journal of Commerce | August 20 2018 Government essentially aggregated and formalized a relationship between the two parties that had existed as a result of DHL's ac- quisitions of several Log-Net customers in the mid-2000s. However, according to court filings, DHL became dissatisfied with the Log- Net offering and began searching for a new system months into the 2008 con- tract. That search culminated in DHL deciding to work with a new provider, GT Nexus, when the Log-Net contract expired in February 2011. GT Nexus is now part of the enterprise resource planning software provider Infor. As that 2011 deadline approached, DHL realized it needed more time to mi- grate customers to the GT Nexus system and so agreed to a one-year extension of the Log-Net contract. As that second deadline approached, a disagreement be- gan to emerge between the two parties. DHL asserted that they had met certain conditions giving them perpetual rights to use the Log-Net system, without up- grades and support. That use, according to DHL, entailed continuing to provide the Log-Net functionality to certain authorized customers. Log-Net understood the expi- ration of the extension to mean that DHL would be able to use the Log-Net system internally, essentially as a historical archive if a customer needed access to certain documents or transactions. Log-Net asserted that DHL needed to continue to pay for the system if it was using it in an ongoing customer-facing fashion. DHL subsequently filed a lawsuit A LATE-JULY DECISION by a US District Court jury to award damages to the logistics management software provid- er Log-Net in a longstanding court case versus DHL could have wider implica- tions for logistics software providers, particularly smaller companies and startups, that often battle to protect their intellectual property while vying for large business deals to transform their growth curve. The jury awarded the New Jer- sey-based software company $14.4 million in damages for copy- right infringement and good faith violations by DHL Global Forwarding. For small logistics software providers, the net impact of the jury's verdict is that there is a way to go after transformative customer wins and retain a measure of control over intellectual property. The Log-Net case, decided in US District Court in New Jersey, pitted a well-established but relatively small provider of logistics software against the largest third-party logistics provider (3PL) in the world. It also represented a thorny issue that cuts across industries when it comes to court decisions on intellectual property rights: Larger companies often have an advantage over smaller ones because of their deeper pockets and a willingness to win cases through attrition. The seeds of the dispute started in 2008, months after DHL signed a three-year contract with Log-Net to provide shipment and trade docu- mentation solutions. That agreement against Log-Net for breach of contract when the software provider threatened to shut the system down, and also won an injunction in 2012 to keep using the software. Sometime in 2014, DHL stopped using the Log-Net system. In the meantime, Log-Net counter- sued DHL for copyright infringement and a violation of good faith and fair dealing, asserting that DHL was misus- ing its software under the terms of the agreement that expired in 2012. "We provided evidence both on copying of portions of the database and copying of specific Log-Net reports generated by the system," said Marc Haefner, an attorney with Walsh Pizzi O'Reilly Falanga, which represented Log-Net in the case. DHL wasn't able to comment, say - ing it was an ongoing legal case. The jury rejected both of DHL's suits, for breach of contract and a failure to act in good faith and fair dealing, and also four other counts that Log-Net brought against DHL. Log-Net founder and CEO John Motley characterized the win as one that shows smaller companies can defend their intellectual property turf against bigger businesses. "I hope our case will stand as an example and warning to the entrepre - neurs and innovators in the United States," Motley said in a statement. "Protect your creativity and hard work from incumbents in your target industry. If you are asked how your technology works, your best answer is, automatically. If you find yourself in a legal battle, endure. Entrepreneurship and excellence in technology innova- tion is extremely hard work." The case will have resonated with other small to midsize software pro- viders, particularly those in a "launch phase," a state where a company tries to demonstrate the viability of its prod- uct and yearns for a large customer to provide it with market credibility. DHL will be able to file post-trial motions, including an assertion that the case should not have gone to jury in the first place, or that the company should get a new trial. If the company fails on those motions, it still has the option to appeal the case to the US Court of Appeals for the Third Circuit in Philadelphia. JOC email: twitter: @LogTechEric IP tensions Jury awards Log-Net $14.4 million in damages in longstanding case against DHL By Eric Johnson International | Washington | Customs | Security | Regulation

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