New Front in HR Software Legal Battle

By Staff Report

Jun. 6, 2008

HR software vendor Softscape sued rival SuccessFactors on Thursday, June 5, adding a twist to the companies’ legal spat and effectively stealing some of the thunder from SuccessFactors’ user conference this week.

Wayland, Massachusetts-based Softscape accused San Mateo, California-based SuccessFactors of “deceptive and unlawful conduct” to gain detailed proprietary information on Softscape’s software products. The suit, filed in the Middlesex Superior Court in Massachusetts, alleges misappropriation of trade secrets, “tortious interference with contractual relations” and unfair competition. It seeks unspecified damages.

Softscape says it has information showing that SuccessFactors accessed Softscape’s confidential and secure computer systems from an address it alleges is registered to SuccessFactors.

That claim echoes charges from SuccessFactors in a suit filed earlier this year that Softscape illegally accessed SuccessFactors’ computer networks.

In a statement Thursday, SuccessFactors called Softscape’s suit a diversion.

“Softscape’s recent complaint is a transparent and groundless attempt to muddy the waters to divert attention from their own well-documented illegal and reprehensible conduct,” SuccessFactors said in the statement. “Their claims are vague and unsupported by facts, which suggests to us they have no legitimate basis.”

In March, SuccessFactors sued Softscape, accusing it of false advertising, unfair competition and other misdeeds associated with the circulation of a PowerPoint presentation highly critical of SuccessFactors. Softscape has said it authored the document, but it was only for internal use.

In late March the court issued a preliminary injunction that, among other things, bars Softscape from disseminating or “affirming the purported truth or accuracy of” the presentation.

SuccessFactors and Softscape are competitors in the fast-growing field of talent management software—tools for key HR tasks such as recruiting and employee performance management.

SuccessFactors is the more prominent of the two firms. It raised more than $100 million in an initial public offering last year and is led by Lars Dalgaard, the brash Denmark-born chief executive who speaks about his firm’s vision of transforming the workplace in grand terms.

“This is a revolution,” he told attendees at the close of the SuccessConnect conference Thursday in San Francisco.

At last year’s company conference in New York, SuccessFactors featured business icon Jack Welch as a speaker. This year’s event, held at the upscale Westin St. Francis hotel, also featured industry luminaries. Robert Sutton, a Stanford University professor and author of the acclaimed book The No Asshole Rule, gave one keynote address, as did University of Pennsylvania professor and author Peter Cappelli.

SuccessFactors customer and conference attendee Daniel Miller had not heard of the new Softscape suit. But Miller, who is vice president of HR systems and technology at media giant News Corp., said legal disputes among vendors don’t do customers any good.

“Nobody wants to be around that drama,” he said.

The “drama” between Softscape and SuccessFactors dates to before the litigation this year. Softscape sued SuccessFactors in 2005 in connection with a former Softscape employee joining SuccessFactors.

According to Softscape’s newly filed complaint, that earlier suit resulted in a settlement in which both companies agreed not to solicit each other’s employees for a six-month period that began in June 2007. But SuccessFactors continued to “target Softscape employees” within that period, the Softscape suit alleges.

—Ed Frauenheim

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