The Wall Street Journal-20080216-Ad Heavyweights Battle Over Software
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Ad Heavyweights Battle Over Software
Full Text (608 words)In a fight between two heavyweights of the advertising industry, the company that provides the software used by most media-buying firms has accused one of its former customers, Starcom MediaVest Group Inc., of stealing trade secrets.
The dispute is between Publicis Groupe's Starcom and Donovan Data Systems Inc., a major supplier of technology to Madison Avenue. Its technology allows media buyers to book advertising time on a range of media, ensure that those ads have run, bill clients, and pay the media that host the ads. Donovan has provided this function for Starcom for the past seven years.
The dispute puts focus on the growing desire among ad companies to rethink their relationships with long-time suppliers in an effort to get ahead in the digital age.
Starcom and Donovan are in arbitration to resolve their differences. The companies said Friday that they are barred from speaking about the details of those proceedings.
In a December filing in the Supreme Court of the State of New York, Donovan alleges that last year Starcom conspired with another company, MediaBank LLC, to copy pieces of its technology. Donovan accused Starcom of "cloning and reverse engineering" Donovan's systems for its own use. MediaBank is a Chicago-based firm that provides a service similar to Donovan's.
Starcom, whose customers include some of the biggest marketers in the country, such as Procter & Gamble Co. and Coca-Cola Co., rejects the allegation. Starcom denies "that it misappropriated any intellectual properties that belonged to Donovan," says Barry Powell, general counsel for Starcom. MediaBank also denies any wrongdoing. "We did not steal anything," says Brad Keywell, MediaBank's chief executive officer.
The problems between the two companies go back to at least February 2007, when Starcom and Donovan were in negotiations to modify some provisions of their then-existing contract. During the negotiations, according to the court filing, Starcom says Donovan falsely accused it of sharing confidential information about Donovan's technology with MediaBank. Starcom states in the legal documents that Donovan also threatened to "immediately discontinue" servicing Starcom's contract unless it entered into a new long-term agreement with Donovan.
In the court documents, Starcom argued that its contract with Donovan didn't end on Dec. 31, as Donovan claimed, and said that at the very least, it was owed up to 18 months beyond that to transition to a new provider. Starcom argued that it would be "irreparably harmed" if it didn't have access to the Donovan system after Dec. 31, 2007. It said it wouldn't be able to "adequately process new media buys or complete the processing of media buys already in" Donovan's system, or "ensure that clients are billed for their media purchase and that media vendors are paid for the advertising they run."
The court denied Starcom's request for an injunction to stop Donovan from cutting off Starcom's service.
According to people familiar with Starcom, the company at the time was interested in finding another provider that had better digital capabilities. In the court filings, Starcom itself says that Donovan "lagged behind in the development of effective software solutions to handle the increasing demand for Internet and Web-based advertising."
Starcom now gets its media-management services from MediaBank and Datatech, a firm that MediaBank recently acquired. One Starcom client said Friday that it had experienced "minor hiccups" since January, such as late payments being made to some media outlets. But other Starcom clients, including Allstate Insurance Co., said there hadn't been any problems stemming from the transition.
Starcom itself now says that the switchover has been a smooth one. "We are up and running, and as far as I know, there are no issues of substance," says Mr. Powell.
