Tech Rights Give Companies Upper Hand

BOSTON (TheStreet) -- In his company's most recent earnings conference call, Netezza(NZ) Chief Executive Officer Jim Baum focused on the launch of a new hardware platform and the phasing out of an older one.

"We were very proud of the fact that we were able to manage this transition with no disruption to our business," he said.

But a lawsuit filed against one of the company's business partners says otherwise. Now, Netezza's ability to offer geographic-information software may be in jeopardy, straining customer relationships with the likes of the Central Intelligence Agency.

Regardless of what will happen in court, the complaint illustrates the power that a small company can wield if it holds on to its own source code, or technology, when teaming up with a big company. The case brings to mind how Skype's co-founders shook up the market when their company, Joltid, sued eBay(EBAY), charging eBay had been using Joltid's technology without permission. In other words, when eBay bought Skype for $2.6 billion four years ago, it didn't buy all the source code associated with running Skype. EBay eventually settled the suit, though the source-code issue threatened eBay's plans to sell a big chunk of Skype to investors for $2 billion.

At issue is the source code behind Spatial, geographic-data-analysis software that can parse and pinpoint map-based information such as hurricane patterns and wireless phone calls. Intelligent Integration Systems, a small Boston-based software company, developed the technology behind Spatial, which initially ran on Netezza's previous data warehousing platform, the Netezza Performance Server. (Offering geospatial capabilities helps Netezza compete with companies such as Oracle(ORCL) and Teradata(TDC).) Netezza's old platform ran on processors from Motorola(MOT). The newer platform, dubbed TwinFin, runs on chips from Intel(INTC).

To that end, moving a software application from one platform to the next would require a rewrite of the geospatial source code, which Intelligent Integration Systems owns. Intelligent Integration Systems officials say they didn't know about plans for TwinFin when they signed the contract with Netezza, and that the company never agreed to develop software for future platforms. But the lawsuit alleges that Intelligent Integration Systems is contractually required to port the Spatial software to TwinFin, and states that along with suing the company, Netezza is ending its contract with Intelligent Integration Systems.