Hold the champagne corks: dBASE ruling will be challenged.

Hold the champagne corks: dBASE ruling will be challenged

Although a dark cloud over Ashton-Tate Corp.'s key software copyright was lifted by a judge last week, questions remain whether the 1,600 workers at the Torrance-based based software publisher should pop champagne corks just yet.

Arch-rival Fox Software Inc. has vowed to continue arguing in court that Ashton-Tate's dBASE software copyright should be declared invalid.

The judge's reversal "only means that Tate hasn't lost yet," said David Fulton, chief executive of Fox Software of Ohio. "This doesn't mean their copyrights are valid, only that it will be settled a trial."

The dBASE software line is Ashton-Tate's flagship product, accounting for about $180 million of its $231 million in revenues last year.

No general agreement exists among copyright lawyers, stock analysts and company officials on whether losing its copyright would cripple Ashton-Tate's dBASE sales.

Ashton-Tate Chief Executive Bill Lyons has stated emphatically that wouldn't happen and his company would win in court, in any event.

Los Angeles federal Judge Terry Hatter, who had declared the dBASE copyright invalid in December, reversed himself April 18. His second shocker to the Torrance-based software publisher was received with elation this time.

But Ashton-Tate's stock price reacted flatly.

Following a public announcement of the reversal, shares on April 24 spiked to $11 each but settled back to their previous close of $9.875. They fell another 25 cents April 25.

Wall Street's reaction raised the question of whether investors ever took seriously the judge's ruling.

"Everyone in the trade press and in the analyst community concluded that (Hatter's original ruling) was just an outright mistake," said securities analyst Terence Quinn of stock brokerage Kidder, Peabody & Co. in New York.

Nevertheless, the stock's flatness might also reflect concern that Asthton-Tate's challenge is not over. Fox Software CEO Fulton said last week he will pursue his attack on the dBASE copyright.

Securities analyst Charlotte Walker of Labe Simpson Co. in New York said, "I think if there were an out of court settlement, it would be extremely positive for both of those companies."

She predicted a settlement would spark Ashton-Tate shares upward. Walker also claimed a big investor was selling steadily last week, weakening the stock price.

Meanwhile, Ashton-Tate employees were celebrating.

"The cloud is gone," asserted CEO Lyons. He told the Business Journal he was "shocked and surprised" by the judge's April about-face "as much as I was by the December ruling." The judge's April 18 reversal, which contained no written explanation, was received by Ashton-Tate in the mail five days later and announced publicly.

Ashton-Tate is suing Fox on copyright infringement charges. It was Fox that convinced Judge Hatter in December to question Ashton-Tate copyrights.

"We're not concerned or afraid of going to trial." said Fox CEO Fulton, who has filed a counter suit alleging monopolistic practices and trade-secret theft by Ashton-Tate. Fox has claimed that 1986 and 1987 merger talks between the two companies resulted in Ashton-Tate later using some of Fox's software technology.

Two other lawsuits against Ashton-Tate are pending, purportedly brought on behalf of cheated software customers. They were filed after the copyright invalidation, which plaintiffs said proved purchasers were defrauded.

Lyons said Judge Hatter's reversal "immeasurably strengthened our hand" in fighting those lawsuits.

The reversal was significant news to most other software publishers. Among them are computer industry titans that are tied up in similar copyright litigation, like Microsoft Corp., Lotus Development Corp. and Apple Computer Inc.

Hatter's moves are news to Ashton-Tate customers many of them business people who may have worried since December about whether they paid for something that wasn't proprietary.

Ashton-Tate captures nearly half of the approximately $450 million-a-year U.S. sales of database software, which store and manage vast amounts of data.

Lyons said copyright concerns may have "affected the emotions of the purchase-decision process" of customers. But he couldn't estimate the dollar-value at stake, calling it "intangible."

Stock analyst Quinn said Ashton-Tate's market share has slipped no more than 1 percent from its approximate 47 percent share at the time of the December copyright invalidation. "No one has indicated there's been hesitance on the part of the corporations (to buy dBASE) because of this 'copyright' issue," said Quinn.

Still, Lyons said the copyright reversal was not a watershed for the company, because Ashton-Tate officials expected to overturn the original ruling on appeal.

Hatter's December declaration "was an aberration," said LeRoy T. Rahn, patent attorney with law firm Christie, Parker & Hale in Pasadena. "It really came out of left field."

Rahn and others have suggested that Hatter mistakenly applied patent law to a copyright situation. Even the U.S. Copyright Office subsequently issued a statement supporting the Ashton-Tate copyright.

Nevertheless, competitors and critics may not give up easily.

Lyons said dBASE was never truly threatened, because Hatter never entered his invalidation into the court record. Furthermore, a licensing agreement inside the cellophane wrapping of dBASE packaging outlaws copycatting, he said.

Patent attorney Rahn doubted the latter. "I think the 'shrink-wrap license' question is quite questionable. The courts haven't really resolved that yet."

Quinn went further: "The concern was anyone could clone it. And that was true."

Hatter attacked Ashton-Tate's copyright for not disclosing that some of its origins lay in software developed at the Jet Propulsion Laboratory. That reasoning sent shock waves throughout the software publishing industry.

"It would have thrown a monkey wrench into enforcement programs," said Rahn, referring to anti-piracy lawsuits filed by trade groups that serve publishers. Many commercial software programs are derived from existing software.

But a Northern California judge turned down a similar challenge mounted by Hewlett-Packard against Apple over the landmark Windows software technology a few months ago.

Hatter's change of heart gives publishers "occasion to sigh relief," said Rahn.

Revenues from dBASE were up 29 percent for the quarter ended March 31 over the same quarter in 1990. In the previous quarter, however, the dBASE version out on the market was widely considered to be flawed, and a drag on revenues.

The problems with that dBASE version came on the heels of five straight quarterly losses, beginning in mid-1989. The trouble led to the departure of then-CEO Ed Esber. He was replaced by Lyons, who was given the titles of president and chief operating officer.

In December, Lyons garnered the title of CEO and was added to the board. Last week he was made chairman of the board.

The prior week Ashton-Tate disclosed it had further bolstered its stock in the first quarter, repurchasing 221.500 of its shares. The company has now bought back 2.1 million shares of stock within the last year. A total of 25.5 million Ashton-Tate shares are currently outstanding.