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Trademark suit complicated IBM's takeover of SPSS; company nears settlement with co-founder

Update: SPSS announced at 3:30 p.m. that it has reached a settlement with Norman Nie regarding the trademark litigation. Terms of the settlement were not disclosed, and the company said it would have no further comment on the issue.

Normally when a company is involved in litigation significant enough to be noted in its annual report the potential liability is resolved before any merger is consummated.


In the case of SPSS Inc., a Chicago-based software company, IBM Corp. went so far as to threaten to reduce its $50 a share offer to take over SPSS because of a trademark suit by a co-founder.

But now IBM is steaming ahead with its $1.2 billion offer to buy SPSS as if the litigation didn't matter. SPSS shareholders will vote next Friday on the merger offer while the trademark suit is slated to go to trial three days later in Chicago federal court.

SPSS is in negotiations to settle the suit, and a source said a settlement could be announced as soon as Friday.

The situation illustrates how the value of a name apparently can be trumped by an even bigger name.

The SPSS name derives from a computer program known as Statistical Package for the Social Sciences. The full name of the software is clunky so the acronym is widely recognized, Barry Wellman, a sociology professor at the University of Toronto said. "It's like IBM."

But it's not IBM.

"If SPSS were to remain an independent company, then the brand was pretty material to the company," said technology consultant Dick Reck, who advised SPSS from 1985 to 2002. "When you are absorbed into a worldwide technology company that dwarfs SPSS, the importance of that name becomes less meaningful over time."


Even before IBM's proposed acquisition was announced on July 28, SPSS had begun de-emphasizing the trade name. In April, the company announced that the entire portfolio of SPSS software will start carrying a new name, "Predictive Analytics Software," or PASW for short.


Nie's attorney, Peter Baugher of Chicago-based Schopf & Weiss, said the name change is tied to the lawsuit. A company spokesperson directed the Tribune to the company's news release that said the new software name will unify the company's product families.


Baugher said the price IBM is willing to pay for SPSS shows that the trademark is a valuable right that his client isn't willing to give up without a fair price. IBM's offer represents a 42 percent premium over SPSS' closing price on July 27, the day before the acquisition was announced.


"The company asked him to transfer the trademark rights for $10," Baugher said. "What IBM is willing to pay reflects in part the trademark that he owns."

Nie, 66 years old, would not comment for the story, Baugher said. IBM and SPSS also declined to comment for the story because the merger and the litigation are pending.

The bitter dispute over control of the SPSS trademark seems an unusual question to come up for a company that is more than 30 years old.

Nie worked with two friends to create the software in 1960s while he was a graduate student at Stanford University. In 1968, Nie moved to the political science department at the University of Chicago, and brought the software and one of his friends, C. Hadlai "Tex" Hull with him.

Together they continued to refine the software and distribute it to other universities. Tom Smith, a senior fellow at Chicago's National Opinion Research Center where Nie and Hull also worked, remembers the excitement around the software.

"They created a product that was cutting edge," said Smith, who helped mail SPSS instruction manuals to universities. "It allowed scientists to analyze data easier by an order of magnitude."

Soon the software business became too big for the university and Nie and Hull formed a separate company called SPSS in 1975. In forming the company, Nie and Hull registered as owners of the "SPSS" trademark and licensed the mark to the company. The agreement provides the company with an exclusive, perpetual, worldwide, royalty-free license.

Nie helped expand the company's customers beyond other social scientists like himself. The software now is one of the most widely used analytical tools in government and business intelligence. SPSS had revenues of $302.9 million in 2008.


Nie was chief executive until 1992, the year before the company went public, after which he served as chairman of the board. But as chairman, according to court papers, Nie "found himself increasingly at odds with company management and other board members on important matters of company strategies, operations, investments, acquisitions, product development priorities and product quality control." In 1998, Nie left the University of Chicago and returned to Stanford.


In May 2007, according to Nie's claims, SPSS asked him and Hull to transfer ownership of the trademark to the company. SPSS offered them $10. The proposal jogged Nie's memory about the 1976 license agreement, which was still in effect, according to court papers. He had had completely forgotten about it, Baugher said.


Nie notified the company in October 2007, after reviewing the license deal, that he intended to assert his legal rights under the license, which he claimed included the right to inspect and approve products sold under the SPSS trademark and to obtain other information regarding those products. According to public filings at the time, the company depended on the mark to promote the sale of virtually all of its technology, solutions and products.


In addition, Nie asserted that the trademark was more likely worth tens of millions of dollars.

The company balked at his demands and on Dec. 31, 2007, went public with the dispute. In a public filing, the company said Nie and Hull wanted $20 million for the trademark. SPSS' net income in 2007 was $33.7 million.


Three days later, SPSS filed a lawsuit in federal court, seeking to stop the founders from enforcing any rights under the license agreement. Nie resigned as chairman the same day and the board immediately replaced him with CEO Jack Noonan. At the time the suit was filed, Hull was a SPSS employee but he was laid off sometime last year, Baugher said.


"Norman feels a great amount of pride and loyalty in the company and its products and the people associated with it," Baugher said. "This was very disappointing to him."


On Jan. 28, 2008, Nie and Hull filed counterclaims against the company, asserting that SPSS is infringing on their rights as owners of the trademark. The company has denied their allegations in court papers. Hull has since assigned his claims to Nie and is no longer part of the case.

The case was scheduled to go to trial in May but the judge postponed it. Little did Nie and his attorney know that at the time company was in the middle of negotiations with IBM. In June, IBM's negotiator told Noonan that SPSS would have to accept a lower price than $50 a share or delay the timing of the transaction, according to SPSS' proxy materials.


SPSS rejected the price reduction but agreed to slow the pace of negotiations while the litigation was addressed. On July 23, IBM came back and said it would proceed with the acquisition at the previously agreed upon price.


"That tells me that IBM felt the price offered was fair including the litigation risk," Reck said.

Source:http://newsblogs.chicagotribune.com/chicago-law/2009/09/trademark-s...

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Here is the update :
SPSS Settles Trademark Case
September 28 2009

MR software giant SPSS has announced that it has settled its trademark case with company founder Norman Nie over use of its name. The company is due to put its $1.2 billion acquisition by IBM to shareholders’ vote this Friday, while the litigation was due to come to trial the following Monday.

Financial terms of the settlement were not disclosed but Peter Baugher, an attorney for co-founder Norman Nie, said that Nie will transfer ownership of the mark to SPSS.

SPSS originated as an acronym for Statistical Package for the Social Sciences. Earlier this year the company introduced a new four-letter acronym for its entire software portfolio, PASW – partly reflecting its focus on the idea of predictive analytics, prominent in its marketing for some time, but also serving to dilute the importance of the original abbreviation.

Neither Nie, 66, or SPSS would comment further on the settlement: IBM has also declined to do so. Nie created the forerunner of the software in the 1960s with two friends including ‘Tex’ Hull, while a graduate student at Stanford University. The two formed a separate company called SPSS in 1975 and registered themselves as owners of the SPSS trademark, which was then used by the company under an exclusive, perpetual, worldwide, royalty-free license. Nie was CEO until 1992, and then Chairman. In 2007 the company reportedly asked Nie and Hull to transfer ownership of the trademark to them, offering a nominal $10 for it: Nie and Hull are then then said to have asked for around $20 million, at which SPSS filed a lawsuit in federal court to stop them from enforcing any rights under the license agreement.

Nie and Hull countered in January 2008 with claims that SPSS was infringing their trademark rights; Hull later assigned his claims to Nie and has dropped out of the case.

During the IBM negotiations, in June, the computer giant mooted a reduction of the offer price if the suit was still ongoing, although this was rejected by SPSS, which agreed to address the litigation promptly: last week it apparently made Nie a new offer, which it seems safe to speculate was somewhere between ten dollars and twenty million...
Strange like a company like SPSS treats its founders. Offering just 10$ for a valueable international brand name to one of the founders and laying of the other founder. Respect and gratefulness look different. That leaves quite a bitter taste...

And from a marketing perspective, introducing a strange acronym like PASW to replace a well-known brand like SPSS also does not seem to be the smartest move...

I am really excited to hear, which extra-ordinary decisions the current SPSS top management will come up with next...

Anyway, after IBM's acquistion of SPSS, there is one independent data mining and predictive analytics software vendor less on the list and others like SAS, KXEN, Rapid-I, etc. will be happy to fill any gap left behind...

Just my five cents... ;^)
And as the world keeps turning, interesting things happen:

In October 2010, SPSS founder and former SPSS CEO Norman Nie finds a new home and becomes CEO for REvolution Computing (see news at B-Eye-Network, Reuters, and REvolution Computing).

So, what did the newly assigned CEO do as one of his first actions in office and with 9 million US dollar of fresh capital?
He fired half of the REvolution team including all founding members of REvolution Computing:

The REvolution blog entry on the acquisition drew a lot of angry comments and left me wondering how such a move will benefit REvolution and its development and how the customers feel about it. Usually, the founders of a company are the most powerful driving force in the successful development of a start-up company. To kick them out from one day to another sends a strange signal. Some former team member left behind by this revolution also expresses her feelings and thoughts about this unexcpected move. And REvolution concludes We live in interesting times.

Well, I guess so. SPSS lays of one of the SPSS founders and the other SPSS founder now heads another data mining company laying of the founders of that other company. What a strange way to develop companies, to do business, and to treat each other. From the other side of the atlantic ocean this almost looks like a sureal comedy. Except that it must hurt to be kicked out of a company you built up yourself with a lot of effort. So it is not really funny and not really a comedy. Just a strange way of developping a business or maybe ruining it. We will see...
...how SPSS will develop under the hood of IBM/Cognos and where REvolution's way will lead to.

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