Web fight – Duel in court

By Todd Cohen

A legal battle is unfolding between two Internet firms that target nonprofits

Kintera, an Internet marketing firm specializing in Web-based software to help nonprofits manage fundraising events such as races, has settled its trademark-infringement lawsuit against Convio, an Internet firm that markets Web-based systems to help nonprofits manage relationships with donors and other constituents.

But a day after announcing the settlement, Kintera filed a second lawsuit charging Convio with stealing trade secrets and infringing on its copyright.

The court fight reflects growing competition among firms offering “customer-relationship-management” software, known as CRM, that collects data on past, current and prospective customers, tracks their activity and aims to help build relationships with them.

With big online charity sites like CharitableWay and GreaterGood having failed or been sold, e-philanthropy firms are posed to compete fiercely to provide CRM tools, says a new study on Internet-based social enterprise prepared for the Flatiron Foundation and The Atlantic Philanthropies.

In a news release issued Feb. 12, Kintera says it “achieved complete victory” in its trademark suit, filed in federal court in December 2001.

The suit claimed Convio’s Friend2Friend product aimed to trade on the value of Kintera’s Friends Asking Friends product.

Vinay Bhagat, founder and CEO of Convio in Austin, Tex., says the settlement with Kintera “had no findings or admissions of infringement or fault, and no money changed hands, and each party paid its legal fees.”

He says “friend-to-friend marketing has been a generically used term in nonprofit circles for years relating to people asking for money from their friends.”

Convio agreed to change its product name – to TeamRaiser – because “we wanted what we believed to be a lawsuit without merit to go away, and to avoid incurring unnecessary legal costs,” Bhagat says.

On Feb. 13, the day after Kintera announced the settlement, the company returned to U.S. District Court for the Southern District of California and filed suit alleging theft of trade secrets and copyright infringement.

Kintera alleges that Convio “unlawfully and surreptitiously obtained Kintera’s confidential and proprietary computer codes and other software.”

Kintera also alleges Convio employees told it that, despite their objections, Convio had directed employees to use Kintera’s trade secrets for a variety of purposes, including development of software and interactive Web sites for third parties.

“I’ve never seen anything like this,” says Harry Gruber, CEO and chairman of San Diego-based Kintera. “This is the stuff that mysteries were written about.”

Bhagat says the claims are “without merit” and that Convio will “defend ourselves vigorously.”

The new lawsuit is “a desperate act to try to change the battlefield from the marketplace to the courtroom,” he says. “We see this as a from-left-field competitive tactic.”

Kintera has raised $19 million from investors, handled more than 100 events and 100 customers in 2001 and already has commitments to handle more than 1,000 events this year, says Gruber.

The company, which is not yet turning a profit, expects to sell stock to the public for the first time this year, he says.

Convio, which has raised roughly $20 million from investors, has 40 customers, up from 10 a year ago, and expects to double its customer base again this year,” Bhagat says.

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