News

Software stalemate

Executives at Seren Systems Inc., a California software development company, have dropped out of settlement talks with Greenland Corporation, in a protracted legal battle over check-cashing software.

January 16, 2002

The owner of Seren Systems Inc. said he dropped out of settlement talks with Greenland Corporation because he didn't think Greenland could pay if a decision was made in his favor.

Seren, a privately-held software development company specializing in ATM, check cashing and related software technologies, has dropped out of talks with Greenland, an ATM developer and manufacturer, in a seven-month dispute.

The case has bounced around a number of California courtrooms since last fall, and an arbitration case is still set for a September hearing. Both companies claimed ownership of software developed by Seren for Greenland. The software, called onecash, is used to operate Greenland's MaxCash automated banking machines.

Seren President Michael Root said he didn't see any point in continuing settlement talks.

"We see no future with Greenland," he said. "We feel the Greenland case is over. Even if we win, we're probably not going to get anything, because I don't think there's going to be any money left in the company. Based on everything, we're sitting really well. A lot of companies have contacted us, so we're moving forward."

Both sides claim the software was worth millions, and both companies have sought full ownership, plus a cash award, through arbitration proceedings.

Seren began settlement talks with Greenland in February after T.A. "Kip" Hyde, Jr. became Greenland's new president and CEO. Several attempts to reach Hyde for comment on the case were unsuccessful.

In a news release announcing the temporary suspension of Greenland's Check Central subsidiary check processing operations, Hyde said, "The software developed by Seren Systems for Greenland and currently used in the Check Central operation is not capable of managing check processing risk to acceptable levels."

He added, "More importantly, since the Seren originated dispute has restricted our access to much of the underlying source code, there are no short-term remedies available to correct this system's limitations and the resulting virtually unlimited check cashing risk."

Greenland also halted sales and distribution of the MaxCash™ automated banking machine.

Lou Montulli, the former Greenland CEO who resigned that month, had said that Greenland had already paid more than $2 million to Seren for its software. In a January interview with ATMmarketplace.com, he said he intended to win the case.

In response to the Greenland court action that brought the case to court, Seren filed a $700,000 countersuit.

"The settlement discussions with Greenland broke down when it became clear to us that Greenland does not have the financial backing necessary to either purchase joint IP (intellectual property) rights to the Trinity® software suite or to successfully market our product," Root said.

Trinity® is Seren's middleware that provides support for check cashing, payday loans, money order and phone card transactions in addition to traditional ATM-type transactions.

Two types of software were initially in question: the onecash software that sits on Greenland's ATMs and Trinity®. The current arbitration is to address issues with onecash.

Seren began developing software for Greenland in June 1998. Seren wrote source code, which ultimately provides executable code for the company to run its machines. The second contract between Seren and Greenland ran from November 1998 to November 1999. When the agreement expired, Root said Greenland chose not to renew the contract. Root said Greenland wanted him to become an employee of the company and sign over all software rights.

"And I said, 'of course not'," Root recalled.

Root said that after November 1999, there was a six-month period when there was no contract agreement between the two companies.

According to Root, the companies entered into an agreement in June 2000 to work on the back-end management of automated check-cashing transactions for 7-Eleven convenience stores. The nine-month agreement began in July. Two months later, Root said Greenland stopped paying for Seren's services.

"They didn't pay us, so we terminated the contract," Root said. "They breached the contract, and we terminated the contract."

In October, Greenland filed a lawsuit against Seren, claiming ownership of the onecash software. Greenland also obtained a temporary restraining order against Seren to prevent Seren from doing anything to harm or modify the software and other related technology.

Due to the restraining order, Seren stopped work with Greenland pending a Nov. 3 hearing to address Greenland's suit over software ownership.

Greenland contacted the American Arbitration Association on Oct. 12, and the two companies entered into arbitration hearings through the association.

Root said Greenland filed the same suit in three different California jurisdictions. In November, San Diego Superior Court Judge Vincent P. DiFiglia denied Greenland's two legal claims. In the first case, Judge DiFiglia ruled that Greenland had submitted insufficient evidence to establish ownership of the software and related technology. DiFiglia also ruled against the second suit, an attempt to acquire other unique software that operates the ATMs.

The third claim, with the American Arbitration Association, is set for a hearing in September.

"Obviously, we have a strong case, because we've won all the court cases," Root said about Seren, which employs eight people. "The judges ruled in our favor on the November contract and the other contract in September was not a work for hire. It was just a development contract for executable code. That was clearly specified in there, and they breached it."

A Greenland employee who answered a reporter's phone call stated that the company is awaiting conclusion of the arbitration in September.

Seren does not plan on walking away from the arbitration.

"We plan on pursuing arbitration to legally gain all title and rights to the software that Seren Systems has developed and owns," Root said.