Claiming that its principal rival SAP AG has infringed upon seven of its core patents, i2 Technologies Inc. has filed a suit in U.S. District Court in Dallas seeking damages and an injunction against the software giant.
The suit -- filed against SAP Americas Inc. and parent company SAP AG -- alleges that the company has infringed on patents awarded to i2 between 1998 and 2006. The patents cover such innovations as supply network models and frameworks for process planning, factory planning, tracking of sales, product allocation, and managing available-to-promise processes.
i2 President and CEO Michael McGrath said in a prepared statement, "We believe that it is critical to protect our patent innovations and, accordingly, took these actions today against SAP."
i2 officials declined to answer questions about the suit.
SAP officials likewise declined to discuss the specifics of the legal action. "It's in the hands of our attorneys," said SAP spokesman Steve Bauer. "In the meantime it's business as usual for us."
Analysts today said they were surprised by the suit, which comes several years after SAP first entered the supply chain market with its Advanced Planning and Optimization product. Since then, SAP has steadily gained SCM market share from pioneers including i2 and Manugistics, which earlier this year was acquired by JDA Software Group Inc.
With SCM software revenues of $654 million, SAP captured 12% of the total market in 2005, according to AMR Research, Inc. That was up from an 11% market share for SAP in 2004.
AMR estimates that SAP's SCM revenues will grow by 8% between 2005 and 2006.
i2, meanwhile, has been steadily losing market share to enterprise suite vendors SAP and Oracle. i2 was ranked third by AMR with 5% of the fragmented SCM market in 2005. Its share is expected to sink to 4% in 2006, with its SCM revenues dropping 6%, according to the research company.
After a very rocky period of shrinking revenues and heavy losses early this decade, i2 has begun to right itself. In recent quarters, the company has reported thin profits, mostly as a result of cost-cutting. The company also has introduced a new generation of SCM applications that is built around a service-oriented architecture.
Despite this progress, however, i2 has continued to see revenues -- particularly software license revenues -- slide, at least partly because of some manufacturers' preference for buying supply chain management software from their ERP suite providers. i2 has also blamed a relatively flat market and customers' growing preference for deploying SCM software incrementally rather than all at once.
"It could be that i2 felt it wasn't making as much progress in the market, and this lawsuit is the result," said Colin Snow, vice president and research director at Ventana Research.
Still, Snow said, it is surprising that i2 would choose to initiate a patent suit now. The company has only recently begun to get out from under a number of lawsuits that, by McGrath's own admission, had served to raise viability questions about the vendor in the eyes of some potential customers.
For example, i2 has settled a class action suit against it involving the performance of its stock. And some former members of the company's management team have settled charges, brought by the Securities and Exchange Commission, that they misstated i2's financial results.
"Mike [McGrath] has talked about being glad to be done with all the lawsuits, so my first reaction to the new suit was, 'Gosh, why would i2 start a whole new round of litigation now?'" Snow said.
He said the i2 suit is unlikely to cause potential SAP SCM customers to pause or rethink their decisions. It may, however, have an impact on i2 customers, he said.
"This could just backfire on i2," Snow said. "Customers may say, 'I thought we were done with this.'"