Why BMC’s Win in Markman Hearing Suggests ServiceNow Customers May Be Exposed

Rob Enderle
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State of IT 2015: Mid-Year Check-In

In a patent case, the Markman hearing is one of the most important, and BMC just won one against ServiceNow. What this showcases is a pattern of behavior in ServiceNow that appears to put customers at risk and includes a mismatch of litigation skills against the exposure.

However, the important takeaway is that ServiceNow has reached a size and scope where an adequate patent defense becomes a critical part of assuring ServiceNow’s customers aren’t adversely impacted by patent litigation, and ServiceNow doesn’t appear to be focused on building that defense. This increasing exposure should be taken into account when using this vendor.

Let me walk you through it.

Markman Hearing

The name of the Markman hearing comes from a Supreme Court case on bar code scanning between Markman and Westfield, in which the district judge had entered a directed verdict overriding the jury because the judge felt the jury was incorrect as a matter of law. The Supreme Court later held that the court could determine what the patent means, and this process is now called a Markman hearing.

In effect, this defines the language in the patents that are being contested; it doesn’t necessarily validate the patents, but, for the winner, it does validate much of the foundation work that has so far gone into preparing for the trial. It also provides an early look into the capabilities of both teams and the strength of their strategies. In this fashion, BMC’s win gives it a significant advantage as it approaches the trial on March 16th of next year and in any settlement discussions that might occur until then.


The Art of Following Litigation

I believe if more people understood how these fights are fought that we could save a ton of money on legal fees and avoid a huge number of unnecessary trials. Often, one side or the other has an untenable position and if they just accepted a reasonable settlement, they’d be far ahead financially. But emotions and a lack of experience lead to massively expensive court actions that result in harming both parties beyond what is reasonable. Granted, there are also clearly times when the firm or person knows they have done wrong and uses litigation and luck in the hope that they’ll get an undeserved favorable ruling. In my view, that is a misuse of the legal process, particularly when the harmed party can’t afford the legal expenses that the attacker can field. That isn’t the case here, as BMC can certainly afford to fight.

In a trial like this one between BMC and ServiceNow, first look at the history of both firms and how often they get into litigation and which side they are on. A quick search on patent litigation shows two data points for ServiceNow as infringing against HP and BMC. A BMC search only shows the ServiceNow action and ServiceNow is accused of infringing. It should be noted that HP is very aggressive at protecting its patents. But we do have a trend with two datapoints, and HP’s claim appears similar to BMC’s, suggesting that ServiceNow is more likely in the wrong so will need to out-execute BMC in order to prevail.

This then takes us to execution.

Litigation

The Importance of Markman

In a Markman hearing, you typically have a judge that understands technology and both sides use a unique class of attorneys that blend legal and technical skills to argue one of the most technical aspects of the dispute: the definition of the dispute itself. A typical Markman ruling tends to be somewhat balanced between both sides if the team execution is equivalent. This is because neither side is going to take a position that it can’t successfully defend. This balance, or lack of it, thus speaks to the relative competence of the legal teams.

In this instance, the ruling was almost entirely in BMC’s favor, which suggests that ServiceNow’s position may be untenable and/or its litigation team is overmatched. Given the history with HP, both have a relatively high probability of being true and, in fact, the harder it is to win a case the more competent the legal team has to be to prevail. This ruling suggests that BMC’s team is adequately provisioned, while ServiceNow’s is not.

While this doesn’t assure BMC will win, it gives it a significant advantage going into the trial because the battle has been defined in accordance with BMC’s wishes. This would be like a duel where one side can pick both the location and weapons before going into the battle and, as you would expect, is particularly proficient with the choices it made.

Products in Contention

By means of background, here are the technologies in contention that likely should be avoided if they come from ServiceNow to mitigate the related risk:

  • Incident Management and Problem Management
  • Performance Analytics
  • Configuration Management, including ServiceNow’s Configuration Management Database (CMDB)
  • Discovery
  • Orchestration
  • Change and Release Management

Wrapping Up: ServiceNow Customers at Some Risk

I see litigation like this as a waste of money. If, as I suspect, ServiceNow has made a practice of violating the intellectual property of others, it would be far cheaper to either develop or buy patents it can use to create a stronger patent defense (where one side uses potential infringement of its patents to offset the infringement it is doing) or a practice of actively licensing patents. This provides a far more controlled way to deal with this problem because litigation can be like playing Russian Roulette, in that a court ruling can result in unaffordable fines and/or the removal of critical products from market (not to mention putting customers in harm’s way).

The practice that ServiceNow appears to be using could end very badly. If you are using any of the products in contention, you might want to put in place a plan to replace them should, as I expect, the final judgment go against ServiceNow. However, it isn’t the Markman ruling itself that creates the problem for customers, it is the practice of not building an adequate patent defense to assure customers aren’t put at risk due to adverse patent rulings, which will be increasingly common for a firm of ServiceNow’s size and scope.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+



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