CashEdge Inc. and Yodlee Inc. both say a legal ruling has given them the advantage in their patent-infringement battle.
However, most of the decisions in the ruling, over how to interpret a variety of disputed patents, favored Yodlee, and one analyst said it likely would give the Redwood City, Calif., aggregation software vendor the upper hand.
Still, CashEdge said that some of the most important issues were decided in its favor, and that it expects these issues to be an important factor in its fight against Yodlee.
Both companies sell software that aggregates information from accounts at multiple financial companies and displays it on a single Web site. Each company alleges that the other is using patented technology illegally to do so.
Yodlee filed a patent-infringement suit against CashEdge in April 2005, asserting that six of its patents had been infringed. CashEdge invoked three other Yodlee patents in its defense of that suit, and it filed a countersuit in March.
On Friday, Judge Susan Illston of the U.S. District Court for the Northern District of California, who is hearing Yodlee's suit, issued a so-called Markman ruling, which defines the basic patent issues at stake in an infringement case.
(The Markman hearing for the CashEdge case is expected to take place next year.)
Joseph Polverari, Yodlee's senior vice president of strategy and development, said in an interview Wednesday, "From our perspective, we think it was a highly desirable result." The judge favored Yodlee's interpretation of six of the nine patents in dispute, and those six are the ones "that really matter."
Sanjeev Dheer, the chief executive of CashEdge, of New York, said that even though the judge favored Yodlee's interpretations of most of its patents, the few interpretations in his vendor's favor are critical, because they undercut several of Yodlee's key assumptions about how its technology works.
One of the issues centers on the definition of "nonpublic information" and how it is collected, he said.
The issue has come up before, in a pair of suits pitting Yodlee against Block Financial Corp. Block sued Yodlee in January 2002, and Yodlee countersued in September 2003. The two companies settled out of court last year.
In the Markman hearing for Yodlee's suit against Block, the court defined "nonpublic personal information" as data that cannot be accessed or retrieved without some kind of verification method.
However, Mr. Dheer said "the court did something very significant," in the ruling issued last week. "It disagreed with the findings of the Yodlee interpretation" in the suit against Block.
Judge Illston wrote, "Nowhere does the patent limit 'nonpublic' " to information that requires verification. She then sided with CashEdge's definition: "information that is personal to a specific end user and not accessible to the general public."
According to Mr. Dheer, that interpretation was important because it "rendered a vast majority of their patents irrelevant" to CashEdge. "We access information differently from the way public information is defined here for the purpose of the patent."
However, Mr. Polverari said CashEdge is making too much of that interpretation. "It's easy to do a selective reading of any court decision."
The sheer volume of issues that went in Yodlee's favor indicate that the vendor has the stronger case, he said.
Yodlee's suit includes 149 claims of infringement, and "all we need to nail them is one infringement of one of these 149 claims," Mr. Polverari said. "Out of 149 claims, the likelihood of us hitting a majority of them is significant."
He also said that Markman rulings are an important indicator of how patent cases are eventually decided. "It's very important, as a party, to get your interpretation" validated at the Markman hearing. "Oftentimes, it's the difference between winning and losing."
Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, said that "these are pretty strong rulings in favor of Yodlee," despite Mr. Dheer's positive claims. "That's the reality."
CashEdge's aggregation software is integrated with several online banking products, including Online Resources Corp.'s Money HQ.
However, aggregation is only part of CashEdge's business, said Mr. Schatt, who was the general manager of Yodlee's data services business from 2002 to 2004. For example, its account-opening and funding software is an important part of its business and relies very little on aggregation, he said.
For CashEdge, the ruling "doesn't spell complete doom," Mr. Schatt said. Nevertheless, "I think that CashEdge is going to be ultimately forced to be out of the aggregation business," and "they've already got one foot out the door as it is."
CashEdge's claim Tuesday that the ruling would help its case was less of a victory shout and more of a marketing move to "get something positive out of something that's pretty strongly in favor of Yodlee," he said.
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said the case may eventually be resolved not in the courts, but by an acquisition. In another recent patent-infringement fight, Solidus Networks Inc. of San Francisco and BioPay LLC of Herndon, Va., resolved their legal issues in January, when Solidus purchased BioPay.
"It's probably a good idea" for Yodlee and CashEdge to consolidate, she said.
