In January 1997 executives of Loan Pricing Corp., a giant of the syndicated loan-information business, sat down with executives of Intralinks Inc., an infant high-tech firm, to talk about a partnership.
Both sides thought Loan Pricing's data and Intralinks' on-line trading platform would make a perfect combination for the booming $1 trillion loan syndication business. Together, the two companies would create a single source for on-line syndication services and for highly regarded industry statistics.
But talks broke down after a few months. And what could have become an alliance instead became a heated feud.
Loan Pricing launched its on-line syndication system in December 1997- six months after Intralinks unveiled its own version. Intralinks then added loan statistics to its product, effectively challenging Loan Pricing to a battle for the market.
Now a legal battle between the companies details how bloody their fight has become. Employees have jumped ship, alliances with rival companies have been formed, and Loan Pricing has accused Intralinks of stealing trade secrets.
Today in New York Supreme Court both sides are scheduled to argue that allegation. Specifically, Loan Pricing will try to prove that a former employee, now with Intralinks, took more than paper clips when he left the company.
At issue is a 78-page customer list Loan Pricing says was taken by James Beeks, who had worked extensively on marketing Loan Pricing's on-line product between 1996 and July 1997 when he was hired away by Intralinks.
In its court filing, Loan Pricing calls the customer list its single most important marketing tool. In an affadavit, Loan Pricing chief executive Arthur P. Davis says the list took 13 years to complete and "the expenditure of millions of dollars in resources."
Loan Pricing has also named Mr. Beeks in its lawsuit. The company says he broke a contractual obligation not to share Loan Pricing data with anyone outside the company.
Chances are Loan Pricing might never had discovered the list was missing had it not been for Howard P. Schipper, former head of Intralinks' European sales force. Mr. Schipper, hired in January, met Mr. Beeks at Intralinks New York headquarters about a month later. There, Mr. Beeks handed Mr. Schipper a copy of the list.
"Jim asked me to return the document," Mr. Schipper said in an affadavit, "and expressed some concern that he should not have shown me the document in the first place."
Mr. Schipper says he photocopied the list before returning it to Mr. Beeks. A month later, Mr. Schipper quit Intralinks. And on April 16 he turned over the copied list to Michael F. Sepesi, Loan Pricing's chief financial officer.
On April 29, Loan Pricing filed suit against Intralinks and asked Justice Barry Cozier to issue a temporary restraining order keeping Intralinks from using the customer list. The motion was denied, in part, because Intralinks promised not to use it.
In an interview last week, Mark Woods, Intralinks chief executive, didn't deny that Mr. Beeks has the document. But, he says, the information on the list was readily available to the public.
"This is about a guy who left Loan Pricing with a box of crap off his desk," he said. "We don't need the list."
Bob Crooke, a spokesman for Loan Pricing, said the company is declining comment during the case. But an affadavit by Mr. Davis indicates Intralinks is viewed as a serious threat and that it obtained the customer list at a "critical competitive moment."
"Intralinks now competes directly with LPC," Davis said. "Intralinks has misappropriated LPC's single most valuable marketing asset and now can use that asset to eclipsing LPC in the market thereby inflicting irreparable harm."
Mr. Woods says the lawsuit against his company is a competitive tactic by Loan Pricing, which feels threatened by Intralinks. "We're doing significantly more business and we're truly the dominant player" in on-line syndication, he said.
Intralinks, according to Mr. Woods, has syndicated 65 loans, representing some $60 billion. Loan Pricing, meanwhile, has handled 10 deals worth $5 billion, said Lou Provenzano, its marketing director.
Mr. Woods acknowledges that competition between the two companies has been intense. After negotiations for a partnership melted down in the spring of 1997, Intralinks immediately entered into an agreement with Loan Pricing's rival for loan statistics, Securities Data Co.
Suddenly, Intralinks, which was less than a year old, was at nearly even strength against the 13-year-old industry leader, Loan Pricing, a unit of Reuters Group PLC.
Intralinks was founded by Mr. Woods, a former Kidder Peabody & Co. vice president, and John Muldoon, a former chief financial officer for the money management firm, Perry Corp. It was the duo's second venture. The first was ProspectusPlus, an on-line documentation service.
The team decided to expand that experience to the syndicated loan market. With backing from a partnership that included former Apple Computer Inc. chief John Sculley they opened Intralinks in the summer of 1996.
When Intralinks' on-line syndication system was launched last summer it not only had the advantage of being first-it had access to the same type of lending data on which Loan Pricing had built its franchise a decade ago.
Loan Pricing struck back. It unveiled its system, LoanMail, in December 1997 to syndicated lenders who already subscribe to Loan Pricing's other products.
In addition, the company continues to update the product, now called LoanConnector, regularly. A new version was released last week that tracks investor activity, offers deal calendars and gives more statistical data. Its greatest asset, in the words of Mr. Provenzano: "It's free."
Still, Loan Pricing continues to lag in the on-line syndication market, Mr. Provenzano said.
That disparity could be further widened should Loan Pricing lose its suit, according to Loan Pricing's court filings. For Intralinks there is the threat of its reputation as a innovative, bright product maker being tarnished.
"I feel like we've been sideswiped," Mr. Woods said.
