Fed. Judge Defers Decision Until Aug. 25 on Injunction Sought by Intellectual Property Suit

August 15, 2003

A federal judge on Thursday deferred until Aug. 25 a decision on whether to issue an injunction against San Diego-based Arrowhead General Insurance Agency Inc.’s use of certain computer software.

The deferral of Southern District Chief Judge Marilyn Huff’s ruling on the injunction sought by California-based Westbourne International Inc. underscores the complexity of the issues involved in litigation brought by Westbourne against Arrowhead, Francis Ruyak, Arrowhead president and CEO, commented.

“Judge Huff is considering a very complex question of copyright claims that are restricted to isolated elements of software used by Arrowhead,” Ruyak said. “The complexity and technical nature of these issues require the judge’s time for consideration. Contrary to statements issued to the media by Westbourne that Judge Huff was expected to issue an injunction on Aug. 14, an injunction was not issued and a final decision has not been rendered on all issues.”

An eight-day jury trial before the U.S. District Court for the Southern District of California was concluded Monday (Aug. 11), with a finding by the six-member jury on behalf of Westbourne’s intellectual property suit. However, said Arrowhead’s counsel, important information that could cause the reversal or modification of a judgment on the jury’s decision is in motions now pending before Judge Huff. He further noted that Westbourne was a subcontractor to a software firm that Arrowhead had engaged to develop software for it.

“What is beyond dispute is that Arrowhead and its customers are not presently enjoined from use of certain of our software,” Ruyak said. “Contrary to unfortunate and premature statements by Westbourne in a news release and in communications to one or more of our business partners, no injunction has been rendered that would limit use of Arrowhead’s automated insurance pricing capabilities.” However, Ruyak also noted that, “in any event, Arrowhead is currently exploring alternative options that may end any further controversy over continued use of the software.”

“Westbourne’s communications contain allegations of wrong-doing on the part of Arrowhead executives that we believe are reckless and not supported by the evidence in the trial record,” he said. “We fully believe that the verdict will be reversed or modified upon post-trial proceedings, and that Arrowhead will ultimately be found to have lawfully used the software in question.”

A federal jury on Monday ordered privately-held Arrowhead General Insurance Agency, Inc. to pay $5,823,000 in damages to privately-held Westbourne International, Inc. for reportedly infringing Westbourne’s copyrighted insurance-pricing software.

Westbourne filed suit in federal court in May 2001 claiming Arrowhead, one of the nation’s largest privately held managing general agents, had used Westbourne’s PrimeRater™ software without permission and created illegal derivate works based on the software. Using Westbourne’s software, Arrowhead reportedly launched YouZoom.com, an online insurance portal, and licensed the technology to over 170 companies, including Bank of America and e-Trade.

During the eight-day trial in the U.S. District Court for the Southern District of California, Westbourne reportedly presented evidence that Arrowhead executives consciously ignored Westbourne’s copyright notices, and that Arrowhead employees destroyed and altered documents in an attempt to cover up the infringement.

According to Arrowhead’s financial records, Westbourne’s PrimeRater software reportedly generated over $85 million in commission revenue for Arrowhead.

Martin Desmond, Westbourne’s 28-year-old founder, who started the company in 1997, commented, “This has been a long and difficult road for us, and I’m thankful that the jury saw through the lies and deception.”

Westbourne’s trial counsel, Gregory Dovel, of Dovel & Luner LLP, a Los Angeles law firm specializing in intellectual property litigation, commented, “This is an example of a large company who thought they could rip off a small start-up firm and get away with it. We proved them wrong.”

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