<p>AUSTIN, Texas – Two Internet banking firms serving credit unions may soon be battling it out in court as one has made some serious allegations against the other in a recently filed lawsuit. Internet banking firm FundsXpress has filed suit against competitor Digital Insight for allegedly stealing and misusing trade secret information; copyright infringement; unfair competition; and interference with contractual relationships. FundsXpress is seeking $75 million in damages. In the suit FundsXpress claims that, "Beginning in 2001, Digital conspired with ex-employees of FundsXpress to steal trade secrets and other confidential proprietary information of FundsXpress for the purposes of destroying or severely damaging FundsXpress' ability to compete with Digital." Much of the suit revolves around three former FundsXpress employees – Gifford A. Dunn, Ronald Goffman, and G. Stephen Crain – who were hired by Digital Insight, and allegedly leaked trade secrets to Digital Insight. These employees all signed nondisclosure agreements with FundsXpress, which FundsXpress is claiming they violated. "What we're claiming is that Digital acquired a number of our trade secrets and confidential information, most notably pricing, timing and customer information, that they used to help them and hurt us in competing," said Peter A. Nolan, an attorney with Winstead Sechrest & Minick P.C., the law firm representing FundsXpress. A major legal aspect of the case is going to be establishing what, in terms of Net banking firms, is a trade secret. Digital Insight CEO John Dorman said that pricing information for Net banking firms is floating all over the industry, and he doesn't consider it a trade secret. "What they claim as trade secrets, we don't see as trade secrets. What's being talked about is information about pricing, information about demos. You're not talking about anything involving source code. It's sales information," said Dorman. "This is information that is readily out there in the public domain. To allege deep, dark trade secrets is over the top." Nolan said that the sales information can be considered a trade secret because it is not something that is generally known to the public, and it's valuable, two legal criteria for defining a trade secret. He equated it to someone stealing Coca-Cola's recipe. Nolan also said that by having specific client sales information, notably contract dates, DI could target certain customers based on those dates. Dorman stressed that DI doesn't permit employees to steal any information from competitors, no matter how harmless that information may be. "I want to unequivocally state that Digital Insight does not condone or tolerate unethical behavior. We have very strong policies against any illegal or unethical behavior, specifically policies on trade secrets," said Dorman. Dorman made it clear that he could not comment on any of the specific allegations made in the suit, and there are many. In one claim FundsXpress alleges that Goffman did not return his FundsXpress laptop upon his leaving FundsXpress, and transferred proprietary information from it to Digital Insight. FundsXpress also states that Dunn e-mailed a copy of FundsXpress' Pricing Suite for all of its products and services to Eric Edwards, a DI regional sales manager, who then, the suit claims, solicited more trade secrets from Dunn in an effort to understand FundsXpress pricing strategies. The suit states that because he had the FundsXpress information, Edwards had a very successful 2001 and it helped him get promoted from regional sales manager to a DI vice president. The suit also claims that Dunn sent a copy of FundsXpress Dynamic Web site Tutorial and Documentation (for its portal product) to a DI regional sales manager, and it was eventually posted on DI's Intranet along with the pricing information. According to the suit, Dunn began working at Digital on Oct. 31, 2001 while he continued to work for FundsXpress until Nov. 16, 2001. FundsXpress claims that Dunn was hired by DI because of his "intimate knowledge of FundsXpress' business…" FundsXpress says in the suit that Digital was aware that Dunn was still working at FundsXpress. Dorman, however, said that FundsXpress laid off many of its sales professionals and DI simply hired some of them, a very common practice in the industry. Nolan did confirm that the three employees in question were laid off from FundsXpress, but that didn't entitle them to leak trade secrets because all three did sign nondisclosure agreements. "Whether you are working for Coca Cola or used to work for them, you still can't give the recipe to Pepsi," he said. Dorman believes this suit can be equated to a last gasp from a smaller competitor. "In the past year FundsXpress has laid off most of their sales force and raised prices at the same time. We hired three of those people they laid off. Were their sales down and ours up because we hired those people and misappropriated information, or because they laid off people and raised prices?" said Dorman. "I take offense that we're playing unfairly. We spend more on R&D than FundsXpress or any of our competitors," said Dorman. It's that along with its size and product line that helps it succeed, he said. Another key legal aspect of the case will be determining what DI management knew about any of these alleged actions. This will determine how much in damages FundsXpress could get. If it's only a few lower level employees, liability may lie with them, whereas if the people at the top knew, Digital as a company could be liable, said Nolan. In the suit, FundsXpress alleges that the higher-ups at DI were aware of at least some of the actions, specifically on pricing. The suit quotes a Nov. 9 e-mail from a DI sales manager that reads, "I will forward their (FundsXpress's) latest pricing info to all of you next week for IB, BP, CM (probably not the Cash Tech Pricing) Portal and Umonitor Aggregation. Hope this helps. Thanks." The suit claims that this e-mail went to DI's "executive management team," though Nolan would not specify who that was. Dorman again could not comment on specific claims, but he did say that DI has terminated two of three employees cited in the suit, and took other disciplinary actions. A court order has been handed down that mandates Digital Insight stop using any of the information FundsXpress is claiming as trade secrets. Nolan said DI has admitted that it does have the FundsXpress information, but DI disagrees that it includes trade secrets. Digital Insight will file its answer in the U.S. District Court addressing each of the suit's claims. "I think they're overreaching. I believe they are a weaker competitor that is trying to use the fact that we're strong and public by using the court system. I intend to defend it vigorously," said Dorman. But FundsXpress is claiming that misappropriation of their information had a direct negative effect on its sales last year. It said that it experienced seven strong consecutive quarters of sales through the first quarter 2001. It anticipated 10% sales growth for the second, third and fourth quarters of 2001, but fell substantially short. FundsXpress President/COO Brent Warrington said since by virtue of the court order DI has stopped using the FundsXpress information, FundsXpress's sales have improved. "Since Digital Insight agreed to a court order prohibiting them from using our trade secrets, and confidential information, our sales rebounded without a change in our sales personnel or prices," said Warrington. Dorman cautioned that so far only one side of the story has come out legally via FundsXpress's suit. Things will get clearer, he said, once DI responds legally. Nolan is confident in FundsXpress's position. "I think we have a very strong case that things were taken and misappropriated, and that which was taken are trade secrets. The question is how much damage was done," said Nolan. This is kind of a David vs. Goliath battle. Just looking at number of credit union clients finds DI is far bigger than FundsXpress. FundsXpress serves a total of 65 credit unions, 30 of which use its Net banking product and 46 which use its portal product. In total, FundsXpress has 356 clients including banks and CUs. Digital Insight serves 1,386 financial institutions, of which about half are credit unions. DI has stated in the past that more than 50% of its revenue comes from the credit union side of the business. [email protected]</p>