Halogen Admits Deceit in SuccessFactors Case

Halogen Software Inc.  admits it fibbed to get a leg up on a competitor, but the falsehood may not hurt the HR software vendor in customers’ eyes.

Ending a monthslong legal dispute, Halogen Software on July 5, announced it settled a lawsuit that rival SuccessFactors Inc. had brought against it. As part of the settlement, Ottawa, Ontario, Canada-based Halogen conceded it made up a phony prospective customer to inappropriately obtain SuccessFactors’ business information. Halogen also agreed to pay an undisclosed amount to SuccessFactors, to destroy wrongfully obtained data and to put in place employee training and new guidelines to prevent such behavior in the future.

Although the settlement is a black eye for Halogen, the news may not dim its chances in the market, said Lisa Rowan, an analyst with research firm IDC.

“Halogen has very, very high customer satisfaction,” Rowan said. “I really don’t think it’s going to have an impact on them.”

Halogen did not immediately return a call for comment.

“SuccessFactors has been extremely concerned about safeguarding its confidential information, so we’re pleased to have successfully resolved this matter of nearly seven months,” said Doug Dennerline, SuccessFactors’ president, in a written statement. “At SuccessFactors, we take extreme pride in winning the right way, within ethical and legal boundaries, so in addition to vindication, we were able to demonstrate a valuable lesson.”

SuccessFactors and Halogen are rivals in talent management software, which refers to applications for such key human resources tasks as compensation, recruiting and employee performance management. Sales of talent management tools have grown in recent years as companies have sought to optimize the way they manage their people.

The Halogen-SuccessFactors legal dispute began in September 2010 when an alleged potential customer, the “Magnus Group,” ended discussions with SuccessFactors after several weeks of contact and purported interest in SuccessFactors’ products, pricing and services. 

By posing as a prospective customer and repeatedly expressing interest in purchasing SuccessFactors’ product, an alleged representative of the “Magnus Group” received information that SuccessFactors would never have disclosed to a competitor, according to statements from the two companies.
San Mateo, California-based SuccessFactors learned that Halogen was the creator of the phony company and filed a lawsuit on Dec. 2, 2010, against Halogen in the U.S. District Court for the Northern District of California in Oakland, alleging misdeeds including unfair competition.

The spat isn’t the first time SuccessFactors has fingered a rival for unfair tactics. In 2008, HR software vendor Softscape agreed to pay an undisclosed sum to SuccessFactors and conceded that it had distributed a presentation that appeared to be the work of one or more dissatisfied SuccessFactors customers.

Softscape later was acquired by SumTotal Systems Inc.

Ed Frauenheim