The Violation Of Think3
Yesterday one of my readers left a comment on my post titled “I Know Who Bought Think3” pointing me to this page on Bloomberg Business Week that gave more information on what exactly happened to Think3. Here is part of the article:
Think3 Inc., a developer of computer-aided design software, filed for Chapter 11 protection on May 18 in Austin, Texas, and was given interim authority on May 23 for what will eventually be a $1 million financing. The final financing hearing will take place June 21.
The Austin-based company, which has been incurring losses for several years, had both a branch and a subsidiary in Italy. On request of creditors, a court in Bologna, Italy, put the Italian subsidiary into bankruptcy in March. The company said in a bankruptcy court filing that the Italian trustee took over both the Italian subsidiary and the company’s own assets in Italy.
The Italian trustee also took over the subsidiary’s and the company’s bank accounts in the U.S.
Think3 was acquired in September by ESW Capital LLC.
Last year it licensed some of its software to Versata FZ LLC for $3 million. The company explained how the Italian trustee purported to terminate the license, even though Versata contends it wasn’t possible under U.S. law. The company said there is a threat the Italian trustee will attempt to terminate other licenses given over the years.
The Italian trustee directed software licensees to make payments to him rather than to the U.S. company.
The primary debt is a $23 million tax liability in Italy.
In my book this is nothing less than the violation of a company. A systematic and planned violation. If you sell the IP of a software company how is it supposed to survive? What is the point in appointing a Chief Restructuring Office for a software company which no longer has its IP and hence a revenue stream? What is left to restructure? The whole point of restructuring is to re-negotiate payments and contracts so that the company can continue with its operations and return to profitability. Not deprive it of its precious assets and leave it to rot. So after restructuring does Think3 plan on cooking up another CAD and PLM system from scratch? WTF?
The pieces are slowing falling into place. Versata bought the IP of Think3 for $3 million, which is peanuts. Of the microscopic kind. I am saying that because I happen to have a good idea of the worth of IP these days since I recently sold the IP of my company. Then ESW Capital went ahead and bought the empty and worthless Think3 in a stock transfer. Or maybe ESW Capital bought Think3 first and then sold the IP to Versata. Either way, Versata ended up with the assets of Think3 at a throwaway price and ESW Capital inherited the liabilities thereby setting it up to go bankrupt.
There are laws preventing such systematic gutting of companies to safeguard the interest of employees, creditors, customers, etc. That’s why the Italian trustee has terminated the sale (perpetual license) of Think3’s IP to Versata. The trustee has already managed to secure the www.think3.com web site and has brought the Think3 Customer Care site back online as well. I am very interested to see where this is headed.
When I started following this story months ago, some in the CAD media dismissed this as an issue of an employer not paying its employees. Many of them didn’t find the story alarming enough to write about and some still don’t. I didn’t ask to become a part of the media. It just happened along the way. And as a consequence I have been enjoying a great deal of privileges as well. However, I realize that those privileges come with responsibilities as well.
The most common reason given by some in the media for not covering such stories is the fear of getting sued. For the record, when I first started writing about Think3 I was served a cease and desist notice by a lawyer in Mumbai representing a certain overseas company. I actually wanted to publish it as a blog post but decided against it. Maybe one day I will. Just for the fun of it.