Adobe ordered to halt InDesign sales

Summary:A U.S. District Court judge says the software maker must stop selling its InDesign product, giving a boost to copyright-infringement charges by Trio Systems.

Adobe Systems has been ordered to stop selling its InDesign software by a U.S. District Court judge, giving a boost to copyright-infringement charges by Trio Systems.

Trio has charged that Adobe's use of a database engine called C-Index violates its license with Trio because it allows third-party software developers to use C-Index without a license. Adobe, which makes a wide range of design software including Photoshop, has countersued Trio in response.

But a preliminary injunction issued Tuesday makes Adobe's chance of success in the case dim. The court said that Trio had established a "likelihood of success on the merits" of its claim and noted that a preliminary injunction is a powerful order rarely used except in cases that clearly merit it.

The injunction prevents Adobe from distributing its InDesign 1.5 layout software and requires the removal of all unsold copies from the marketplace. The order also affects Adobe's InCopy 1.1 and the Design Collection Suite that includes InDesign 1.5.

"We're continuing to pursue our defense of this matter," said Adobe spokesperson Autumn Blatchford. "The financial impact will be negligible," she added, as the company has announced InDesign 2 will ship in as little as two weeks.

"Trio's claims are largely moot, given our imminent release of InDesign 2.0, and our Q2 release of InCopy 2.0, which do not include any Trio software," according to an Adobe's official statement.

Blatchford said she couldn't respond to reports that InDesign 2 uses a database engine based closely on C-Index.

The case against Adobe is ironic given that the company, with annual revenue topping $1 billion, has been one of the most "aggressive copyright litigants in the country," according to Trio's trial attorney Henry Gradstein. Adobe went after Dmitry Skylarov, a Russian programmer charged with violating the Digital Millennium Copyright Act, after he gave a presentation about technology he created to crack Adobe's e-books.

Analysts said the case isn't likely to have much financial effect on Adobe.

"We believe this court order will have minimal to no financial impact in 2002," said Morgan Stanley analyst Solin Cho, who added that the products affected make up about 7 percent of Adobe's revenue.

A new version of InDesign, which is scheduled to be released next month, does not contain C-Index, Cho said. Furthermore, Adobe has a practice of taking "reserves against revenues" to cover an estimated number of product returns. The company has said it believes reserves already taken against revenue will be more than enough to cover the pulled and returned copies of InDesign as well as typical returns of other products.

Furthermore, the injunction only affects products sold in the United States. David Albohair, a spokesman for the company's office in France said the injunction does not stop Adobe from selling the product overseas. "We are not impacted," he said.

The biggest cost will likely involve collecting copies of the product from store shelves. Adobe has also said the legal costs will have "immaterial financial impact," Cho said.

Adobe shares were down 5 cents to $32.95 in early trading Wednesday. Adobe Systems has been ordered to stop selling its InDesign software by a U.S. District Court judge, giving a boost to copyright-infringement charges by Trio Systems.

Trio has charged that Adobe's use of a database engine called C-Index violates its license with Trio because it allows third-party software developers to use C-Index without a license. Adobe, which makes a wide range of design software including Photoshop, has countersued Trio in response.

But a preliminary injunction issued Tuesday makes Adobe's chance of success in the case dim. The court said that Trio had established a "likelihood of success on the merits" of its claim and noted that a preliminary injunction is a powerful order rarely used except in cases that clearly merit it.

The injunction prevents Adobe from distributing its InDesign 1.5 layout software and requires the removal of all unsold copies from the marketplace. The order also affects Adobe's InCopy 1.1 and the Design Collection Suite that includes InDesign 1.5.

"We're continuing to pursue our defense of this matter," said Adobe spokesperson Autumn Blatchford. "The financial impact will be negligible," she added, as the company has announced InDesign 2 will ship in as little as two weeks.

"Trio's claims are largely moot, given our imminent release of InDesign 2.0, and our Q2 release of InCopy 2.0, which do not include any Trio software," according to an Adobe's official statement.

Blatchford said she couldn't respond to reports that InDesign 2 uses a database engine based closely on C-Index.

The case against Adobe is ironic given that the company, with annual revenue topping $1 billion, has been one of the most "aggressive copyright litigants in the country," according to Trio's trial attorney Henry Gradstein. Adobe went after Dmitry Skylarov, a Russian programmer charged with violating the Digital Millennium Copyright Act, after he gave a presentation about technology he created to crack Adobe's e-books.

Analysts said the case isn't likely to have much financial effect on Adobe.

"We believe this court order will have minimal to no financial impact in 2002," said Morgan Stanley analyst Solin Cho, who added that the products affected make up about 7 percent of Adobe's revenue.

A new version of InDesign, which is scheduled to be released next month, does not contain C-Index, Cho said. Furthermore, Adobe has a practice of taking "reserves against revenues" to cover an estimated number of product returns. The company has said it believes reserves already taken against revenue will be more than enough to cover the pulled and returned copies of InDesign as well as typical returns of other products.

Furthermore, the injunction only affects products sold in the United States. David Albohair, a spokesman for the company's office in France said the injunction does not stop Adobe from selling the product overseas. "We are not impacted," he said.

The biggest cost will likely involve collecting copies of the product from store shelves. Adobe has also said the legal costs will have "immaterial financial impact," Cho said.

Adobe shares were down 5 cents to $32.95 in early trading Wednesday.

Topics: Software

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