ANAHEIM, Calif. – Digital Assurance Certification LLC and the Municipal Advisory Council of Texas announced yesterday that they had reached an agreement that resolves DAC’s claim that the Texas MAC’s Central Post Office facility infringes on a patent it obtained last year.
Under the terms of the settlement, the Texas MAC’s Central Post Office will make specific technical changes to the CPO’s operations. But the agreement does not require any payments between the two parties.
The statement yesterday also said, “Recipients of third-party subpoenas served in this case shall have no need to respond to those subpoenas,” as a result of the settlement.
Sources noted that the technical changes will not result in major alterations to the nuts-and-bolts of the Texas MAC disclosure facility.
The agreement had been rumored for days but came as a surprise in that late last month, DAC tried to expand its suit against the Texas MAC to include federal and state law charges – in addition to the alleged patent infringement. Specifically, DAC had claimed that the Texas MAC was trying to steal its clients.
However, DAC and the Texas MAC also agreed last month to make changes in the CPO site to eliminate any possibility of infringing on DAC’s patent – a move that negated the need for a June 5 federal court hearing on DAC’s request that the CPO be shut down. Both sides said the agreement in May was the first step toward an eventual settlement.
In yesterday’s two-page agreement, which was dubbed a “global settlement” and was distributed by a DAC employee at the annual conference of the Government Finance Officers Association’s annual meeting here, the MAC agreed to remove additional features that DAC said violated its patent, on top of the concessions MAC had agreed to last month.
Among the changes specified in yesterday’s announcement, MAC promised that within 30 days it will disable its feature that enables users of the CPO to create cover sheets to be used with annual disclosure filings. Previously, the CPO collected issuers’ documents, paired them with standardized cover sheets, and then sent them to all four nationally recognized municipal securities information repositories and three state information depositories.
But sources said that the change was relatively small because the same information will go to the NRMSIRs, but it won’t be included in a separate cover sheet.
Also under the settlement, issuers will not be able to download their disclosure documents more than 30 days after they are filed. Still, the filing index that the CPO maintains, which records all filings, will not be altered.
In fact, the statement released Monday said DAC will begin contributing to the CPO by the end of next year. “While DAC will continue to submit all filings made on the DAC System to the NRMSIRs and [State Information Depository], DAC will begin by December 11, 2008 to also send filing information to the CPO to enable the creation of a master index of filings, for the benefit of the market as a whole,” the statement said.
In another change to the CPO, MAC agreed to disable within a year a feature that e-mails CPO customers alerting them to filing deadlines for their secondary market disclosure documents.
In addition, by July 11 the CPO will modify its Web site and promotional materials to reflect the modifications.
“Overall we are very pleased to reach the global settlement and the ability to get back to business and providing the best disclosure system in the industry,” said Paula Stuart, CEO of DAC, in a statement. She did not return emails seeking additional comment.
Drew Masterson, chairman of the MAC, said: “DAC offered to resolve our differences in January of this year and has worked diligently to arrive at the solution reached today.” DAC had originally filed its lawsuit in January, claiming the CPO violated a patent it obtained Dec. 26 that extends back to April 22, 2002. DAC charged the MAC copied the features of its system for the CPO and asked the court for injunctive relief, triple damages, and the payment of attorney’s fees.
The CPO, which started up in September 2004, was devised by the Muni Council, a group of 18 muni market groups working to improve secondary market disclosure, to both provide issuers with a one-stop filing place for secondary market disclosure documents and eliminate inconsistencies in the way the NRMSIRs obtained and filed the documents. The CPO operates from the Web site DisclosureUSA.com.
DAC, which began operating in 2001, offers a broad array of disclosure services, including setting up issuer conferences for investors. It operates through dacbond.com.
