CharacTell Files a Lawsuit against Top Image Systems (TiS)

March 7, 2004
CharacTell filed a lawsuit against Top Image Systems alleging intellectual property rights infringements
March 8, 2004
Court Rejects All of TiS' Claims against CharacTell, Orders TiS to Pay Courts Costs

Background
Last fall, Top Image Systems (TISA, NASDAQ) petitioned to the Tel-Aviv District Court for temporary injunctions against CharacTell, a provider of advanced and innovative character recognition products of printed and handwritten characters. Top Image Systems (TiS) asked the court, among others, to stop CharacTell from marketing competing systems, and prevent CharacTell from using software it had purchased from TiS. TiS based its requests on claims that CharacTell violated agreements between them, used TiS proprietary software inappropriately, and used TiS' inside information, to develop competing products. As evidence to said claims, TiS presented an executive summary it said was submitted to it by CharacTell in 1998, upon its founding.

CharacTell denied all of TiS' claims. CharacTell demonstrated that the executive summary in question was sent to TiS on April 23, 2001 – three years after it was founded – and thus was not relevant to CharacTell's product plans in 1998. CharacTell further pointed out that TiS' lack of consent to submit the CharacTell products TiS claimed were competing and/or infringing to independent expert inspection and examination as an indication that TiS, in fact, knew its claim to be baseless. CharacTell further argued that additional TiS claims involving alleged questionable conduct by CharacTell with respect to TiS customers, were nothing more than a blatant attempt by TiS to defame it.

What the court says (Click here to see the court decision in Hebrew)
Her Honor Mrs. Sarah Sirota, the District Court's second highest ranking judge, rejected every single one of TiS' claims and ordered it to pay court costs. The judge determined that TiS' claims, as well as supporting information provided, and testimony given, by TiS executives were inconsistent and unreliable.

The judge further ruled that CharacTell had not violated its agreements with TiS, and its products were appropriately developed by CharacTell. She also ruled that TiS has failed to prove its claims that TiS software or know-how were used illegally by CharacTell to develop its products.

CharacTell files a lawsuit against TiS
One day before this ruling was issued, on March 7, 2004, CharacTell filed a separate lawsuit against TiS in which it alleged that TiS has infringed on its intellectual property rights, used CharacTell software in violation of its license terms, and breached its contract with CharacTell by distributing CharacTell-provided software without paying for it. CharacTell asked the court to forbid TiS from using certain software products that CharacTell has developed for, and delivered to, TiS, and order TiS to inform its customers that its licenses to these products have been revoked. The CharacTell lawsuit is pending before the court.

Because of these alleged violations, CharacTell has notified TiS that it is canceling its license to use, distribute, and support any CharacTell software that is in dispute. According to CharacTell, TiS took advantage of the specialized software provided to it by CharacTell to be awarded a sizeable contract by the Guardian Life Insurance Company, the fourth largest insurance company in the US, according to an announcement by TiS.

CharacTell is represented by Messrs G. Toledano and E. Reznik of Haim Zadok & Co., a leading law firm based in Tel-Aviv, Israel.