Mortech Inc., a Nebraska software company, has found itself caught in a legal battle between two Internet giants - Google and LendingTree.
Mortech's rise over the past few years has been intimately connected with LendingTree's success. Mortech's products allow lenders to plug dozens or even hundreds of variables into a computer and receive a rate quote within seconds making it an attractive site for users.
Mortech provides these types of services to LendingTree, a financial services company that collects loan information and lets borrowers get quick offers from multiple lenders.
LendingTree built its business as an online loan aggregator and personal finance resource. Its parent company Tree.com, Inc.
generated over $200 million in revenue last year.
LendingTree v. Mortech
LendingTree and Mortech have an exclusive service agreement. Recently, LendingTree received notice that Mortech is working with the Internet super-giant Google, on technology automating lender offers, the same work LendingTree does.
As a result, LendingTree is seeking an injunction to prevent Mortech from working with Google. It usually applies when money is not enough to remedy the damage done. LendingTree wants Mortech to stop working with Google so it doesn't give away LendingTree's secret business and technology information and harm their business.
What Is an Exclusivity Agreement?
According to LendingTree, it entered into an exclusivity agreement with Mortech. This agreement is a contract between people or companies agreeing to deal only with each other in a specific area of business. These agreements take a business relationship to a higher level of commitment.
LendingTree has used Mortech as a "referred provider" since April 2008, when it signed an agreement with the company. LendingTree claims the contract was amended in November to "limit Mortech's ability to make its pricing engine services available"1 for use by competitors. LendingTree says it shared confidential information with Mortech it wouldn't have shared otherwise.
Mortech's representative say the company "has a proven track record of treating all industry partners and customers with absolute respect and consideration. We will deal with this issue in a responsible, forthright and timely fashion while upholding our commitment to supporting our customers' success. We look forward to furthering the mortgage community through our continued innovation and dedication."2
LendingTree fears that during Mortech's work with Google, it will disclose LendingTree's trade secrets. A trade secret keeps information that gives a company an advantage over competitors. Mortech provided LendingTree with "pricing-engine" technology, a key part of the online loan exchange - LendingTree's basic business.
The software tracks eligibility, investor guidelines and underwriting conditions for lenders to match them to potential borrowers. The papers explain that because Mortech is helping Google develop the mortgage-loan rate aggregation business, LendingTree fears that "in the course of its collaboration with Google, Mortech will inevitably disclose the confidential, proprietary, and secret information that it has about LendingTree."3
Google issued a written statement saying it is "working on a small ad unit test" involving a limited number of mortgage-related searches."4 In addition, the company added, "We have a number of experiments going on at any one time, but we don't speculate on future product development."5
LendingTree claims to have an exclusive agreement that limits Mortech's ability to work with other companies and that Mortech violated that agreement by working with Google. "We will vigorously protect our contractual rights, our company, our customers and our clients in this matter," says Doug Lebda, founder of LendingTree and chief executive of its parent company, Tree.com Inc. This case was scheduled to be heard on September 2.
The court will have to review the actual agreement signed between LendingTree and Mortech to determine if it is fact an enforceable exclusivity contract and whether Mortech's collaboration with Google violated the contract.
Sources1LendingTree, LLC v. Mortech, Inc.
, Complaint for Injunctive Relief and Jury Demand, Civil Action No. 09-CV-367, p. 4
, http://online.wsj.com/public/resources/documents/082509lendingtree.pdf, accessed September 22, 2009.2
Geoffrey A. Fowler, LendingTree Suit Claims Google Is Getting into Mortgages, Wall Street Journal
, Blogs, Aug. 26, 2009, http://blogs.wsj.com/digits/2009/08/26/lendingtree-suit-claims-google-is-getting-into-mortgages/, accessed September 22, 2009.3LendingTree, LLC v. Mortech, Inc.
, Complaint for Injunctive Relief and Jury Demand, Civil Action No. 09-CV-367, p. 5
, http://online.wsj.com/public/resources/documents/082509lendingtree.pdf, accessed September 22, 2009.4
Rexrode Christina, Lawsuit: Google Plans Rival to LendingTree
, CharlotteObserver.com, Aug. 26, 2009, http://www.charlotteobserver.com/business/story/909768.html, accessed September 22, 2009.5
Questions for Your AttorneyHow do exclusivity contracts work, and what are the chances of enforcing them in court? How do courts generally view such contracts? Can exclusivity be implied? What if I contract with a business to make a specific product or perform a service based on my specific needs? What if my business is similar to Mortech? How should my contracts be structured if I want the freedom to use developments in my business for multiple clients?