LAKE SUCCESS, N.Y. — After discussions of a potential business arrangement between DealerTrack, RouteOne and Finance Express went sour several years ago, a legal battle soon followed.

After the deal didn't work out, DealerTrack began exploring legal proceeding as it contended that despite differences in applications, both RouteOne and Finance Express are infringing on its patents and has asked the court system for declaratory and injunctive relief, as well as damages.

A little more than four years ago, DealerTrack kicked off legal proceedings against RouteOne, claiming the company is infringing on its patents. Just over two years later, Finance Express was drawn into the legal battle when the DealerTrack took similar action against it in the New York court system. That lawsuit was soon dismissed in favor of being reinstated in the California Federal Court system.

Both RouteOne and Finance Express officials assert their business models are not infringing on any patents owned by DealerTrack, and in response to DealerTrack's allegations these companies filed countersuits.

In response to the legal action against it, Finance Express claimed in its countersuit that the company provided confidential information (or trade secrets) to DealerTrack in its previous talks and that DealerTrack misappropriated these trade secrets, among other allegations.

RouteOne made similar claims, according to DealerTrack's recent SEC filing, with both it and Finance Express contending, "RouteOne, David Huber and Finance Express asserted counterclaims for a declaratory judgment of unenforceability due to inequitable conduct with respect to ‘427 patent and patents."

Further, the document stated, "David Huber and Finance Express also asserted counterclaims for breach of contract, deceit, actual and constructive fraud, misappropriation of trade secrets and unfair competition related to a confidentiality agreement between Finance Express and us (DealerTrack)."

According to the SEC filing, the heart of the legal battle revolves around three patents related to DealerTrack's computer-assisted credit application analysis and decision routing systems, including the methods used by these systems.

This situation is expected to come to a head in July of this year, with the federal court in Santa Ana, Calif., proving to be ground zero.

While the lawsuits are currently in the discovery stage, come July, each side is expected to present its own expert testimony concerning the patent validity, infringement and damages involved with the cases.

In fact, in a recent financial report, Mark O'Neil, chairman and chief executive officer of DealerTrack, is quoted as saying, "We anticipate that based on our scheduled trial date in July 2008, that this will be the final year that this level of expenditure ($7 million) will be necessary."

When contacted by SubPrime Auto Finance News for further comment, O'Neil responded, "DealerTrack values its intellectual property as an important company asset and intends to vigorously pursue claims for patent infringement against RouteOne and Finance Express." 

"We are pleased with the progress to date in defending our intellectual property," he added.

Meanwhile, officials from RouteOne and Finance Express also provided comment to SubPrime Auto Finance News regarding the ongoing legal proceedings.

Mike Jurecki, RouteOne's chief executive officer, told SubPrime Auto Finance News, "As we have always maintained, we believe that the RouteOne system does not infringe any valid claim of any DealerTrack patent.

"We will continue to defend ourselves vigorously in this case and are confident that we will prevail. We will continue to operate our business as we always have, and remain fully committed to the growth and progress of the RouteOne platform," he continued.

David Huber, president of Finance Express, said, "We have numerous defenses that we intend to pursue vigorously. We have several counterclaims seeking damages that we also intend to pursue vigorously."

No other indirect lending platforms were named in the legal proceedings, only the companies involved in the initial discussions about a business arrangement.