Fisher and Paykel Finance faces potential NZ$5.9 mln hit from 'non-material' court spat over intellectual property rights

Fisher and Paykel Finance faces potential NZ$5.9 mln hit from 'non-material' court spat over intellectual property rights

By Gareth Vaughan

Whiteware maker Fisher & Paykel Appliances now says a court case taken against its finance company by a US firm alleging breach of intellectual property rights, which it previously dismissed as being not material, could cost it the thick end of NZ$6 million if it loses.

As reported by interest.co.nz in September, Fisher & Paykel Finance defended allegations in the High Court from San Francisco-based Karum Group LLC, formerly known as Credit Management Services Inc. Karum wants an injunction to stop the New Zealand consumer lender from using parts of a credit management system that it says incorporates its intellectual property.

Karum is also seeking an unspecified amount of money in damages. Fisher & Paykel Financial Services Limited, ultimately a subsidiary of Fisher & Paykel Appliances via F&P Finance, was named in the case.

In its half-year results out on Friday, F&P Appliances said a judgment in the case is expected by December 31 this year.

"There are complex legal issues and a range of possible outcomes," F&P Appliances said. "Accordingly, the directors consider it is now prudent to make a provision given this uncertainty."

The provision, whose value wasn't revealed with the company saying doing so could prejudice its position, was lumped in with legal costs incurred by the group up to September 30.

"For the six month period ended 30 September 2011, litigation costs (including both legal costs and the provision) were NZ$5.9 million," F&P Appliances said.

F&P says Karum sought the injunction to restrain Fisher & Paykel Financial Services from using aspects of a credit management system that it alleges incorporates its intellectual property. On its website Karum says it has provided private label credit products and services for more than 20 years to some of the world’s biggest retailers. These have enabled them to increase sales, boost gross margin return on investment and customer loyalty, it says.

"With our innovative suite of services ranging from application processing, transaction authorisation and customer service, we provide all of the necessary functions for companies to quickly, easily and cost-effectively manage a credit card programme," Karum says.

F&P Finance operates the Q Card, a credit card with fixed installment and revolving credit purchase options, and the Farmers Finance Card.

F&P Finance, which has some of its deposits guaranteed by the extended Crown retail deposit guarantee scheme until December 31, says whether the court grants an injunction depends on whether it determines liability for F&P Financial Services, and then whether it decides an injunction is an appropriate remedy for Karum in the circumstances.

F&P Finance says if an injunction is granted, its credit management system should be able to be amended to remove any elements found to be infringing in a "reasonable" time period.

"If this was unable to be achieved, the proceedings could have a material adverse impact on the operations and financial position of the Charging Group (F&P Finance and its guaranteeing subsidiaries) until replacement software was introduced."

An F&P Appliances spokesman told interest.co.nz in September that the case wouldn't have a material adverse effect on the group's operations or financial position. Former Rhodes Scholar Alan Galbraith QC defended F&P in the High Court.

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