Dye & Durham Corp. DND-T is accusing an upstart rival and an ex-client of improperly copying its software to build a business it claims is siphoning off its clients.
The publicly traded Toronto-based legal software company last week sued LawLabs Inc. and law firm Kelly Law Professional Corp., both of London Ont., in Ontario Superior Court, alleging the defendants had infringed on D&D’s “exclusive rights” related to its Unity platform. Real estate law firms use Unity to process property transfers.
The law firm is led by Thomas Kelly. Son Alex Kelly is a lawyer with the firm. Another son, Harrison Kelly, is chief executive officer of LawLabs. All three are defendants.
D&D alleges in its claim LawLabs accessed Unity through a licence held by the law firm with the intent of “reverse engineering” and copying the Unity software, in breach of the terms of use, to create its own platform, Closer.
The claim also alleges that Alex Kelly created user profiles for seven LawLabs employees, including his brother. The employees systematically reviewed templates and forms on Unity, pretended to open transactions to access forms and spent 155-plus hours watching training webinars, the claim alleges.
That “could only have been for the purpose of replicating the user interface, look and feel, and underlying logic of Unity” in Closer, the claim alleges. That violated Unity’s terms of use, which state customers cannot sublicense use to third parties, reverse-engineer, infringe, copy or reproduce any of its copyrighted material, including its software, code or documents, D&D alleges. It terminated Kelly’s licence in May.
D&D is asking the court for damages plus “all profits realized by LawLabs from its wrongful conduct” and the maximum penalty under the Copyright Act of $20,000 per work or other subject matter infringed.
The claims haven’t been tested in court. Won Kim, a lawyer who represents the defendants, called the claim “meritless” in an e-mail to The Globe and Mail, stating that LawLabs didn’t copy or incorporate any aspects of Unity. He said his clients would refute the allegations “in full” in their statement of defence.
LawLabs, he added, is “engaged in lawful competition” offering “a more affordable and user-friendly” platform, and that D&D may have brought the suit to impede the legal business activities” of a rival.
D&D, led by CEO Matt Proud, has grown by acquiring providers of software to professional services firms, particularly real estate lawyers, and often hiking prices, sometimes by hundreds of percentage points. That has led to an outcry from D&D’s clients and complaints to Canada’s competition regulator. Despite their opposition, lawyers typically pass on D&D’s fees to their own clients and remain D&D customers.
But opposition to the price hikes has benefited D&D’s smaller competitors and prompted startups to launch rival products. LawLabs was one of them. It incorporated in December, 2020, and launched in February, 2022.
In an e-mail to The Globe two months ago, Harrison Kelly called his startup “a direct result of D&D’s price increases” that it had 200 law firm customers, mostly former Unity users. D&D had just told customers it would again increase prices, this time to $285 per sale or mortgage transaction processed through Unity, unless they agreed to subscribe to the platform for three-year contracts, in which case it would hold per-transaction prices steady. The cost per transaction was just $25 when D&D picked up the software at the core of Unity in its December, 2020, purchase of DoProcess LP.
LawLabs’ website states “your business should be earned; not taken for granted,” and that the company has “an underdog mentality” and “the confidence to take on any Goliath that gets in our way.” It charges $60 or $75 per transaction.
In its claim, D&D stated LawLabs represented itself to customers “as a low-cost upstart alternative” in “stark contrast to their illegal conduct.” D&D spokesman Wojtek Dabrowski declined to comment on the case, but said his company has ”always welcomed competition,” adding “we strongly believe that all competition must be fair, without breaching contractual obligations and based on respect for intellectual property and the laws that protect it.”
Waterloo-based intellectual property lawyer Jim Hinton said in an interview after reviewing the claim that it appears D&D has “caught LawLabs dead to rights for copying its platform.” But he said the causes of action, that LawLabs overcopied Unity and that the defendants violated a contract, “are inherently limited.”
Mr. Hinton said while the court might determine LawLabs overcopied Unity, the penalty could be limited to the licence cancellation and some statutory damages under the Copyright Act. But “the ability to develop competing software is not something D&D can necessarily stop.”