After three years of legal wrangling, Finance Express can put DealerTrack’s patent-infringement claims behind it.
In a July 7 decision, the U.S. District Court for the Central District of California ruled that Finance Express does not infringe on any of DealerTrack’s asserted patents. The court also ruled that one of DealerTrack’s patents was invalid. (Another DealerTrack patent was previously invalidated.)
Both DealerTrack and Finance Express offer online systems that enable dealers to submit loan applications electronically to lenders. DealerTrack’s technology focuses on franchise dealers, while Finance Express’ centers on independent dealers.
How this clause works is a mystery to me. If the companies can’t demonstrate financial viability, there won’t be any money to call. If they don’t use the funds, they can’t achieve financial viability. Talk about circular logic.
This isn’t circular logic.
The government gets first priority in a liquidation (bankruptcy) scenario. There are a host of creditors in addition to the government such as bond holders, retirees, etc. with the equity holders last in line. If the auto company goes into liquidation then the first $17 billion in proceeds from assets sales, tangible and intangible, should be used to payoff the taxpayers. The bond holders would probably be next, followed by (insert creditor here). Pretty good deal I think.
Financial viability – This is the hard one. You are insolvent when your liabilities (debt) exceed assets (pre-debt firm value). What this means is that you take the cash flows from the business plan and present value them. This would be firm value today. You then subtract out amounts due creditors such as the government, bondholders, etc. If you end up with a positive value then you are solvent (financially viable). This is why its important to (1) make cash flows as high as possible by cutting costs and (2) make liabilities as low as possible by doing a bonds-for-equity swap.
My two cents.
Financial viability –
I think this is good for the Industry it opens up the dealers deals to a free trade solution. I think that the STAR Standard is a great solution to handle this transactions. This decision takes all the Risk out of developing using this standard and move to open standards like STAR and other interfaces.
The ruling was justified. DealerTrack remains the solution of choice for most franchise dealers. Finance Express has a great platform for the Independents. All of the online systems for connecting dealers with lenders have improved lender efficiencies, but have also made application approvals a commodity where the best bid often wins. Let’s all just hope the credit markets open up soon so we can get back to doing some “real” business again.