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Sun, 09/30/2012

After a legal battle that has spanned more than three years, DocMagic and Ellie Mae agreed to settlement terms Wednesday to resolve allegations of violations of antitrust regulations, intellectual property rights and the terms of a software sharing agreement between the two mortgage technology vendors.

Under the terms of the settlement agreement, neither side will admit liability for the lawsuits’ claims, nor will they pay monetary damages. The case will be dismissed with prejudice, meaning that the companies will not be able to bring up these claims in future lawsuits.

“I can say that we could not have achieved the quality of partnership we now have with Ellie Mae without the trials and tribulations of the last several years,” said Dominic Iannitti, president and CEO of DocMagic, in an email to Mortgage Technology. “History aside, DocMagic and Ellie Mae are well positioned to bring a great deal of innovation to the industry at a time when compliant solutions are needed more than ever.”

DocMagic will develop an integration to Ellie Mae’s Encompass loan origination system via the Ellie Mae Network, a platform that provides lenders with access to third-party underwriting services from within the LOS environment. Vendors that provide doc prep, verification of income and employment, credit checks and other products use a software development kit to integrate with the LOS and pay Ellie Mae fees to provide their services across the network.

“We’re excited that Don and DocMagic are back on the network,” Ellie Mae Chief Operating Officer Jonathan Corr told Mortgage Technology in an interview Wednesday, adding that under the terms of the agreement, DocMagic “will pay customary Ellie Mae Network fees as part of being back on the network as a business partner.”

The ongoing case between Carson, Calif.-based document preparation vendor DocMagic and Pleasanton, Calif.-based Ellie Mae has amounted to a modern-day mortgage technology version of the Hatfield-McCoy feud, leaving lenders that used both vendors’ systems caught in the middle. DocMagic had developed a workaround to provide joint users with connectivity to its software from within the Ellie Mae LOS. That will remain in place until the new integration is established, which Corr estimated would take 60 to 90 days.

DocMagic’s 2009 lawsuit and two subsequent amended complaints alleged 14 claims against Ellie Mae. DocMagic claimed Ellie Mae used intellectual property it obtained from a technology sharing agreement to build its own competing document software, called Ellie Mae Docs.

Ellie Mae denied the allegations, asserting that after it stopped using a private-label version of DocMagic technology, it retooled Ellie Mae Docs based on software developed by Online Docs Inc., a subsidiary of Stewart Lender Services that Ellie Mae acquired in October 2008.

DocMagic also claimed unfair competition practices in the way its software interacts with Ellie Mae's Encompass LOS and the Ellie Mae Network, formerly called the ePass Network.

Ellie Mae later counter-sued, alleging DocMagic reverse-engineered technology to gain access to Ellie Mae's software, servers, and network resources.

The settlement comes 13 months after the two sides participated in court-ordered mediation in August 2011. After reaching an agreement, the judge presiding over the case delayed further proceedings to give the companies time to finalize the settlement.

DocMagic v. Ellie Mae Timeline

08/28/09: DocMagic files state and federal lawsuits against Ellie Mae alleging attempted monopolization and violations of antitrust regulations, intellectual property rights and the terms of a technology sharing agreement

10/6/09: Ellie Mae responds to lawsuits, denying allegations and making its own claims against DocMagic

11/17/09: Judge denies Ellie Mae’s motion to have state lawsuit dismissed

04/09/10: Both sides agree to dismiss state lawsuit and consolidate claims in federal case

04/26/10: Ellie Mae files amended complaint, adding allegations against DocMagic

05/10/10: DocMagic files amended complaint, using information from Ellie Mae’s April initial public offering disclosure to bolster its case

10/12/10: Judge dismisses portions of each side’s claims

03/11/11: Judge denies Ellie Mae motion for summary judgment and DocMagic’s motion for a temporary restraining order

08/24/11: Parties participate in court-ordered mediation

05/08/12: Parties notify court that they intend to settle lawsuit

08/07/12: Parties schedule additional mediation session and judge grants two-month extension to deadline for litigation to proceed

10/10/12: DocMagic and Ellie Mae reach settlement agreement

As featured on National Mortgage News, October 2012.