17 Oct Power services firm JT Packard isn't through growing
Verona, Wis. – Jeff Cason is preparing to expand his company through a series of mergers and perhaps a long-awaited courtroom victory.
As founder of JT Packard & Associates, Inc., Cason presides over a rapidly expanding power service provider. The company has grown by 500 percent over the past three years, and now is the largest uninterruptible power supply (UPS) service company in the country by a factor of five, according to Cason.
With its recent purchase by Anaheim, Calif.-based Power Plus, JT Packard is positioned to acquire a number of smaller, regional service providers, but its legal dispute with UPS manufacturers will define the parameters of its future market opportunities.
UPS systems have been around for 25 years and are “an incredibly critical link in the chain of electricity that comes from the street into the building,” Cason said.
Information systems, phone systems, hospital life support systems, and 911 centers all depend on UPS to operate with continuous power. “UPS is a unique animal,” Cason said. “We never have to explain to customers why they should buy the service. It’s a foregone conclusion because of its critical nature.”
With 235 employees, JT Packard reached $41 million in sales last year and will likely exceed $70 million this year, Cason said. To contain this growth, the company is building a new warehouse and office complex in Verona.
Power Plus, a provider of temporary electricity for construction sites and generator rental and services, purchased majority interest in JT Packard last week. The purchase will enable several mutual advantages.
“We believe that the biggest focus, or initial, immediate hit of our marriage will be the generator service growth,” Cason said. “JT Packard has outfitted the United States with field engineers to work on UPS and batteries, and the next immediate initiative that we believe could happen very quickly is to overlap that national footprint with technicians to work on generators.”
Power Plus also will act as a resource for capital and acquisitions. The company has already identified about six regional generator service companies for acquisition to roll into JT Packard.
Legal face-off with OEMs
Approximately three years ago, JT Packard entered its ongoing legal struggle for control the UPS service space.
UPS manufacturer MGE sued JT Packard and several other companies alleging copyright infringement, maintaining that JT Packard illegally used the proprietary software integrated into its UPS systems.
“The service space for UPS systems has historically been dominated by manufacturers,” Cason said, and they are now entrenching that dominance by installing “padlock software” on their UPS systems to guarantee their claim on post-warranty service.
So JT Packard responded with a countersuit on antitrust grounds.
Cason argues that the installation of the software, although legal, shouldn’t be permissible without informing the customer about it at the time of the equipment sale. By withholding such a disclosure, Cason said, customers are deprived of the option to investigate the total unit life cycle costs.
“We call that a deceptive selling practice,” Cason said.
As a result, companies like MGE could establish an unfair price advantage and a eliminate market competition. Cason fears that if this issue isn’t addressed, other manufacturers could adopt the same lockout practices.
While all the other defendants settled, Cason is willing to let the federal court decide the case.
Cason said that CIOs, CTOs, and facilities managers of Fortune 1,000 companies shopping for critical power systems are at risk of being “duped” by UPS equipment manufacturers who behave monopolistically.
But the legal dispute only intensified after the initial lawsuit. A second, analogous complaint was filed by Powerware, another large UPS manufacturer owned by Eaton Corp., in federal court on June 17, 2005.
Eaton’s complaint asserts that JT Packard is culpable for trademark and copyright violations, “misappropriation of trade secrets, false advertising, unfair competition, and tortuous interference with business relationships.”
“Eaton filed this litigation to protect its proprietary intellectual property and expects to be successful in the trial of this lawsuit currently scheduled for January 2007,” said Gary Klasen, a spokesman for Eaton.
If Rebecca Pallmeyer, a federal judge in the U.S. District Court for the Northern District of Illinois, validates Cason’s position, however, the case would be a “watershed event” for the company, Cason said. He estimates that the proliferation of the padlock software has effectively locked him out of $30 million or more in potential business.
“There has never been before, in our opinion, behavior as egregious as what the UPS manufacturers are doing today,” Cason responded. “It’s not about price gouging; it’s about not having good service when you need it.”
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