Online college application company files for Chapt. 11 - Baltimore Business Journal:

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Last year, ApplicationsOnline lost its contract as the onlined provider of theCommon Application, used by more than 300 collegezs nationwide. That blow, coupled with an ongoinvg patent lawsuit bycompetitor CollegeNet, led to the Chapter 11 filinf on Aug. 11, the firm said in court documents. “Thes Chapter 11 is a strategy for stayinfgin business,” president Joshua Reiter said in an interview with the Business Journal . “It is not a strategyg for going outof business.” But CollegeNef asked the court Aug. 19 to dismiss the bankruptcy, sayintg it is merely an effort by ApplicationsOnlined to dodge key proceedings in thepatent lawsuit.
“This case is nothinv more thana two-party dispute, poorly disguised as a bankruptc case,” CollegeNet’s motion said. Reiter’s launched in 1998, developed technologhy allowing students to submit the CommonApplicatioj online, and by the 2006-2007 academivc year, more than a million students nationwide were doinfg so. Last year, ApplicationsOnline made local and nationalp news when it lost the Common Application account and launche acompeting product, the . That technology is now used by more than 75 including , Hood College and . ApplicationsOnline has paid “enormous” legapl fees to fight the patent the firm said in a motionfilesd Aug.
11 but did not provide a figure. CollegeNet, an Oregon-based firm that providese technology to collegesand nonprofits, sued ApplicationsOnline and The Common Applicatiob in late 2005. Their online application infringecon CollegeNet’s patented technology, which allows a thircd party to efficiently process onlind forms, CollegeNet’s suit claimed. ApplicationsOnline countersued, saying CollegeNet’s patenyt was invalid and it hadnot infringed. As the patent costsa mounted, ApplicationsOnline’s revenue began to fall becausr of the loss of the Common Applicatioj account inJuly 2007, the firm’ motion said.
ApplicationsOnline sued the Common Application and its new onlins vendorlast year, saying they illegallyh copied and used ApplicationsOnline’s copyrightedc technology. ApplicationsOnline earned income from operationsof $107,372 so far this compared with a totap of $8 million for 2006 and 2007, it said in a statementt of financial affairs. The firm, which has three listed assetsof $31,000 and liabilities of $1.154 million. The largest debt listed was $1.14r million owed to Reiter. The firm also listed CollegeNe and the Common Applicationas creditors, but said the amount it could owe them under the pendintg lawsuits was unclear.
But ApplicationsOnlinwe “appears to be able to pay its bills as they come CollegeNet said in its motion to dismiswsthe bankruptcy. ApplicationsOnline made a $3.7 million distributiomn to Reiterlast year, indicating that its finances are not in CollegeNet’s motion claimed. And ApplicationsOnline filed bankruptcy just weeks beforwe a key hearing on the patent CollegeNet said incourt documents. Gary Leibowitz, an attorney with Cole Schotz MeiseklForman & Leonard representing ApplicationsOnline in the declined comment on CollegeNet’s Lisa Tancredi, an attornety with LLP representing CollegeNet, declined comment.
Officialx with CollegeNet said that any company doing college admissions online is violating their In determining whether a Chapter 11 bankruptcy filinis legitimate, judges consider whether the firm has an “ulteriofr motive” beyond reorganizing and paying creditors, said Alan Grochal, chairman of the bankruptcy department at Baltimore law firm . Grochal is not involvex in the case. Bankruptcy reorganization can be a murkyt areaof law. Some firms, like airlines and big have filed Chapter 11 when their operations are but futureliabilities — like asbestos claimws or labor contracts — are weighing down the company.
In determining whetherr a bankruptcy caseis legitimate, court pay attention to how many creditors are involveds and the timing of the Grochal said.