Microsoft Corp. moved to Cambridge last year looking to set the world afire with innovation. Instead it got sued.
It's a case that pits a home-grown tech firm called InterSystems Corp. against an out-of-town competitor that wants to build a first-of-its kind research center. But the legal battle has nothing to do with cutting-edge technology - rather, it's all about bricks and mortar and an outdoor sign.
InterSystems, a longtime tenant of One Memorial Drive, says it has the rights to the space where Microsoft plans to open a laboratory and is seeking to block the behemoth from expanding. Adding to the rub, Microsoft wants to put a sign on a building where InterSystems grew from a tiny start-up to an international company.
"We want to stay in our building. It's very much our home," said Paul Grabscheid, vice president of strategic planning for InterSys tems. "The idea of coming to work every day under a Microsoft sign is not so appealing to us."
InterSystems occupies 88,000 square feet in the 17-story building along the banks of the Charles River. Microsoft currently occupies 80,000 square feet and wants to add 60,000 more next year. To block its rival's expansion, InterSystems filed suit in Middlesex Superior Court, asking a judge to prevent Microsoft from moving into the upper floors.
InterSystems has also sued the building owner, Equity Office Partners, a subsidiary of The Blackstone Group, contending that it conspired with Microsoft to lease space that InterSystem had rights to, and sought to drive up rents in the process.
Microsoft, based in Redmond, Wash., said in a prepared statement that it intends to move forward with its laboratory. "Microsoft has a valid lease at the building that was negotiated in good faith," said company spokesman David Bowermaster. "Microsoft is committed to its partners and employees in Massachusetts and looks forward to expanding its strong R&D presence in Cambridge."
The lawsuit over One Memorial Drive reflects broader competitive tensions in the Cambridge office market as high-tech powerhouses battle for talent at Harvard University and the Massachusetts Institute of Technology. In addition to Microsoft, Google and Yahoo Inc. have also opened offices in Kendall Square. Another firm, VMware Inc., a player in the hot market for virtualization software, now occupies space above Google.
Amid all the maneuvering, InterSystems, a leading provider of software for healthcare institutions, has maintained a quiet existence in the neighborhood, steadily expanding its operations with little fanfare.
The company was founded in 1978 by MIT graduate Phillip "Terry" Ragon, who graduated with a degree in physics and soon began exploring the then emerging field of database software. In 1978, he founded InterSystems and bounced around offices until the company settled at One Memorial Drive. The firm now has $220 million in assets and offices in 22 countries.
In court papers and interviews, InterSystems executives allege that the landlord, Equity Office Partners, was quick to overlook its success and immediately gravitated to Microsoft, which had heady plans for its Boston Concept Development Center, where it would create new Internet businesses.
InterSystems said Microsoft was also offering more money - $75 per square foot, nearly double the $40 per square foot it was paying for space in the building. Equity Office, which was acquired by Blackstone in February 2007, signed a lease with Microsoft in June of that year.
"After Blackstone took over, their intent seemed to be to clear the building out," said Grabscheid. "From their perspective, making it the Microsoft building is probably a lucrative investment strategy."
Blackstone declined to comment for the story. In court papers, the company denies the allegations, declaring that it committed no "unfair or deceptive acts" in leasing space in the building. It also argues that InterSystems missed a deadline for notifying the firm of its intent to lease the space that went to Microsoft.
In its filing, Blackstone's attorney, Stephen Oleskey, notes that a meeting with Ragon in the middle of the dispute ended up focusing not on the lease, but on the prospect of InterSystems having to share space with Microsoft.
Ragon "asserted that Microsoft's presence would be a threat to the Internet security of InterSystems [and] claimed InterSystems would now have to operate its business differently," Oleskey wrote. He also wrote that Ragon indicated that plans to upgrade common areas in the building would not benefit InterSystems, because its employees would have to fraternize with competitors from Microsoft.
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