The agreement between Macquarie Telecom and Cocoon dated back to2015, when Cocoon was known as Covata, and involved Macquarie rebadging Safe Share as SigBox, before selling it to government clients.
It was a non-exclusive agreement, meaning Cocoon could continue selling Safe Share itself to non-Macquarie clients.
The product let customers securely share documents on an encrypted, cloud-based platform, and was a big success in Canberra.
While the Australian Taxation Office had previously been a client of Covata, it moved over to Macquarie Telecom, which then succeeded in signing up a wide array of new clients including the Department of Defence, the Department of Health and Services, the Australian Federal Police, the Australian Bureau of Statistics, the Australian Prudential Regulation Authority, Australian Securities and Investments Commission and the Bureau of Meteorology.
Macquarie Telecom's Aidan Tudehope met with Cocoon's Mr Telford prior to the end of the reseller agreement.
Cocoon's claim says it became aware that Macquarie Telecom was failing to uphold parts of its agreement such as including Covata and Safe Share trademarks on its SigBox marketing material, and more significantly was not performing software upgrades produced by Covata for its clients.
This meant new features that Covata was developing in Safe Share, and code changes, which could improve the security of the software, were not being passed on to Macquarie Telecom's government clients.
Under the terms of its partnership agreement, Covata/Cocoon was not allowed to deal directly with Macquarie Telecom's clients. Its claim cites an occasion when APRA approached Covata directly wondering why it was not getting software updates, but that it had to simply refer it back to Macquarie Telecom.
The claim says Macquarie Telecom began telling its clients that upgrades were not available, and that the SigBox product was going to "end of life" in November 2019, ahead of an upgraded product.
Earlier that year, Cocoon chief executive Trent Telford met with Macquarie Telecom managing director Aidan Tudehope, and Macquarie subsequently wrote to Cocoon saying it wished to extend the reseller agreement.
At a meeting in August 2019, Cocoon claims Macquarie Telecom promised to extend its reseller agreement by a minimum of three years, on the provision that Covata/Cocoon provided it with confidential details about its product road map and new features that were in development.
After Mr Telford sent Mr Tudehope these details, Macquarie Telecom did not sign a new reseller agreement and instead set about building its own version, which it called SigBox 2.0.
Cocoon claims Macquarie Telecom's new product went against its previous agreements by copying and adapting Covata's technology, and that it passed off its copycat product to clients as a simple upgrade of Covata's product, rather than admitting it was a new product that Covata had no commercial or technical involvement with.
Macquarie Telecom marketing material used in a bid to sell SigBox 2.0 to the ATO, which was released under a freedom of information request, showed how it sold its new product, based on agencies' knowledge of the Cocoon-built original SigBox platform.
"We've created the Sigbox solution for government, purpose built behind our Secure Internet Gateway (SIG). Your data is encrypted in transit and at rest in our data centre," the Macquarie Government brochure said.
The FOI documents show the ATO's internal business case for upgrading, and that the agency clearly had no idea that it was buying a different product built by a different vendor.
"The existing version of SigBox, whilst extremely well regarded by users, provides little by way of user administration and reporting functionalities that allow effective growth management," the ATO procurement document states.
"SigBox 2.0 has been redeveloped to include more effective user administration and reporting functions."
The ATO subsequently agreed to pay $215,074.20 to Macquarie Telecom in order to use SigBox 2.0 from September 2019 to September 2020.
Cocoon is claiming damages related to areas including loss of custom, breach of contract and reputational damage, because of Macquarie Telecom failing to update its software.
Macquarie Telecom declined to comment on its actions when contacted by theFinancial Reviewbecause of the legal proceedings. However it said it would defend the matter in court.
Mr Telford meanwhile said he had taken legal action due to the hit to earnings it had suffered, and in order to get details of the events in front of the court.
"The wholesale loss of federal government agency business was a surprise to us, and the catalyst for these proceedings," he said.
"At the primary level, we believe Macquarie Telecom failed to encourage their customers to upgrade to the latest versions of our product. Further, they took a strategic decision to swap out our product for something Macquarie Telecom created, and pass it off as merely ‘Sigbox Version 2’."
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