Federal judge Anna A. Brown issued an opinion and order declaring that XAP Corporation of Los Angeles willfully violated the Lanham Act in its competition with CollegeNET. Both companies host web-based college admissions applications on behalf of colleges and universities. The judge's order follows a bench trial held last January in which she reviewed a jury's decision last October to award $4.5 million in damages to CollegeNET for XAP's violation of the federal Lanham Act. In addition to upholding the jury's damages award, the judge, relying on the evidentiary standard of "clear and convincing", found "willfulness" and "exceptional circumstances" and ordered XAP to pay CollegeNET's attorneys fees and costs. The judge wrote:

The Court has found XAP actually deceived students by failing to inform them that XAP deemed they were giving "express consent and direction" to the release and sale of their personal information to financial institutions and other third parties solely by answering "yes" to the opt-in question on their online college applications. XAP also made a conscious, knowing, business decision to reject proposals by at least one of their Mentor System customers to make clear to students the consequence of a "yes" answer to the "opt-in" question. At both the jury trial and the bench trial, XAP witnesses, nonetheless, touted all five of XAP's privacy-policy statements as models of clarity, particularly in an environment where identity theft is rampant. The only reasonable inference and conclusion to be drawn from this record is that XAP used its privacy-policy statements to mislead students and to give them a false sense of security that their personal information would remain private. XAP engaged in this deceptive practice for the sole purpose of increasing the number of 'yes' responses to the "opt-in" question and, thereby, increasing their revenue. In addition, XAP's conduct enabled it to process students' online applications to colleges and universities free of charge while CollegeNET was required to charge colleges and universities a fee for every application processed, which resulted in XAP's obvious unfair competitive advantage over CollegeNET. On this record, the Court concludes XAP's unfair competition was willful...Section 35(a) of the Lanham Act authorizes the Court, in its discretion, to award attorneys' fees to the prevailing party in "exceptional circumstances." 15 U.S.C. § 1117(a). Such circumstances include "cases in which the act is fraudulent, deliberate, or willful." Horphag Research Ltd. v. Garcia, No. 04-55373, 2007 WL 45910, at *7 (9th Cir. Jan. 9, 2007). For all the reasons stated above, the Court concludes XAP engaged in willfully deceptive misconduct that resulted in damages to CollegeNET and thereby established the exceptional circumstances that justify an award of reasonable attorneys' fees to CollegeNET.

Tiffany Souza, CollegeNET vice president and counsel, stated: "This is obviously a big victory for CollegeNET. The judge's decision makes very clear that competing for college and university business should be on the merits of service, not on hidden sales of private student data." Ms. Souza responded to XAP's spin on the outcome: "In XAP's just issued press release, Liz Dietz, XAP president claims that 'it all relates to practices discontinued some time ago which affected a small percentage of XAP accountholders'. Yet at the jury trial, the evidence showed that the private data of approximately 600,000 applicants—including social security numbers—was opened for sale by XAP. Further, under the Kentucky open records laws, we learned that Liz Dietz recently renewed an agreement between XAP and the Kentucky Higher Education Assistance Authority (KHEAA) that was a key piece of evidence in the case. This renewed agreement, among other things, provides for XAP to be paid $10 per student lead from XAP's Alabama Mentor System. While XAP may indeed have a new and legitimate method of obtaining student consent, our view is that they should now make very clear to the market what that method is. In any event, we know from their renewed agreement with KHEAA that XAP, quite unlike CollegeNET, remains firmly in the business of selling student data."

About CollegeNET, Inc.
CollegeNET, Inc. is focused on web-based, on-demand technologies that save institutions money and improve educational access and affordability for citizens. The company provides innovations in event and academic scheduling, decision support, admissions, web-based tuition processing, prospect management, alumni development, and course evaluation to colleges, universities, and nonprofits worldwide. More than 1,000 institutions use CollegeNET solutions. The company is headquartered in Portland, OR.

For more information, please contact Paul Casey, Director of Corporate Communications, CollegeNET. Phone: 503.973.5200. Fax: 503.973.5252.