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I plan on working in the pattern recognition software industry. Some research into this industry led me to read about a company called “Nuance Communication.” According to this techcrunch article, “Nuance Communications is a massive company with a $6 billion market cap.” http://techcrunch.com/2011/06/09/nuance-sues-vlingo-again-over-voice-recognition-patents/

More specifically, the article linked above describes Nuance Communication's suing of a Yahoo and AT&T backed statup company called Vlingo for IP infringement, a second time. A simple google search for “nuance communication sues” returns a long list of IP lawsuits between Nuance Communication and smaller competitors in the pattern recognition market. So apparently, the incident above between Nuance and Vlingo isn't an isolated case.

Here are some articles about Nuance Communication's IP lawsuits that I came across in a google search:

I imagine it's not easy for a small startup company to survive in court against a plaintiff with $6 billion. I imagine that not having the necessary time and funds to go to court for an extended period of time can result in the failure of a startup.

In addition to taking many smaller companies to court, Nuance Communications has a history of acquiring their competitors. According to the wikipedia article on Nuance Communications, Nuance Communications got its name after merging with a company called ScanSoft. Prior to and after that merger, wikipedia lists no less than thirty-four competing companies that were acqiured by Nuance Communication.

http://en.wikipedia.org/wiki/Nuance_Communications#Acquisitions

The following Business Week article suggests a link between Nuance's numerous lawsuits and acquisitions: "Nuance Plays Hardball in Voice Recognition"

I found two companies who were sued by Nuance Communications and who spoke out against Nuance Communication's business practices:

I think this statement made by president and CEO of Zi Corp., accurately characterizes what Nuance Communications is all about:

“This motion for contempt is without merit. Providing this notice is clearly a tactic employed by Nuance in light of its failed proposal to acquire Zi last week at a low valuation. The timing of this motion is highly suspicious and is an unnecessary legal tactic by Nuance. We are disappointed that Nuance is resorting to these kinds of tactics to acquire Zi without recognizing its full value. We will vigorously defend ourselves in this litigation proceeding. We are examining all legal remedies available to us with respect to Nuance’s tactics.”

In Summary:

Having done some preliminary research, it seems to me that Nuance Communications locates competitors in the pattern recognition industry, offers to buy them out at an unreasonably low evaluation and sues for IP infringement if the offer is turned down. If correct, this is a horrifying conclusion. Here are my questions:

  1. Am I understanding my research and these links correctly?
  2. Are these business practices as malicious and unethical as I think they are, or is this normal in the business world?
  3. What can a startup company in this industry (or any other) do to protect against these kinds of "hardball" tactics?
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It is ironic that when I clicked on your profile I got a post about TL;DR amichaioneducation.com – TimJ♦ Jun 13 '11 at 19:47
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what is the point of this question? You are taking what looks like an outlier and asking a generic question about a broad topic. This is not really something that can be answered, and there is no one right answer. – TimJ♦ Feb 3 '12 at 20:26

2 Answers

up vote 6 down vote

Thank you for posting an incredible case for patent reform.

Am I understanding my research and these links correctly?

Yes.

Are these business practices as malicious and unethical as I think they are, or is this normal in the business world?

Yes, and Yes.

What can a startup company in this industry (or any other) do to protect against these kinds of "hardball" tactics?

Locate and launch your business in a location which does not recognize their patents.

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This is a case for patent reform (copyright not an issue in Nuance's strategy). – user6603 Jun 13 '11 at 19:45
You are right. Sorry. Mistype! – Joseph Barisonzi Jun 13 '11 at 20:48
up vote 3 down vote
  1. Yes.

  2. Malicious and unethical is in the eye of the beholder. Nuance's actions are not against the law, but that is not to say that they are not malicious or unethical. The CEO of Vlingo certainly thinks so:

    Competing with Nuance is like having a venereal disease that's in remission.

    (See the Business Week article). I imagine other companies targeted by Nuance have similar opinions. On the other hand, the "shareholders" of Nuance might be happy, assuming that Nuance profits from this legal strategy.

  3. I suggest reading up on Vlingo's strategy. Vlingo bought patents from Intellectual Ventures (another company often accused of malicious and unethical behavior) and then sued Nuance for patent infringement. Vlingo appears to be putting up a pretty good fight but only time will tell... Business can be brutal.

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