SAN FRANCISCO — Will the real innovator please stand up?
As Nuance Communications Inc. and ABBYY Software House — two competitors in optical character recognition — brought their long-running case to a jury in U.S. District Judge Jeffrey White's San Francisco courtroom on Monday, their lawyers traded classic barbs of patent warfare.
Representing plaintiff Nuance, partner James Bennett of Morrison & Foerster described ABBYY in his opening statement as "a follower, not a leader."
Coming to the Russian company's defense, partner Gerald Ivey of Finnegan, Henderson, Farabow, Garrett & Dunner suggested that Nuance felt threatened by a more nimble competitor.
"ABBYY is an innovative company that has begun to out-innovate Nuance," Ivey said.
Burlington, Mass.-based Nuance, which is also represented by lawyers at Wilson Sonsini Goodrich & Rosati, contends that ABBYY gravely harmed its business by infringing several of its patents and copying its trade dress. An early entrant in the field of optical character recognition, or OCR, Nuance in 1988 introduced its signature product, OmniPage, which converts scanned images of text so they can be searched and edited digitally. Nuance accuses ABBYY's FineReader, which performs similar functions, of being little more than a copy.
Nuance seeks more than $100 million in damages for price erosion and lost profits. The suit also targets Lexmark International Inc., which used ABBYY's technology in its products.
The suit "is the direct result of ABBYY's business strategy – dropping prices to rock bottom amounts to take customers from Nuance even as ABBYY … infringed Nuance's patents and … copied its trade dress," MoFo partner Michael Jacobs, who is co-lead counsel for Nuance with Bennett, wrote in a partially redacted pre-trial brief.
Ivey denied that ABBYY had infringed Nuance's patents or trade dress and implored the jury on behalf of his Russian clients not to stifle competition. "They want to ask you with your verdict to allow them to continue to compete fairly in the United States," Ivey said.
Three patents are in question, but lawyers for both sides agree that Nuance Communications v. ABBYY Software House, 08-0912, centers on U.S. Patent No. 6,038,342, which covers a "trainable template" that is updated during the process of converting scanned images into searchable text. The invention represented "a fundamental breakthrough in OCR technology," Bennett said.
"Others had tried to do this," he told jurors. "They had failed."
But Ivey noted that the technology is now more than 20 years old. "ABBYY's technology is newer, it's different and it's more effective," he said.
Although they are just now appearing before a jury, Nuance and ABBYY have been squabbling for years. Nuance filed suit against Lexmark and ABBYY in 2008. ABBYY fired back the next day with a declaratory judgment suit alleging that Nuance's patents were invalid, but the suit was tossed two years later. ABBYY was stymied again this May when White declined to dismiss Nuance's patent and trade dress infringement claims and sanctioned ABBYY $135,000 for holding up the discovery process. The trial is expected to run through late August.
Before Nuance's OmniPage debuted, OCR systems were either limited in their ability to recognize fonts or painstakingly slow, Bennett said. Nuance's key patent, no. '342, calls for the software's template to be updated as letters are deciphered, expediting the process.
Bennett's voice began to race as he described the patent. White urged him to slow down.
"The system learns," Bennett stressed, "as it scans a document."
Ivey said ABBYY's technology uses a different system of "weighted guesses" to identify letters in text. But Bennett noted that the patent that ABBYY secured for its own technology contained "wholesale copying of the language of Nuance's patent." ABBYY fired the employee who was responsible, Ivey said.
"This particular issue, ladies and gentleman, is a sideshow," he said.
That wasn't the only instance in which Nuance accused ABBYY of playing copycat. During his opening, Bennett displayed a slide that juxtaposed the companies' similar packaging.
ABBYY "entered this market knowing that Nuance was the market leader … and did everything it could to take market share," Bennett said.
Sophisticated shoppers on the market for OCR software are not likely to be thrown off by packaging, countered Ivey, who added that there are no documented cases of consumers mistaking ABBYY for Nuance. Displaying the iconic symbols of companies like Nike and Microsoft, Ivey questioned how distinctive Nuance's packaging was in the first place.
"They're not entitled to say no one else can use a scanner on a box or the color red," Ivey said.
Nuance has grown through acquisitions, and it is steeped in Silicon Valley connections. One of its predecessor companies, Caere, was founded by Robert Noyce, who also launched Intel Corporation. ABBYY's roots are in Moscow, but Ivey played up the parallels to Valley lore. The company was started by a group of students who lived on as little as $20 a month in the early days, he said.
Repeating the word "ABBYY" each time it appeared on a FineReader package, Ivey struck down the notion that his clients were trying to pass for Nuance.
"They have indeed grown that company into something that they are quite proud of," he said. "One of the things that goes with that pride is that they want everybody to know their name."