December 1998, Vol. 15, No. 12 A Tale of Two Patents Nestor accuses HNC Software of patent infringement HNC Software (San Diego, Calif.; www.hnc.com), a provider of neural network-based solutions, has been awarded a U.S. patent for its technology for detecting fraudulent transactions in customer accounts, prompting arch-rival Nestor (Providence, R.I.; www.nestor.com) to file suit against HNC for patent and anti-trust violations. Nestor, a developer of a patented neural network-based credit card fraud detection system called Prism, alleges that HNC has engaged in "anti-competitive, exclusionary, predatory and illegal conduct." Nestor's complaint focuses upon unreasonably exclusionary agreements, below-cost pricing, patent fraud, disparagement and business disruption, as well as an attempt to eliminate Nestor as a competitor. The complaint alleges that HNC has obtained monopoly power in the U.S. market. The patent claims arise from the fact that Nestor obtained patents in 1982 and 1988 — the system covered by Nestor's 1988 patent was subsequently developed into Nestor's Prism fraud detection system. Nestor's suit claims that HNC's Falcon product line infringes Nestor's 1988 patent. Other HNC products covered by the new patent include Falcon Cheque, a checking account fraud detection solution, and VeriComp, a Worker's Compensation claims fraud detection system. HNC's patent covers techniques for applying current transaction and customer data to a predictive model based on past transaction data in order to score an account transaction for the likelihood of fraud. Nestor has asked the U.S. District Court for the District of Rhode Island to enter a declaratory judgment of patent invalidity and non-infringement with respect to HNC's Falcon patent. "We never wanted to fight this matter in the courts," said David Fox, Nestor's president and CEO. "HNC has been issued a patent for what we believe is a simple and obvious application of Nestor's own fundamental patented inventions. As a result, we now feel that we have no choice but to seek the protection of the court from HNC's conduct." According to Patricia Campbell, HNC's director of marketing, "We find no merit in the allegations or the lawsuit, and we intend to vigorously defend our patent." Web Site © Copyright 1997, 1998, 1999 by Lionheart Publishing, Inc. All rights reserved. Lionheart Publishing, Inc. 2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA Phone: 770-431-0867 | Fax: 770-432-6969 E-mail: lpi@lionhrtpub.com Web: www.lionheartpub.com Web Design by Premier Web Designs E-mail: lionwebmaster@preweb.com