February 2000, Vol. 17, No. 2 A Tale of Two Patents Continues HNC and Nestor shift strategies in ongoing litigations For over a year ISR has been monitoring a patent battle between two of the top developers of intelligent fraud detection software. As reported in the December 1998 issue of ISR, Nestor (Providence, R.I.; www.nestor.com), makers of Prism fraud detection sysytem, filed a patent infringement suit against HNC's (San Diego; www.hnc.com) recently issued patent (U.S. Patent 5,819,226) for the technology used in its Falcon system, as well as other products. Nestor also alleged that HNC had engaged in "anti-competitive, exclusionary, predatory and illegal conduct" in order to obtain a monopoly on fraud detection software. In answer to the suit (see ISR August 1999), HNC filed a counter-claim asserting that Nestor's patent (U.S. Patent 4,760,604) was invalid and unenforceable and that Nestor's fraud detection system infringed on HNC patents. Simultaneous claims of misrepresentation and fraudulent practices were filed by HNC against Nestor's distributor Transaction Systems Architects Inc. (Omaha, Neb.; www.tsainc.com) and its subsidiary ACI Worldwide Inc. As the new millennium began, tactics for both HNC and Nestor shifted. In mid-January HNC announced that Nestor had dropped the patent infringement claims. "From the beginning HNC has believed that there was no merit to Nestor's position and that HNC would be vindicated at trial. And now that the claim has been dropped, even the potential threat of an injunction against our Falcon product has been eliminated completely," said HNC Software President and CEO John Mutch. But Nestor quickly countered by "amending" their other suits against HNC. According to David Fox, Nestor's President and CEO, "Our basic claim that HNC's fraud detection patent is invalid and was inequitably obtained remains unchanged, and we look forward to resolving this key issue in the courts." This claim, and seven additional claims covered under the original lawsuit, including violations of Section 1 and 2 of the Sherman Act and the corresponding sections of the Rhode Island Antitrust Act, alleging that HNC has engaged in "anti-competitive, exclusionary, predatory and illegal conduct" continue to be litigated. Table of Contents Web Site © Copyright 2000 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