Vlingo Lawsuit Charges Nuance With Unfair Competition and Commercial Bribery

A new front has been opened in the longstanding legal war between two Massachusetts speech technology powerhouses.

On Thursday, Cambridge, MA-based Vlingo filed a lawsuit in U.S. District Court of Massachusetts charging its much bigger archrival with unfair competition, commercial bribery, breach of contract, and intentional interference with prospective business relationships. Among its chief allegations is that Burlington, MA-based Nuance Communications (NASDAQ: NUAN), out to drive up Vlingo’s costs and force it to agree to an acquisition or technology partnership, filed a baseless patent infringement lawsuit against the smaller company. The complaint also charges Nuance with interfering with Vlingo’s efforts to negotiate deals with AT&T and Nokia, in the latter case by hiring a key Nokia executive who had confidential knowledge of Vlingo’s patent portfolio and patent strategy, and says Nuance CEO Paul Ricci attempted to bribe three key Vlingo executives by offering them $5 million apiece if they could convince their board of directors to sell to Nuance.

“The bottom line is we’ve really got a case against Nuance now for illegal acts in terms of interfering with our business,” said Vlingo CEO Dave Grannan during a phone interview about the lawsuit. “They’ve really tried to destroy or buy our business anyway they can.”

(Disclosure: Xconomy Boston editor Gregory Huang is a brother-in-law of Vlingo co-founder and CTO Michael Phillips. He was not involved in the reporting, writing, or editing of this story and saw no part of it before publication.)

This is just the latest in a string of legal disputes between the two firms. Indeed, Grannan says the companies are now involved in seven open lawsuits—five brought by Nuance, two by Vlingo—covering patent infringement claims on both sides, a false advertising suit brought by Nuance against Vlingo, an investor rights case also lodged by Nuance, and last week’s unfair competition complaint filed against Nuance by Vlingo. (This is all despite the fact that Nuance is an investor in Vlingo, having led the company’s $25 million Series C financing round in October 2009 and contributed $15 million to the round.) The firms have settled one other case, and just last month, a jury in a federal court in Boston determined that Vlingo did not infringe on Nuance’s so-called ‘295 patent, ending a suit that was filed by Nuance in June 2008.

The new complaint (click here to view the PDF), filed on the heels of Vlingo’s success in the ‘295 patent case, tells a fascinating story of this complicated relationship and the long-running tension between the two speech recognition leaders, which dates back almost to Vlingo’s founding in mid-2006. Keep in mind that it only gives Vlingo’s view of events. In response to my request for comment, Nuance only provided this statement from senior vice president and general counsel Jo-Anne Sinclair: “Nuance strongly believed, and continues to believe today, that Vlingo ran afoul of Nuance patents. We dismiss the recent claims as a distraction from the one principle that matters most—that Vlingo is infringing upon Nuance’s deep, long-standing investments in innovation and intellectual property.”

Long-Spurned Suitor

“Nuance has been aware of Vlingo since Vlingo’s inception as Mobeus, Inc. in June 2006 and, since that time, has coveted Vlingo’s innovative, cutting-edge technology,” last week’s filing asserts. Just a few months after Vlingo’s formation, it says, the company presented prototype products to a Nuance sales representative for evaluation, leading to an invitation from Nuance to take part in its annual users group conference in Orlando. Nuance’s “excitement” about Vlingo at that event, the complaint says, led Ricci to invite Vlingo co-founder Mike Phillips to lunch.

That meeting took place on October 24, 2006, according to the filing, and apparently marked … Next Page »

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