Vlingo Lawsuit Charges Nuance With Unfair Competition and Commercial Bribery

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the first time Nuance attempted to buy Vlingo—an offer that Phillips declined. But the next month, another meeting took place between Ricci, Phillips, and John Nguyen (also a Vlingo co-founder, now VP of Engineering), in Vlingo’s office in Kendall Square. “At this meeting,” the complaint says, “Paul Ricci once again offered on behalf of Nuance to acquire Vlingo. Mike Phillips and John Nguyen informed Paul Ricci that Vlingo did not wish to be acquired by Nuance.”

At this point, the filing paints a picture of a revengeful Ricci out to bend Vlingo to his will. “In February 2007,” it says, “Vlingo received several visits from Rich Palmer, then head of corporate development at Nuance. Mr. Palmer indicated that Nuance wanted to create a ‘technology partnership’ with Vlingo. Rich Palmer reminded Mr. Phillips that Mr. Ricci takes all Nuance business personally. Mr. Palmer informed Mr. Phillips that Mr. Ricci was very disappointed that Phillips left Scansoft and did not accept Mr. Ricci’s invitation to acquire Vlingo.” A little background here: Scansoft was the name that Nuance went by until it picked up its current moniker in the course of a 2005 merger. Phillips was Scansoft’s CTO between 2003—when a company he’d founded called SpeechWorks was acquired by Scansoft—and 2005. The complaint continues: “Mr. Palmer informed Mr. Phillips that Mr. Ricci can be vindictive if he does not get his way and that Vlingo would not be happy if Mr. Palmer and Mr. Phillips could not work out a technology partnership and the matter was placed in the hands of people with big egos, such as Mr. Ricci. Finally, Mr. Palmer threatened Mr. Phillips with bearing the exorbitant cost of intellectual property litigation and told Mr. Phillips to inform his Board that they can either take the technology partnership deal offered by Nuance or pay $20 million in legal fees vindicating themselves in intellectual property litigation.”

Indeed, Vlingo alleges, its refusal to agree to the deals proposed by Ricci and Palmer was the impetus for the lawsuit that Nuance filed against Vlingo in June 2008, alleging infringement on patent number, 6,766,295 (the so-called ‘295 patent). Vlingo also charges that the 2008 suit was filed in Texas rather than Massachusetts, where both firms are based, with the intent to “increase the expense of litigation to Vlingo, so as to leverage a potential acquisition of Vlingo.” (The case was transferred to Massachusetts in August 2009, according to Vlingo’s filing.) And Vlingo additionally asserts that Nuance’s charge of infringement in the ‘295 patent suit “was objectively baseless and interposed in bad faith for anti-competitive purposes.” Last month’s verdict in Vlingo’s favor confirms that Nuance knew or should have known that Vlingo was not infringing on the patent, the newest complaint says.

Allegations of Attempted Bribery

It’s at this point in the filing that Vlingo drops the bombshell claiming that Ricci tried to bribe Phillips, Ngyuen, and Grannan into either selling the company or leaving it and joining Nuance, a move it says would completely destabilize Vlingo. A hat tip here to Bloomberg BusinessWeek, which back in May drew out much of the story based largely on an interview with Grannan.

The complaint provides more detail. It says that in September 2009, while the ‘295 patent infringement case was ongoing, Grannan and Phillips met in California with Ricci, Nuance executive vice president and chief marketing officer Steve Chambers, and another Nuance representative—and that once again Vlingo rejected a Nuance offer to acquire the company.

Several days later, the complaint says, Ricci and Chambers called Grannan and Phillips. “During the telephone call…in violation of Massachusetts’ prohibition against commercial bribery, Mr. Ricci, the CEO and Chairman of the Board of Nuance, a public company, offered to pay … Next Page »

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Bob is Xconomy's founder and chairman. You can email him at bbuderi@xconomy.com. Follow @bbuderi

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