Vlingo Buys Patents from Bellevue-based Intellectual Ventures As Defense In Nuance Lawsuit—Hopes for “Horse Trade”

7/26/10Follow @xconomy

Vlingo, a Cambridge, MA-based provider of voice-to-text software, has taken a defensive move to help protect it against a lawsuit filed by speech software giant Nuance Communications, announcing a deal today with Intellectual Ventures that adds a slew of intellectual property to its arsenal.

Vlingo has purchased several patents from Bellevue, WA-based Intellectual Ventures that Nuance would need to license to continue shipping its products, Vlingo president & CEO Dave Grannan told me in a phone interview. Vlingo filed a lawsuit against Nuance last week regarding infringement over those particular patents, Grannan says. Additionally, Vlingo has enlisted in a program in which it gets non-exclusive rights to Intellectual Ventures’ portfolio of patents.

“By acquiring patents from Intellectual Ventures, we can even the playing field,” Grannan says.

Vlingo’s hope is that Nuance, which is suing the software startup for patent infringement, would be willing to drop the suit in exchange for a business settlement with the company, Grannan says. In such a settlement, each company would get access to the other’s patents. Grannan called that type of deal “a bit of a horse trade,” and said it would be more productive for both businesses than the litigation.

In June of 2008, Burlington, MA-based Nuance (NASDAQ: NUANalleged Vlingo had violated U.S. Patent No. 6,766,295, issued to Nuance engineers, which protects a technology for making voice-to-text software more accurate by sampling multiple audio clips, such as phone sessions. Nuance sought monetary damages and to prevent Vlingo from making, using, and selling the software.

“A lawsuit is a waste,” Grannan says. “It takes time and effort away from both of our companies to make good products.” He says the deal with Intellectual Ventures protects Vlingo as it continues to pursue its own patents, a process that can take four to six years. Vlingo has filed more than 30 patent applications, he says. “We’re very intent on getting our own patents awarded, that just takes time.”

A Nuance victory in the lawsuit could shut down Vlingo’s partnership deal with Yahoo, through which it powers the Internet giant’s oneSearch mobile search engine with its speech recognition technology. The deal was announced just two months before the Nuance lawsuit surfaced.

When news of the lawsuit first hit, Grannan told Wade that the lawsuit was Nuance’s response to not scoring the deal with Yahoo. Grannan reiterated the general idea to me today, saying that Nuance has routinely used litigation as part of its business. “In our industry, there are companies and players like Nuance that use patents aggressively and offensively as a business tactic,” he says. “Sometime it’s easier for them to litigate over a patent issue than to come out with new products.”

A Nuance spokeswoman told me that the company doesn’t comment on ongoing litigation, but I’ll be sure to update this space if Nuance has anything additional to say about Vlingo’s patent deal with Intellectual Ventures.

In the past two years, the lawsuit from Nuance has slowed, but ultimately not prevented, Vlingo’s deal making with other players in the wireless industry, Grannan told me. Last year, the company announced Nokia would be shipping certain devices in Europe with Vlingo’s technology. It also announced it was abandoning the speech recognition engine developed by IBM and maintained by Nuance in favor of AT&T’s technology. AT&T took a minority stake in Vlingo in the process.

Vlingo has raised three rounds of venture funding, the company says. It nabbed about $26.5 million in its first two rounds, including a $20 million Series B round led by Yahoo in April 2008. Charles River Ventures and Sigma Partners have also backed the company.

(Disclosure: Vlingo CTO and co-founder Mike Phillips is brother-in-law to Greg Huang, Xconomy’s Boston editor. Neither was involved in the reporting of this story.)

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