The patent litigation between Burlington, MA-based Nuance Communications (NASDAQ: NUAN) and Cambridge, MA-based Vlingo is nothing new.

A false advertising lawsuit is, though. Earlier this week, Nuance filed such a lawsuit against Vlingo in Suffolk County Superior Court. The suit asserts that Vlingo, on its website and elsewhere, “makes numerous false and misleading representations of fact to induce consumers to purchase or use Vlingo products and services,” according to court documents provided to Xconomy by Vlingo.

[Disclosure: the brother-in-law of Xconomy Boston editor Greg Huang is a co-founder of Vlingo. Mr. Huang was not involved in the planning, directing, reporting, or editing of this story.]

These allegedly false and misleading claims include the statement that Vlingo’s technology achieves unprecedented accuracy, that it applies “automatic adaptation” to pronunciation and vocabulary, that it learns for example, “over time that a particular user tends to ask for Mexican food,” and that the adaptation process is “new technology.” Nuance calls these claims unfair and deceptive—for instance, at one point the suit says “Vlingo claims that certain technology is ‘new’ when in fact it is not”—and has sought unspecified monetary damages for the harm Vlingo has caused it as a result. Nuance also states that the claims “harm the consuming public and are contrary to the public interest.”

A representative from Nuance said that the company does not comment on matters of litigation.

Here is the PDF of Nuance’s false advertising complaint against Vlingo and supporting documents.

Nuance says in its suit that it became aware of the false advertising as part of the discovery process—specifically when it deposed key Vlingo employees—in one of the pending patent infringement cases. Nuance says a protective order issued in that case prevents it from using at least some of the information in the new false advertising suit at this time, but that it is seeking ways to do so.

“To me it looks like a real sign of desperation,” Vlingo CEO Dave Grannan told me on a call Thursday. “It’s just a measure of the fact that they’re trying to increase our legal expenses and create some sense of uncertainty and doubt against our customer base.

“It’s continued to be part of the Nuance strategy to compete in the courtroom rather than in the market,” he says.

Vlingo offers a mobile app that consumers can buy themselves and also powers voice recognition features for device makers like Samsung. Grannan says his company has recently inked some big customer deals —which he didn’t name—in which it went head to head with Nuance. “Every time we have a market victory, they sue us again,” he says.

The false advertising lawsuit is the latest step in the three-year legal wranglings between the two software companies. Earlier this month, Nuance hit Vlingo with … Next Page »

Comments | Reprints | Share:          

Affymetrix (NASDAQ: AFFX), the diagnostics instrument maker based in Santa Clara, CA, won a favorable court ruling that dismissed a patent infringement lawsuit filed against the company by San Diego-based Illumina (NASDAQ: ILMN). In a statement yesterday, Affymetrix says the U.S. District Court for the Western District of Wisconsin granted the company’s request for a pre-trial summary judgment. The court found that Affymetrix does not infringe the two patents that Illumina cited, and dismissed Illumina’s patent-infringement lawsuits against Affymetrix.

Comments | Reprints | Share:          

San Diego-based Illumina (NASDAQ: ILMN) and its Solexa subsidiary are countersuing Carlbad, CA-based Life Technologies (NASDAQ: LIFE) and Applied Biosystems in a patent dispute over gene sequencing technologies. In a statement today, Illumina and Solexa denied allegations that Life and Applied Biosystems raise in their Sept. 21 lawsuit, assert that Applied Biosystems’ patents are invalid, and allege that Life is infringing on four Solexa patents. A Life spokesman says, “We believe these claims are without merit and we will vigorously defend our intellectual property.”

Comments | Reprints | Share:          

Sequenom had the big story for San Diego’s life sciences community this week. We have the latest developments about that, as well as other biotech news.

—Sequenom (NASDAQ: SQNM) now faces a long rebuilding process after the San Diego medical diagnostic company ousted president and CEO Harry Stylli and a senior vice president of research and development over mishandled data in the development of a prenatal test for Down Syndrome. Five others also left the company after a five-month internal investigation invalidated studies that said Sequenom’s test, which uses a simple blood draw from pregnant women, was 100 percent accurate at detecting Down’s in a developing fetus. Now those tests will have to be re-done.

—A legal dispute over genetic-sequencing technologies and products is beginning to look more like a free-for-all. Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) has filed a patent suit against San Diego rival Illumina (NASDAQ: ILMN) which is already engaged in similar litigation with Affymetrix (NASDAQ: [[ticker:AFFX) of Santa Clara, CA.

—San Diego-based Zogenix has collected $36 million in a $51 million equity financing round intended to fund the company’s January launch of its needle-free system for delivering a pain drug for migraines. Zogenix says its delivery system releases a quick increase in pressure to penetrate the skin and then injects liquid medicines—without needles.

—Fate Therapeutics CEO Paul Grayson says the San Diego biotech startup is in advanced talks about partnerships with several large pharmaceutical companies about partnerships. Luke says the fast-growing company is using genetically engineered proteins and small molecule compounds to nudge ordinary adult cells into becoming pluripotent stem cells, which have the potential to turn into any cell type.

—Juliet Singh knows how to rub it in. Singh, who oversaw efforts to Irvine, CA-based Allergan (NYSE: AGN) to get FDA approval for botulinum toxin (Botox), is now the CEO of Transdel Pharmaceuticals, a La Jolla, CA-based company. Transdel intends to develop ketoprofen, a common pain reliever used in pills, into a topical cream.

Comments | Reprints | Share:          

Illumina (NASDAQ: ILMN), the San Diego-based developer of genetic analysis systems, said today it has filed a patent infringement suit in federal court in Madison, WI, against Affymetrix (NASDAQ: AFFX), the Santa Clara, CA-based maker of semiconductor-based “GeneChip” technology.

The suit asserts that a variety of array plate products and a related scanner sold by Affymetrix infringe on a patent Illumina was awarded earlier this year for “making and using composite arrays for the detection of a plurality of target analytes.” An array plate enables scientists to analyze many gene samples at the same time. Illumina, which refers to the patent issued March 31st, as the “841″ patent, wants a federal judge to prevent Affymetrix from making and selling its plate arrays, and for unspecified monetary damages.

In a filing submitted today to the SEC, Affymetrix said Illumina’s “claims are without merit” and added that the Northern California company “will vigorously defend against them.” Affymetrix and Illumina last year settled a patent dispute when Illumina agreed to pay $90 million to Affymetrix without admitting fault.

MIT and E8 Pharmaceuticals, a biotech formed by two Boston professors, filed a patent suit against Affymetrix last July that alleged Affymetrix was infringing on another patent, the “228″ patent. As Xconomy reported, MIT professor and E8 co-founder David Housman, a pioneer in forensic DNA analysis, compared their patent filing with an Affymetrix’ product manual, saying, “they are one and the same thing.”

Comments (1) | Reprints | Share:          

What a week for news! Qualcomm and Broadcom agreed to drop their respective patent lawsuits—and sue for peace, while Prize Capital moved closer to creating a $10 million prize competition, and shares of San Diego’s Sequenom fell 70 percent on news of mishandled data. It’s all in our Xconomy roundup.

—San Diego’s Qualcomm (NASDAQ: QCOM) and Broadcom (NASDAQ: BRCM), a rival chipmaker based in Irvine, CA, signed a peace agreement last week that ended a four-year patent war. The deal also protects Qualcomm’s business model, which is based on licensing fees paid by cell phone makers and competing chipmakers. Qualcomm took a $748 million charge in its fiscal second quarter to account for its settlement payment to Broadcom, which adversely impacted its financial results. But Qualcomm said the deal also eliminates “uncertainty, employee distraction and costs related to protracted litigation.”

—Sequenom (NASDAQ: SQNM), a San Diego medical diagnostics company, had plans to launch SEQureDx, its noninvasive blood test for Down syndrome, next month. But in a bombshell announcement that pushed its stock price off a cliff, Sequenom said data from a series of in-house studies that validated the genetic test had been “mishandled.” In a conference call with analysts, CEO Harry Stylli refused to elaborate on what “mishandled” means, or whether the data had been falsified. Since then, Sequenom’s share price has plunged more than 70 percent, and at least six class-action shareholder suits have been filed against the company.

—With San Diego seeking to establish itself as “a big green cluster” for algae-based technologies, perhaps it was only fitting for local cleantech leaders to organize a cluster of algae-related events that included two major announcements. One, from UC San Diego, involved the formation of SD-CAB, a consortium of research institutions also known as the San Diego Center for Algae Biotechnology. And San Diego-based Prize Capital announced plans to establish a $10 million prize competition intended to encourage rapid advances in algae biofuels technologies.

—Another major algae event was organized by the Regional Algae Initiative to recap the progress made by various algae-based efforts in the San Diego area. The presentations covered the waterfront, so to speak. But for me, the highlight came when Jason Anderson of the San Diego Regional Economic Development Corp., kicked off the session by saying Xconomy had set the right tone with a headline proclaiming it’s “A Good Day for Pond Scum.” Hey, thanks Jason! It was either that, or, “What’s It All About, Algae?”

—Life Technologies (NASDAQ: LIFE) and its Applied Biosystems division are now working with Geospiza of Seattle so that scientists can store their genome sequencing data on third-party servers in the Internet cloud.
As Luke reported, this is the first time a major gene sequencing company has taken the leap into cloud computing.

—Carlsbad, CA-based PhotoThera, which is developing a noninvasive infrared laser therapy for treating strokes, said it has closed a $50 million Series D round of financing led by private equity firm Warburg Pincus. PhotoThera also named Arthur T. Taylor to succeed Thomas C. Wilder as CEO.

—Longtime biotech allies Isis Pharmaceuticals (NASDAQ: ISIS) of Carlsbad, CA, and Alnylam Pharmaceuticals (NASDAQ: ALNY) of Cambridge, MA, have agreed to work together to develop new drugs based on single-stranded RNA interference (ssRNAi) techniques. Isis gets $31 million from Alnylam under the deal.

—In another drug development partnership, San Diego’s Ardea Biosciences (NASDAQ: RDEA) said it struck a deal with German drug giant Bayer HealthCare for rights to a class of small molecule cancer drugs known as MEK (mitogen-activated ERK kinase) inhibitors. Ardea gets $35 million upfront from Bayer, and future payments could total as much as $407 million if all goes according to plan.

—Kevin Kinsella, founder of La Jolla, CA-based Avalon Ventures, told Juha-Pekka Tikka that he anticipates another deep dive in the markets after key economic data is released this week. But Kinsella said he sees a healthy resurgence of venture activities eventually—and even some venture-backed IPOs on the horizon.

—A patent infringement lawsuit filed against San Diego-based Histogen by rival SkinMedica of nearby Carlsbad, CA, caused a financing deal to fall through, which in turn forced Histogen to lay off all 36 employees three months ago. But with half the employees staying on without pay while the company hunts for new funding, the situation didn’t deter Histogen’s cosmetics division, Histogen Aesthetics, from introducing its ReGenica line of skin care products last week for use in anti-aging and to promote healing following cosmetic skin treatments.

Comments (1) | Reprints | Share:          

Our last installment concerning Histogen ended in a cliffhanger. As I reported in February, Histogen CEO Gail Naughton was scrambling to raise funding after a patent infringement lawsuit was filed against her biotech company by SkinMedica, a rival based in nearby Carlsbad, CA. The lawsuit led a group of angel investors to back away from their planned $2.4 million investment in Histogen, which forced Naughton to lay off all 36 Histogen employees at the end of January.

Undeterred, Naughton is forging ahead. Today a cosmetics division called Histogen Aesthetics is launching its line of ReGenica skin care products for use in anti-aging and to promote healing following chemical peels, dermabrasion, and phototherapeutic laser skin treatments. The company plans to market its new products through dermatologists and plastic surgeons, as well as direct sales from Histogen’s website.

I left a message for SkinMedica CEO Mary Fisher after business hours Friday, after I had learned of Histogen’s plans, but Fisher didn’t get back to me over the weekend. SkinMedica also has targeted the skin care market and sells its TNS Recovery Complex through physicians’ offices. In a statement issued in January, SkinMedica says it acquired two patents in the bankruptcy liquidation of Advanced Tissue Sciences, Naughton’s previous company, that encompass SkinMedica’s NouriCel technology. SkinMedica’s patent infringement lawsuit seeks damages and a court order preventing Histogen from developing aesthetic and therapeutic products that infringe on its patented conditioned cell culture media technology.

Naughton contends that ReGenica products are not infringing on the patents SkinMedica acquired from her previous company. The skincare market must be a lucrative business. A 1.5 oz bottle of Regenica Advanced Rejuvenation System is priced at $99 on the Histogen Aesthetics site.

ReGenica, which is the key ingredient in Histogen Aesthetics’ products, was developed from Histogen’s laboratory expertise in culturing and growing fibroblasts, the cells that form connective tissue. ReGenica is made from fibroblast-secreted proteins, growth factors, and other products. Histogen, meanwhile, is focused on developing therapeutic products, and has been studying whether ReGenica injected into the scalp will stimulate hair regrowth.

Meanwhile, Naughton says she’s managed to raise about $350,000 for Histogen over the past few weeks. But the company still needs about $2 million to resume normal business operations. Naughton says about 18 people who were on Histogen’s payroll in January continue to work almost full-time, even though they’re not getting paid.

In coming weeks, Naughton says, Histogen also plans to report the final results of an early-stage clinical trial that tested ReGenica’s potential to regrow hair on the pates of balding men. In February, Naughton reported preliminary results of the five-month study, which was conducted outside the United States.

“The rest of us are submitting grants and trying to raise money,” Naughton told me Friday evening. “We’re riding out this time until we can get this business going again. Basically, we’re back in startup mode.”

Stay tuned to this Xconomy site for our next episode of the Histogen saga.

Comments | Reprints | Share:          

San Diego wireless giant Qualcomm (NASDAQ: QCOM) and Irvine, CA-based Broadcom (NASDAQ: BRCM) said last night they have agreed to end their wide-ranging patent war and enter a broad cross-licensing deal.

As part of the global settlement, which terminates litigation in federal court as well as formal disputes before trade commissions in Europe and South Korea, Qualcomm has agreed to pay Broadcom $891 million over the next four years. Qualcomm says its first payment, for $200 million, will be paid to Broadcom before June 30.

That could put a ding in Qualcomm’s net income next quarter, but it seems doubtful shareholders will mind. A J.P. Morgan analyst said last week that settlement payments would have little impact on Qualcomm’s future earnings.

When Qualcomm announced Wednesday that it was postponing the release of its earnings for the second that ended in March (because it was in advanced settlement talks with Broadcom), the San Diego company added it would meet or exceed its prior guidance for quarterly revenue and operating income (excluding the cost of its deal with Broadcom.) In last year’s second quarter, Qualcomm reported operating income of $766 million on $2.6 billion in revenue—and the company said earlier this year it expected second-quarter revenue to fall between $2.25 billion and $2.45 billion.

The agreement also relieves both Broadcom and Qualcomm of substantial legal costs—in a battle where Qualcomm wasn’t faring particularly well. The company suffered its worst setback in mid-2007 when San Diego federal judge Rudi Brewster issued a blistering, 54-page ruling that found Qualcomm and its trial counsel had committed “gross litigation misconduct” by withholding tens of thousands of relevant documents from Broadcom during a patent infringement trial. That decision against Qualcomm was largely upheld by a federal appellate court last December.

Strategically, the benefits of reaching a comprehensive settlement with Broadcom would seem to far outweigh the financial impact on Qualcomm’s earnings—especially since Qualcomm said terms of the agreement “will not result in any change” to its licensing revenue model for its 3G and 4G wireless technologies. And Qualcomm’s licensing revenue is the central engine of its success.

After fighting for more than a decade to establish its CDMA (for Code Division Multiple Access) wireless digital standard, Qualcomm attained its first strategic breakthrough in 1999, when it settled a wide-ranging patent dispute with Sweden’s Ericsson. In that deal, Qualcomm agreed to sell its CDMA wireless infrastructure business to Ericsson and Ericsson agreed to support a single worldwide CDMA standard.

At that time, Qualcomm also settled on a corporate strategy that focused its business on wireless innovation, which enabled the company to generate enormous revenue through technology licensing deals.

In July, Qualcomm struck a surprise settlement agreement with Nokia, the world’s largest mobile phone maker, that ended a similar high-stakes licensing dispute. That deal enables Qualcomm and Nokia to share many more technology patents than they did before. Qualcomm also licensed its technology to Nokia and Nokia allowed Qualcomm to incorporate its technology within its mobile phone components; buyers of those components will pay Nokia’s royalty fees rather than Qualcomm’s.

Broadcom posed the last major challenge to Qualcomm’s licensing model.

“We believe that this resolution is positive for both Qualcomm and Broadcom, our customers, our partners and the overall industry,” Paul E. Jacobs, chairman and CEO of Qualcomm, and Scott A. McGregor, president and CEO of Broadcom, said in a joint statement.

“The settlement will allow us to direct our full attention and resources to continuing to innovate, improving our competitive position in this economic downturn, and growing demand for wireless products and services,” Jacobs said.

Comments | Reprints | Share:          

Qualcomm (NASDAQ: QCOM) said today it is in advanced IP settlement discussions with rival chipmaker Broadcom of Irvine, CA, and the San Diego wireless giant postponed the release of its second-quarter financial results that was scheduled today.

“Hopefully, this is a good thing,” says James Brehm, an information and communications technologies analyst with Frost & Sullivan near San Antonio, TX. “I think they want to put as much water under the bridge as possible on this one.”

Meanwhile, Broadcom (NASDAQ: BRCM) has been busy on several fronts. In addition to negotiating its IP case with Qualcomm, the Irvine company disclosed yesterday it’s making an unsolicited $764 million bid for Emulex Corp. (NYSE: [[ticker: ELX]]), a networking specialist in nearby Costa Mesa, CA. That news eclipsed the release of Broadcom’s first-quarter financial results as scheduled yesterday. The company posted a first-quarter loss of $91.9 million on sales of $853.4 million.

The two Southern California chipmakers have been locked in a wide-ranging patent dispute taking place in federal courtrooms in San Diego and Orange Counties, and the quasi-judicial International Trade Commission. Qualcomm says a global settlement of all its disputes with Broadcom—if an agreement can be reached—would have an impact on its financial results. The company rescheduled its second quarter earnings call to Monday.

Excluding the potential financial impact of a settlement with Broadcom, Qualcomm says in its statement that the company’s second-quarter revenue and operating income met or exceeded prior guidance. Qualcomm added that it remains in its quiet period and that its investor relations representatives will not be available until after Monday’s conference call.

Comments | Reprints | Share:          

If there’s a theme to be found in the innovation news for San Diego last week, it might be comings and goings. While some companies are making layoffs or even shuttering their doors, we also found a number of new startups taking root here (although not as many as a year ago).

—In a report on San Diego’s innovation economy, the non-profit business group Connect found 73 new technology companies were started here during the last three months of 2008, a 58 percent decline compared to the year-ago period. It’s a sign the local tech economy is down, but not out.

—Luke profiled Amira Pharmaceuticals, a biotech startup founded in 2005 that is developing a drug to treat pulmonary fibrosis. In this recession, it’s worth noting that the three scientists who started Amira joined forces after Merck had shut down the San Diego operation where they had worked.

—A different kind of start-over is San Diego-based SpectraScience (OTCBB: SCIE). After salvaging the biomedical equipment maker from bankruptcy in 2004, local entrepreneur Jim Hitchin is just beginning to sell the company’s updated “optical biopsy” machines. The technology combines a low-power, fiber-optic blue laser with computerized spectroscopy.

—Another new biotech that Luke profiled is San Diego’s Pico Pharmaceuticals. The company is using research out of New York’s Albert Einstein College of Medicine to develop highly specific small molecule drugs that bind more tightly to their receptor targets.

—JP (Juha-Pekka) found that Dotmatics, a U.K. bioinformatics and visualization software developer, has opened a satellite office near San Diego as part of its expansion into the U.S. life sciences market.

—Sorenson Media, a Salt Lake City-based developer of video compression and encoding software, also has opened a new San Diego office to serve as the central hub of its business operations.

—On the other side of the ledger, I rounded up more layoffs that have come to light in San Diego in recent weeks. They included specialized laser maker Cymer, which with its latest round of 130 cuts has eliminated 38 percent of its workforce since … Next Page »

Comments | Reprints | Share:          

Privately held SkinMedica of Carlsbad says it has filed a patent infringement lawsuit against new San Diego startup Histogen and Gail Naughton, its founder and CEO. The lawsuit, which was filed in federal court in San Diego, alleges that Histogen and its affiliated Histogen Aesthetics business infringe on two SkinMedica patents related to proprietary conditioned cell media technology. SkinMedica says its complaint asks for unspecified relief for the “misapprorpiration of SkinMedica trade secrets and confidential information by Histogen.”

Comments (1) | Reprints | Share:          

A federal appellate court agreed that San Diego’s Qualcomm (NASDAQ: QCOM) should be punished for hiding its work from industry groups developing a new video technology standard. But the three-judge panel ruled that a San Diego trial judge went a step too far by invalidating Qualcomm’s patents on the video compression technology it had concealed.

Qualcomm’s misconduct emerged in a January 2007 trial that was the culmination of a patent infringement lawsuit the San Diego wireless giant filed two years earlier against Broadcom (NASDAQ: BRCM), a rival chipmaker in Irvine, CA.

In its ruling yesterday, the U.S. Court of Appeals for the Federal Circuit upheld much of the punishment that San Diego federal Judge Rudi Brewster imposed on Qualcomm in his August 2007 opinion. The panel agreed, for example, that Qualcomm must pay Broadcom’s attorneys’ fees in the case, which totaled more than $8.5 million. Instead of stripping Qualcomm’s video patents, however, the appeals court said Qualcomm cannot assert its patents in connection with what’s known as the H.264 standard, an upgrade to MPEG 2 and MPEG 4 video technologies.

Perhaps more importantly, the appellate opinion clarifies the proper legal course that technology companies should follow in disclosing their internal technology development to standards setting organizations.

The appeals court agreed that Qualcomm was legally required to disclose its intellectual property rights as a participant in an industry group called the Joint Video Team that was developing a standard for video compression technology in 2003. That’s because a patent holder is in a position to “hold up” other participants in the group from implementing a new standard by claiming its patents take precedence. Instead, Qualcomm withheld the fact it had established two key patents in the area in 1995 and 1996.

Qualcomm then sprang its patent “ambush,” citing its key patents in a 2005 lawsuit filed against Broadcom. Throughout the case, Qualcomm and its lawyers insisted the company had not participated in the 2003 standard-setting meetings, which would have precluded the company from filing its suit. Broadcom lawyers uncovered emails during the trial, however, that showed Qualcomm had participated and its engineers were closely following the technical progress of the standards setting organization.

A federal magistrate in San Diego later sanctioned six lawyers representing Qualcomm for withholding tens of thousands of emails in a “monumental” violation of the legal rules for pre-trial discovery.

Comments | Reprints | Share: