Second Top Story of 2013: ABBYY Beats Nuance in Court

In a case that went on for more than five years, ABBYY finally prevailed in a lawsuit related to OCR patent infringement. The case was heard over two weeks in August in a federal court in San Francisco. ABBYY was awarded a "clean sweep," in the words of its general counsel. "The jury found no infringement on any of Nuance's patent or trade dress claims."

Nuance had been seeking $107 million from ABBYY and its customer Lexmark. Nuance's claims were related to OCR patents that were filed for in the late 1980s and early 1990s and granted in the 1990s and and early 2000s. The case started with six patents in question, but was narrowed down to three by the time it came to trial - two of which Nuance had picked up in its 2000 acquisition of Caere.

ABBYY's defense was "non-infringement." The patents had been through a reexamination, so arguing
that they were invalid was not an option,” said LeighAnn Weiland, VO and general counsel for ABBYY USA.“If you look at ABBYY’s methods as compared to the very simplified processes in the patents that Nuance is alleging we violated, it’s very clear that ABBYY is not infringing. What Nuance has patented is analogous to building a bicycle, while we are building jet airplanes.”

There are not that many developers of OCR technology left on the market, but ABBYY's win was certainly a victory for those that are left, as well as end users - including those who utilize Google's Open Source OCR. Had Nuance won, we're assuming it would have gone after patent licensing agreements with everyone else in the market. And while Nuance still could go after patent infringement by other vendors (whose development methods presumably differ from ABBYY's), ABBYY is their biggest and most direct competitor, and this loss will certainly take the wind out of Nuance's sails - in addition to money out of its pockets that could be used for further litigation.

It's probably worth noting that Nuance's legal team for the case included outside counsel from Morrison & Foerster LLP, the same firm that represented Apple in its patent suit against Samsung. “We were up against the best of Silicon Valley,” said an elated Weiland. “It’s quite gratifying that our team could work like a little machine to convince a jury of what we believe are the actual facts of the case."

The verdict brought to an end an important case that we had been covering since 2008.

Sale of Kodak DI - Top Story of 2013

I apologize for being a few days late with this but I was busy enjoying holidays with my family, as well as dealing with living in the snowiest city in the U.S. so far this year: and yes, it is certainly coming down as I write the first draft of this post on Thursday evening (We're at 70 inches and counting- more than twice as much snowfall as Anchorage Alaska!). Anyhow, in between holiday cheer and bouts of flu and cold, I've been going over my annual article index for 2013, which will get published along with my 2014 predictions next week.

Going over the index is a great way to review the top stories and events of the previous year, which is inevitably leads to a top 10 list or something like that. For 2013, it seemed there were certainly two stories that stood out above all others, and maybe eight more that I thought were fairly significant.Today I'll share with you my top story in the document imaging industry from 2013 and follow up shortly with number 2, and the rest thereafter.

Without further ado, here is a summary of the top story we covered in DIR in 2013:

1. Kodak Document Imaging is acquired by the Kodak U.K. Pension Plan (KPP).

In a deal that was announced in May 2013, one of the leading players in our market was sold to an organization that is roughly the equivalent of an equity investor, but with a longer-term vision. Not coincidentally, KPP, which operates independently of Eastman Kodak, also happened to be Eastman Kodak's largest unsecured creditor. KPP agreed to pay Eastman Kodak $650 million in cash and non-cash considerations for DI and Kodak Personalized Imaging (PI), which combined generated $1.46 billion worth of profitable revenue in 2012. As part of the deal, Eastman Kodak was also relieved of $2.8 billion in claims that KPP had made against the bankrupt organization. So, in all Eastman Kodak received a potential net $3.45 billion for the two businesses, which KPP renamed Kodak Alaris, when the sale was completed in early September.

This brought to an end a saga which began in early 2012, when after months of rumors, Eastman Kodak filed for bankruptcy. Originally, DI was positioned as a "core business" that Eastman Kodak would hang on to help fund its emerging "growth businesses." That changed in August when Eastman Kodak realized it needed to sell more assets to pay off its creditors and get them to agree to the terms of its bankruptcy. Per bankruptcy laws, a formal process was put in place for selling DI that included accepting a "stalking horse" bid that would serve as a starting point in an auction.

The stalking horse bid came in April from Japanese manufacturer Brother, which offered $210 million, plus the assumption of $67 million worth unfulfilled service contracts for DI. However, that bid was trumped less than two weeks later by KPP's much higher bid for both DI and PI.

Just a few weeks after the sale to KPP was closed, the recently renamed Kodak Alaris DI put on its second annual Global Directions educational conference, where the keynote was noted author and futurist, and current Google Director of Engineering Ray Kurzweil. The event focused on a more software-centric future for Kodak DI. "In five years, we’d like to have at least one third of our revenue coming from software,” said Tony Barbeau, DI VP, products and services. “It could be higher depending on how much investment the organization makes. We could possibly choose to complement our organic growth through acquisition."

Barbeau and most of the Kodak DI management team, including President Dolores Kruchten, stayed on through the acquisition, so we don't expect any major shake-ups in the way DI will be doing business going forward. That said, everyone in the organization seemed relieved and somewhat elated that the sale to KPP was completed. They are looking forward to the opportunity to run free of the burden of their failing parent and the increased nimbleness and aggressiveness their new position should bring. We expect more exciting news from Kodak Alaris DI in 2014, but we're not sure if it can top the exciting events of 2013.

Jury Rules in Favor of ABBYY, Lexmark, in OCR Patent Trial

(Some updates since first post)
The long-lasting OCR patent lawsuit filed by Nuance against ABBYY and Lexmark is finally over. Yesterday, a jury appointed by the U.S. District Court of San Francisco, ruled unanimously in favor of ABBYY and its partner Lexmark. It ruled that neither company owes Nuance anything in damages related to patent or trade dress infringement. 

The way I understand it, Lexmark, which manufactures printers and MFPs, was a partner of Nuance, but at some point, prior to 2008, when Nuance filed the suit (I guess the suit was originally filed in Wisconsin in 2002, but moved to California in 2008), Lexmark switched out its bundled Nuance OCR technology in favor of ABBYY's. Nuance accused both Lexmark and ABBYY of attempting to create packaging that resembled Nuance, and also accused ABBYY of violating five six patents that Nuance picked up in its 2000 acquisition of Caere. ABBYY promptly filed a countersuit, accusing Nuance of violating two of its patents, as well as violating anti-trust act. The whole thing was combined in one trial in the Court of Judge Jeffrey S. White.

In 2009, eCopy and it's OCR partner I.R.I.S. were dragged into the suit, but that was apparently resolved when Nuance acquired eCopy later that year and replaced the I.R.I.S. technology with its own.

Apparently before the case went before a jury, in a trial that started earlier this month, it was narrowed down to three patents.

I've read Nuance's OCR patents and they are pretty broad based - meaning that if ABBYY were found in violation of them, it could have affected everyone else developing (and licensing non-Nuance) OCR technology. So, this decision should have many people in the document imaging market breathing a collective sigh of relief. 

No word yet if Nuance plans to appeal, if they can, and/or if they will go after anyone else for patent infringement related to OCR . We expect to talk with ABBYY reps later today and I know Nuance is planning on issuing a statement. We'll keep you posted as more news on this develops.

eDiscovery Dispute Highlights ABBYY-Nuance OCR Patent Suit

This is kind of ironic - and thanks to our friends at Harvey Spencer Associates for connecting us with the link to this article, but it seems ABBYY has been ordered to pay Nuance $135,000 in a dispute over document discovery. Yes, it seems the two OCR ISVs are arguing over the exchange of documents.

U.S. District Judge Jeffrey White, whose office is in San Francisco where Nuance's lawsuit against ABBYY and Lexmark (Lexmark licenses ABBYY technology) over OCR patent infringement is being heard, ordered "Abbyy to pay Nuance $135,000 in sanctions for taking so much time handing over requested documents that the court reopened discovery and Nuance retook depositions that had already been completed."

Also from the article "ABBYY contended that it disclosed the information late because it was tied up responding to 'Nuance's multiple other discovery requests seeking massive amounts of irrelevant information,' but Judge White didn't buy that excuse. 'The court does not find the delay in production justified considering the scope of this case and the sheer amount of lawyering and the parties' investment of time and effort,' he said."

Alright, so it appears the game is on. This case has been in court since 2008, but it seems some headway is finally being made. According to the article, "All the parties were ordered to attend a settlement conference to be held no later than July 5."

If you remember, one of the predictions we made in DIR to start the year was "Some major market developments driven by ongoing patent lawsuits." Stay tuned.

Kofax receives Data Matching patent

Document capture and BPM ISV Kofax has received a patent related to matching data captured from scanned documents with data from a back-end system like an ERP application. This a fairly common practice in many document imaging applications, especially involving invoice capture - one area that Kofax says it is already using the technology.

The patent is number 8,345,981 with the US Patent and Trademark Office. It's entitled "Systems, methods, and computer program products for determining document validity." Basically it describes a process for applying OCR to a scanned document, extracting information from it, identifying a complementary document in the back-end system, mapping the information on the scanned document to the info on back-end system document, and checking the info captured by OCR against the info. on the back-end system document.

Kofax originally filed for the patent in Feb. 2009. I'm not sure how its approval is going to affect the market or if Kofax plans on enforcing it, but it seems to me the practice that Kofax has described is in pretty widespread use, especially in the area of invoice capture today, and it was already being done prior to 2009. In the press release, Kofax notes that it plans to expand use of this technology into the EOB processing space.

Latest on ABBYY-Nuance Lawsuit

Apparently, ABBYY's parent company is back in the lawsuit, being brought by Nuance over OCR patent infringement. According to this blog post, both ABBYY 's Cyprus and Russian location, which had previously been dismissed from the suit, have been ruled back in play. The case, which was originally filed in 2008 is currenlty being played out  in United States District Court for the Northern District of California under (case no. 08-CV-2912) Judge Jeffrey S. White.

InCab Scanning Suit

Over the past 10 years, the transportation industry has steadily increased its adoption of document scanning, and has been one of the leaders in the adoption of distributed capture. The latest trend seems to be the push for mobile scanning  - whether it be through dedicated sheetfed scanners attached to laptops or through utilizing the the cameras on SmartPhones. If you remember, we recently did a story on ACS Xerox, which is promoting applications in both these areas.

It was recentlly brought to our attention, however, the Wilmington, OH-based shipping specialist R&L Carriers believes it has a patent on capturing bills of lading with mobile scanners while in transit. The patent number is 6,401,078, and it was filed in 2000 and granted in 2002. It's entitled, "Bill of lading transmission and processing system for less than a load carriers"

Claims include:

"A method for transferring shipping documentation data for a package from a transporting vehicle to a remote processing center: placing a package on the transporting vehicle; using a portable document scanner to scan an image of the documentation data for the package, said image including shipping details of the package; providing a portable image processor capable of wirelessly transferring the image from the transporting vehicle; wirelessly sending the image to a remote processing center; receiving the image at said remote processing center; and prior to the package being removed from the transporting vehicle, utilizing said documentation data at said remote processing center to prepare a loading manifest which includes said package for further transport of the package on another transporting vehicle."

and "The method of claim 1, wherein the image sending step is accomplished from onboard the transporting vehicle."

Apparently, R&L has filed suit against multiple parties, including ACS, DriverTech, Pegasus Transtech, Qualcomm, Intermec, and PeopleNet. Sounds like a interesting case.

Millennium L.P. Carrires On

If you are one of the many people in the document imaging industry who has unwillingly donated to Dr. Mitch Medina's Kenyan missions, you shouldn't feel alone. According to a recent report by the group PatentFreedom, Millennium has been one of the busiest non-practicing entities (NPEs) pursuing patent suits over the past five years. In total Millennium has sued 110 companies with more than 90% coming since 2003.

Millennium, as many of you know, has some patents that seem to be related to automated forms processing. Although there has been a lot of talk about trying to stop them, eventually everyone seems to settle because the terms are made so agreeable. And Medina, who is apparently back in good standing with the Kenyan government after being exiled a couple years ago, marches on. For 2009, I found suits filed suit against SpringCM, A2iA, and eCopy.

Part of the settlement used to be that the defendant couldn't talk about it and had to name some competitors or other vendors to go after. Don't know if that's still the case, but, after a big year in 2005, Millennium seems to have settled down to going after a handful of companies per year. Not all its suits involved imaging, as according to the site "Patent Prospector," Medina has 17 U.S. patents, including one for retrieving dog poop (5,403,050). How apropos."

Ralph

Mirror Imaging Patents

Not exactly sure what this is all about, but it appears two banks have settled with this Michigan-based company regarding the use of patented technology used to retrieve document images in financial environments. Reading the abstract for the patent it appears to be for some sort of hierarchical storage management that enables older documents to be stored on outside storage and accessed directly from there.

How The Zumbox Works

Here's the explanation we received from Zumbox's PR team (They are the company being sued by Pitney Bowes for their paperless mail solution.):

As a paperless postal system, Zumbox allows for mail and other content to be sent securely as digital files. This means that a biller can send the same files that go to their printer directly through Zumbox in parallel to their paper mailings and manage the transition to paperless mail as recipients get comfortable with the new option. So in terms of technical details, the system is simply built to deliver print-ready (and other – any format) digital files to street addresses online. All mail is received at Zumbox.com where a recipient enters their street address to effectively claim their digital mailbox; there is one for every street address in the country. It should also be noted that Zumbox is a closed system, with bank-level security and complies with PCI, HIPAA and BITS security standards.

We also received a response from Pitney Bowes and the patents appear to have to do with electronic delivery and there isn't any talk about scanning or anything. 

However, we will say that we find Zumbox's digital mailroom concept very intriguing - especially when potentially coupled with a scanning/service bureau operation. 

Pitney Bowes Sues Digital Mailroom Provider

This is interesting. The company being sued, Zumbox, doesn't seem to be a traditional digital mailroom provider in the way we think of it. Rather, they seem to have some sort of on-line network that ingests files before they are printed and then delivers them digitally to their addressee. We're not exactly sure how this works, as it's not really described on the Web site, so we've pinged them for more info. To us, it sounds like some kind of general mail version of OB10's e-invoicing network. PBI is suing Zumbox over some patents related to electronic delivery of messages. We're assume this doesn't apply to traditional digital mailroom environments, (or PBI would have sued Earth Class Mail, right?), but we really don't know.

Ralph