ATM-makers go tit for tat in patent spat

 
July 14, 2016 | by Suzanne Cluckey

They say the best defense is a good offense. Nautilus Hyosung America has concluded that it's a theory worth testing in respect to patent litigation as the company fends off a suit brought by Diebold Inc.

A brief refresher

In October — nine months ago, now — Diebold Inc. lodged a complaint with the District Court for Northern Ohio alleging that Nautilus Hyosung America and its Korean parent company, Hyosung, were infringing on a half-dozen of its patents covering service trays, divert cassettes, check bins, presenter gates, check redaction and a movable MICR head.

Simultaneously, Diebold petitioned the U.S. International Trade Commission to bar the import of Nautilus Hyosung ATMs that incorporated the allegedly infringing technologies — which is to say virtually all of them.

In February — four months after the Diebold action — Nautilus Hyosung America filed its own complaint with the District Court for Northern Texas alleging that Diebold Inc. was infringing on four of its patents covering the company's active media and active recycling modules, among other items. 

Predictably, the company also asked the U.S. ITC to prohibit the importation of parts for Diebold ATMs that allegedly infringed on Nautilus Hyosung patents.

In an April hearing before the International Trade Commission, attorneys for Hyosung argued that at least one of the Diebold patents should be ruled invalid in light of the Alice decision by the U.S. Supreme Court, which determined that abstract concepts could not be patented. A decision on that argument is pending.

A more substantial claim?

Meanwhile, Hyosung asserts that its patent suit against Diebold presents a more substantial claim than the Diebold suit against Hyosung, and for a couple of reasons.

In the first place, the company has the advantage of time, said NHA executive vice president and chief operating officer Nancy Daniels.

"These four patents are much more recent than most of the patents that were claimed against us," she said in an interview with ATM Marketplace.

In the second place, Daniels believes that the Nautilus Hyosung ATM patents inherently have more substance than Diebold's.

"[They are], in fact, what I would call true intellectual property violations, where there's not a lot of prior art," she said "Based on our research, there is a substantial body of prior art that is associated with the Diebold claims. ... I'm not a lawyer, but my opinion is that there will be an opportunity for several of the patents that Diebold has claimed to be dismissed on the basis of prior art."

Even so, Daniels said, given Diebold's assertion that Hyosung has committed no fewer than 105 individual violations of its six contested patents, it's likely that at least some of the claims will stand.

ITC findings still a year away

The companies will make formal arguments before the ITC in late August; by late September, they can expect an initial determination by the commission as to the viability of the Diebold claims. 

A final review period will follow, and the ITC will then issue its final ruling on Diebold's requested import ban on March 20. The ITC ruling would be final — the commission's process does not allow for appeal.

The ITC steps for Nautilus Hyosung claims against Diebold will parallel those of the Diebold case against Nautilus Hyosung — the timetable would simply move down the calendar four months, since Hyosung's request was filed four months after Diebold's. A final decision on Hyosung's request for an exclusion order banning the import of Diebold products would most likely come in September 2017, Daniels said. However, she added, "Most cases are settled well before you get to the end."

Separately from the ITC investigation, the companies' lawsuits will wind their way through the U.S. judicial system on their own timetable. Settlement might — or might not — depend on ITC findings along the way.

What if the ITC finds violations?

The ITC could find for either, neither or both of the companies. A finding against Hysung, which manufactures its ATMs overseas, would mean that that company could not import any machines that use patent-infringing technology. This result could mean that, for all practical purposes, Hyosung would be shut of of the U.S. market. 

However, Daniels said, Hyosung engineers in Korea have determined that it would be fairly simple to design workarounds for any of the patent violations filed by Diebold, which are largely process related.  

On the other hand, a finding against Diebold, which manufactures ATM parts overseas and ships them to the U.S. for final assembly, would mean that Diebold would be unable to bring key machine modules into the U.S.

"In the case of Diebold, I have been told that the patents that we have selected would be quite difficult to design around," Daniels said.

A best case scenario

Most judges would prefer that parties find a compromise solution for their legal differences rather than having suits and countersuits cluttering up their docket. 

So far, though, the ATM competitors have not been able to come together on a settlement. But looking down the road at a legal fight that could go well into next year and beyond, there is still plenty of time for the parties to settle — and perhaps incentive to do so, as well, given what's at stake, including millions in legal fees and a sizeable share of the North American market.

"This case really is without precedent in our industry in terms of how it's being handled," Daniels said. "ITC is an incredibly aggressive approach ... we're really very customer-centric in nature and Hyosung absolutely remains open to find a settlement to this, which reduces the impact on our customers."


Diebold suits and patents

  • Diebold Inc. et al v. Nautilus Hyosung Inc. et al, 1:15-cv-0215, Northern District of Ohio
  • In the Matter of Certain Automated Teller Machines, ATM Modules, Components Thereof, and Products Containing Same, investigation number 337-TA-972, before the U.S. International Trade Commission
  • U.S. Patent Nos. 6,082,616; 7,121,461; 7,249,761; 7,229,010; 7,314,163; and 7,832,631

Nautilus Hyosung suits and patents 

  • Nautilus Hyosung Inc. v. Diebold Inc. et al, 3:16-cv-00364, Northern District of Texas
  • In the Matter of Certain Automated Teller Machines, ATM Modules, Components Thereof, and Products Containing Same, investigation number 337-TA-989, before the U.S. International Trade Commission
  • The patents Hyosung claims have been infringed are U.S. Patent Nos. 7,891,551; 7,950,655; 8,152,165; and 8,523,235

illustration istock


Topics: Manufacturers

Companies: Diebold, Incorporated, Nautilus Hyosung America, Inc.


Suzanne Cluckey / Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally. She is now the editor of ATMmarketplace.com and BlockChainTechNews.com
wwwView Suzanne Cluckey's profile on LinkedIn

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