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Gloves off: Diebold and Hyosung spar over ATM patent claims

On Monday, Diebold started a fracas by announcing patent infringement actions against Nautilus Hyosung. By Tuesday, it was clear that Hyosung was ready to fight toe-to-toe with its US market rival.

October 23, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

It's been a clamorous week in the ATM industry. Last Saturday, ATM heavyweights Diebold Inc. and Wincor Nixdorf AG announced the planned acquisition of the latter by the former.

(NCR Corp. offered color commentary on the announcement in an interview with ATM Marketplace.)

Then on Monday, Diebold abruptly threw down with Nautilus Hyosung USA (and parent company, South Korea-based Nautilus Hyosung) with an announcement that the company had launched a lawsuit and investigation aimed at its ATM rival.

Diebold complaints filed with both the U.S. district court and the U.S. International Trade Commission allege that Nautilus ATMs — every last one of them — infringe on six patents owned by Diebold Inc. (See table below for patent numbers and descriptions). According to the company's press release:

Diebold is requesting the ITC issue an exclusion order to bar infringing Hyosung products from being imported to the United States.  Diebold is also requesting the District Court enjoin the importation, sale, and/or distribution of infringing products in the United States and award Diebold appropriate damages for Hyosung's infringement.

The complaint alleges that Hyosung has infringed upon six Diebold patents which relate to key features in Hyosung products. ...

While Diebold welcomes legitimate efforts to compete with its innovative products and unparalleled service organization, the company is committed to vigorously enforcing its intellectual property rights.

On Tuesday, Nautilus Hyosung USA jabbed back with a press release of its own:

While Nautilus Hyosung would have welcomed a dialog in advance of these unprovoked aggressive actions by Diebold, Nautilus Hyosung will respond to Diebold appropriately considering all options available. ...

Moving forward, Nautilus Hyosung is fully prepared to respond to Diebold's aggressive advance. As we prepare an appropriate response against Diebold's asserted patents, and assess potential counter-claims based on Nautilus Hyosung's own proprietary technology, Nautilus Hyosung will not allow these actions by Diebold to distract us from our true goals — the commitment to provide superior products and excellent service to the financial institutions and independent ATM deployers we proudly serve.

Also on Tuesday, Nautilus Hyosung America Executive Vice President and COO Nancy Daniels spoke at length with ATM Marketplace, offering a blow-by-blow analysis of the suit — and plans for addressing it. Following are excerpts from that conversation:

Tell me about the background of this lawsuit.

ND: As you well know, in this business there are intellectual property claims that go back and forth all of the time. Hyosung does that; everybody does that if they find what they believe to be potential intellectual property issues. But it's really kind of unusual to see one of this nature and as aggressive as this, where basically a very, very broad set of intellectual property claims on patents that go back many, many years are claimed.

Why would this be coming up now?

ND: Up until fairly recently Nautilus Hyosung has had a fairly small percentage of market share and as we have begun to significantly grow, obviously we are bumping up against the other players in the marketplace. And this seems to be a very classic kind of competitive tactic that you see not only in this industry, but other industries, to basically create fear, uncertainty and doubt among customers and as we stated, we're assessing it.

Let's talk about the six Diebold patents and the technology that those claims are covering.

ND: Interestingly enough, the way that this has been written, virtually every Hyosung product has been highlighted associated with these patents. ... And virtually — in fact not "virtually" — every model number of Hyosung equipment has been tagged with one of these patents. ... Clearly the intention of this thing is basically to identify every product that we make with the intention of trying to find some legal mechanism, whether it is valid or not — which the courts will determine — to prevent us from bringing innovative products to the marketplace.

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What are your next steps in answering this claim?

ND:We are assessing our own intellectual property portfolio, particularly in the context of the combined Wincor-Diebold, and are looking broadly across our intellectual property portfolio to determine if it is appropriate for us to consider a counterclaim to the combined entity, or the individual entities, depending on how that's approached relative to our intellectual property. ...

So this is going to be a complex process that is going to go on for months. And our real intent with our release was to, number one, assure our customers that we could not allow the very aggressive press release that was fairly uncharacteristic of our industry to go unanswered. And like I say, Diebold, unfortunately, through those actions left us no option but to respond.

I admire them from a public relations standpoint — basically, off the heels of the Wincor-Diebold announcement that came out on Saturday on Reuters, following up on Monday morning with this particular press release, you've got to sort of admire that particular tactic.

How do these two events figure together?

ND: I was appointed to this role at Nautilus Hyosung America to help use my 25 years of industry experience to help substantially grow this business. And in the time I've been here, I've gotten the team very, very focused on that. It involves absolutely touching a broad range of FI clients, many of which are currently Diebold customers.

And my view is that sensing this, particularly on the back of the Diebold-Wincor merger ... this was potentially sort of a tactic to thwart our sales efforts in a marketplace where there were four major suppliers — there are now three — and depending on what results, could be even fewer.

Would these patents apply in other NH markets as well?

ND: That was once again very curious about the Diebold claim because normally — particularly with a company like Diebold, NCR or Hyosung, because the cost is generally small in dealing with the PTO and the international patent authority — generally what you do is file on a global basis.

I would have to check the details, but I would be shocked if these patents aren't global patents. And it's quite curious that the specific statement from Diebold that was in both the press release and the claim, which is public domain knowledge, was specifically seeking to bar Hyosung from doing business in the U.S.

How this will be dealt with? Will it go through the court system?

ND: I can't conjecture on that and it would be totally inappropriate for me to read the mind of the international trade commission's commission. ... [T]hese involve very, very subtle and byzantine legal claims and processes, and I'm not a lawyer, I've just been in the business a long time. I'm sure that we're just going to go through due diligence process and I am hopeful that this is nothing more than just simply a competitive tactic to end Nautilus Hyosung's growth in the U.S. marketplace.

ATM Marketplace invited Diebold to counter Daniels' comments. The company declined to comment on a case now before the court and the commission, and instead restated remarks from the Monday press release:

Our company has invested hundreds of millions of dollars in research and development and has built a strong patent portfolio of more than 1,000 patents over the years. While we welcome legitimate efforts to compete with our product innovations and menu of services, Diebold is committed to vigorously enforcing its intellectual property rights — especially as we consider our transformation into a true services-led, software-enabled company.

That last line offers a fair indication of what's at stake in this brawl. Round two coming up.

About Suzanne Cluckey

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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.

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