Diebold gets a win — though not quite a victory — in its ATM patent battle

| by Suzanne Cluckey
Diebold gets a win — though not quite a victory — in its ATM patent battle

photo istock

In 280 B.C., King Pyrrhus of Epirus led his troops into battle against the legions of Roman Consul Publius Valerius Laevinus. Pyrrhus beat the Romans decisively, but lost huge numbers of men in the process.

He had no choice but to retreat from Italy with what was left of his army — triumphant but empty-handed — knowing that "another such victory might utterly undo him," Roman historian Plutarch wrote.

A few thousand years later, a decision by the United States International Trade Commission has many of the earmarks of a Pyrrhic victory.

On May 19, the ITC issued its final decision on a Diebold Nixdorf petition to bar the import of certain Nautilus Hyosung ATM models for patent infringement. In its decision, the commission agreed that Hyosung had, indeed, violated two Diebold patents.

A press release from Diebold Nixdorf followed, announcing the company's win and informing the reader that:

The ruling bars Hyosung from importing or installing a significant number of bank and retail grade ATMs in the United States because those products infringe Diebold patents. …

Nautilus Hyosung ATMs affected by the exclusion order include the Halo II series; MX 5600 series; MX 5200 series; MX 7600 series; MX 7800 series; MX 8200 series; MX 8700 series; and MX 8800 series.

A decisive victory, yes?

No, according to a press release from Nautilus Hyosung America that included this statement from executive vice president and COO Sungmahn Kim:

There will be zero impact to our customers, our new and existing products or our ability to provide service and parts to any and all Hyosung ATMs. Hyosung is thankful that the ITC's ruling validates our rich history in research, development and innovation by rejecting Diebold's claims as to our latest and most cutting edge technology.

This kind of parallel universe PR tends to make people ask, "What the what?" So ATM Marketplace spoke with Hyosung legal counsel Kevin Wheeler, a principal in the Washington, D.C. office of Fish & Richardson PC, to get a clearer picture.

Here's what we found out:

Regarding U.S. Patent No. 7,832,631 — Method of reading coded records including magnetic indicia on checks deposited in an automated banking machine

… In the 631 patent the very specifics of the patent violation had to do with a movable head or multiple movable heads to accommodate the different sizes of different checks that you can to have. …

We had no customers using that feature. So to be completely frank, our resolution, which was approved by the ITC, was to simply disable the ability to enable an option that we had nobody using anyway, because if the check was a little bit bigger, the bank would just simply rely on the [optical character reader] ...

Regarding U.S. Patent No. 6,082,616 — Automated banking machine enclosure

The patent was addressing an opening for service access. And a couple of our products had an opening but it wasn't actually for service, it was just to allow some clearance when you're rotating the different pieces.

The point was we didn't care about the hole — we can just cover the hole; we can just have a tray that doesn't have that opening because it wasn't actually used by us for servicing purposes. That's what I mean from a commercial standpoint it didn't matter.

Regarding the importation of Hyosung ATMs

As for the final patent, the ITC's decision addressed just three retail ATM models with a legacy design feature that has been eliminated. [i.e., No further infringement, no impediment to importation.]

Regarding Hyosung customers operating legacy machines

[T]he ITC very clearly, very affirmatively said we're clear to continue servicing and providing replacement components for those ATMs that are already installed that may have some of these legacy features. …

What the ITC doesn't want to do is unjustly and unfairly impact you the customer. Because at the time you bought that [machine] there was no ruling; there was no [claim of] infringement.

What this all means is simply that patent-infringing Hyosung machines that shipped prior to the May 19 ruling are unaffected by the decision because the customer purchased the machine in good faith, unaware of the patent issue.

And all Hyosung machines that ship after the ruling are unaffected by the decision because they no longer use the technologies that the ITC found to infringe Diebold patents.

That's not to say that: a) the case is closed; or b) that Hyosung won't be held liable for damages in civil court proceedings.

However, these proceedings won't even begin until three other legal efforts have played out in full:

  • at Hyosung's request, the U.S. Patent Office is currently reassessing Diebold patents '616 and '631 and could find one or both invalid;
  • the company plans to appeal the ITC ruling in federal court and while the civil court would not be bound by either an appeals court decision or ITC findings, they could carry weight with a jury; and
  • the company is awaiting a final decision from the ITC on July 15 in regard to its own petition claiming infringement of its patents by Diebold; in March, an administrative law judge for the ITC handed down an initial ruling favoring Hyosung.

In each instance, the outcome could influence this back-and-forth struggle significantly or somewhat or not at all. But barring a cease-fire agreement, it seems, the legal battles will go on — including the civil suit filed by Hyosung with the U.S. District Court in Texas in response to the complaint filed by Diebold Nixdorf with the district court in Ohio.

Still, Wheeler said, the company would be open to ending the litigation in a mutual stand-down that would allow both to get back to focusing on business.

"[I]f at any time Diebold wants to do that, great. We think that should have happened in the first place. But as long as they want to keep litigating then we'll keep litigating."

And in the end, what will be won ... and at what cost? 

It could be years before we know. 

Diebold complaints

  • 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

Nautilus Hyosung complaints 

  • 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

Topics: Manufacturers, Regulatory Issues

Companies: Diebold Nixdorf, Hyosung

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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