Workforce Optimization Giants Continue Patent Battles

The last two weeks have not been nice to Nice Systems in regard to its patent lawsuits with Verint Systems, a competitor in the workforce optimization (WFO) space. Another ruling in favor of Verint came through after Memorial Day from the U.S. District Court for the Northern District of Georgia, this time in a battle over Nice's 2004 Internet Protocol (IP) recording patent.

The bench-trial ruling found Witness Systems -- acquired by Verint in 2007 -- did not infringe the Nice patent (U.S. Patent Number 6,871,229) in regard to IP recording. This follows another decision on May 19, in which CRM magazine's sister publication, Speech Technology magazine, reported that a Georgia jury awarded Verint $3.3 million in damages for Nice's infringement of Verint's speech analytics patent (USPN 6,404,857).

According to a statement released by Nice Systems on its Web site, the company says it not only intends to appeal the latest ruling, but to stay on the offensive, as well: "We believe that Verint's patents asserted against Nice are invalid and we intend to continue seeking invalidation of these patents," writes Dr. Shlomo Shamir, Nice's president.

Nonetheless, Verint sees these last two decisions as victories and validation. "We obviously consider this a very positive progression here in this collection of litigation," says Nancy Treaster, senior vice president and general manager of the Verint Witness Actionable Solutions business line. "We have the majority of the patent issues behind us, and hopefully we can move forward."

Treaster's view of a "majority" may be overly optimistic: Of the four lawsuits in the two WFO companies' patent battle, which dates back to 2004, only half have been resolved -- the two most recent decisions in Verint's favor. A third suit ended with a deadlocked jury and was ruled a mistrial in January 2008; a new trial date has not yet been set, according to documents filed by Nice with the Securities and Exchange Commission. The fourth and final lawsuit between Verint and Nice involves an integrated screen-capture patent in the quality monitoring space. Verint is seeking more than $30 million in damages and a permanent injunction against Nice from making or selling any infringing speech-analytics products, including speech analytics offered with Nice SmartCenter, Nice Perform, NiceUniverse, and NiceAdvantage. If the company succeeds in obtaining treble damages in this case, Nice may be on the hook for more than $100 million. (Patent-infringement lawsuits frequently afford the plaintiff the opportunity to receive damages three times the value of actual damages.) According to Treaster, no starting date for this final trial will be set until fall.

So far, says Ken Landoline, program manager for Yankee Group, Verint seems to have an early edge, at least in terms of logging and recording contact center interactions. "Certainly the winds are blowing in favor of Verint right now," he adds.

The series of skirmishes represent more than just two WFO leaders battling for intellectual-property supremacy. Both Treaster and Landoline say that these decisions are critical due to the rising importance within the contact center of Voice over Internet Protocol (VoIP) and speech analytics. "VoIP clearly is the direction in which many of our contact center customers are moving toward," Treaster says, adding that more Verint customers are moving their telephony infrastructure from the traditional Time Division Multiplexing (TDM) infrastructure to an IP infrastructure. Consequently, those contact centers would then have to change from TDM recording systems to systems built around IP recording, so it's paramount for Verint to be able to offer the ability to record in a VoIP environment. "I wouldn't be surprised if this year we have for the first time 50 percent of our business in IP," she adds.

Landoline agrees, explaining research from his firm a couple of years ago predicted 50 percent of North American contact centers would use IP telephony in the next three years. According to him, recent follow-up research indicates that "we're certainly right on track with that [prediction] within the next six to 12 months." Look for even more rapid adoption beyond the next year, which also calls out the importance of being able to provide VoIP technology. "We suspect that virtually the entire [contact center] base will be IP telephony based in the next four to five years," he says. "So obviously IP recordings are going to be a significant and high growth area."

In order for vendors to protect their intellectual property, Treaster concludes that companies will have to get tough, even if it means going to court. "Protecting your IP is definitely a strategic part of any growing company and certainly large software companies like [Verint]," she says. "We have to protect ourselves through the patent process."

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