Acquisition Scorned By Zi, Nuance Sues For Patent Infringement

Rebuffed in its attempt to acquire Zi Corp., Nuance on Monday filed patent infringement litigation against Zi, claiming its Zi Qix and eZiText products infringe patents held by Nuance's Tegic subsidiary.

The patents involved are entitled "reduced keyboard disambiguating system" and were acquired by Nuance when it acquired Tegic Communications last June. Nuance filed the suit in Federal Court in Toronto.

Based in Burlington, Mass., Nuance provides speech and imaging applications to a business and consumer user base; the company has been acquiring companies in those fields in recent months.

Zi responded in kind in a press release from its president and CEO Milos Djokovic. "Providing this notice is clearly a tactic employed by Nuance in light of its failed proposal to acquire Zi last week at a low valuation," Djokovic said in a statement. "The timing of this motion is highly suspicious and is an unnecessary legal tactic by Nuance."

Nuance's initial offering totaled more than $40 million in cash for Zi -- more than double the value of Zi's stock in trading at the time. In its most recent quarter, Zi reported deteriorating financial conditions and quarterly revenue of $2.7 million. However, Djokovic said his company was making progress in its efforts to develop new revenue-producing opportunities.

After Zi turned down the Nuance offer, Nuance issued a notice maintaining that Zi's decline of the offer was "perplexing and inappropriate given the compelling premium our proposal represents to Zi's market price."

Zi recently reported that it has a new contract to use its eZiText application in some Hewlett-Packard LaserJet multifunction printers.