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Yahoo accused of raiding workers

Posted by inet - 2005-10-10

Nuance Communications, a Menlo Park maker of speech-recognition software, has sued Yahoo for unfair competition and theft of trade secrets, accusing the Internet giant of ``raiding'' all but one of Nuance's research and development engineers.
Nuance said 13 engineers from its Menlo Park and Montreal offices were 75 percent finished with a project that would allow people to search the Internet by speaking their queries into a telephone, rather than typing them on a computer keyboard. Nuance planned to sell the technology to companies like Yahoo.

In a lawsuit filed Tuesday in Santa Clara County Superior Court against Yahoo and the defecting engineers, Nuance asserts, ``Yahoo will be able to enter the interactive speech-technology market with Nuance's cutting-edge technology, but without the significant time and R&D costs expended by Nuance.''

Nuance will argue in court today for a temporary restraining order and preliminary injunction preventing its former engineers from working on the same project at the Sunnyvale search giant.

Yahoo has filed a sealed rebuttal. Spokeswoman Kiersten Hollars declined to comment, except to read a prepared statement: ``We believe the claims in the lawsuit are without merit and plan to defend ourselves vigorously.''

Latest in string

This is the latest in a string of such lawsuits -- known as ``employee raiding cases'' -- emerging over the past year. Experts say it's evidence that the tech economy is improving and the race for innovation on the Internet is speeding up.

In July, Microsoft sued Google -- which then counter-sued -- for hiring Kai-Fu Lee, a computer scientist with expertise in search technology and the Chinese Internet market. Microsoft alleged that Lee, who had signed a non-compete agreement not to work for competitors, of using his inside knowledge of Microsoft plans to get a job at Mountain View-based Google. A judge in Washington state this month barred Lee from working on products, services or projects at Google that he also worked on at Microsoft, pending a January trial.

In its lawsuit, Nuance claims its technology is ``so valuable'' that Yahoo preferred to ``raid Nuance's R&D staff, so as to acquire and control it, rather than purchase a valid license for Nuance's technology.''

The company's core ``speech engine'' technology swiftly matches the sound waves of whatever a caller says to the electronic patterns of 25 million words and phrases stored in its database. Yahoo had licensed a version of the technology, which converts text to speech, to allow premium e-mail customers to listen to their e-mail messages over the phone.

Larry Heck, Nuance's vice president of R&D engineering, and his team of engineers spent the past 18 months developing a more specialized, advanced version of the speech technology that would be sold to online search companies and Internet service providers.

Heck ``began agitating for more authority'' as Nuance was being acquired by rival ScanSoft, of Peabody, Mass., Nuance said. But the combined company denied his request to be named chief technology officer.

Meanwhile, Heck swapped e-mails with Yahoo about joining its team. The suit says Heck then e-mailed himself his own résumé, a list of Nuance employees to potentially bring to Yahoo, and a proposed organizational plan for an R&D department.

On Aug. 30, Heck announced he was quitting Nuance to work at Yahoo. So did one of his key managers.

The next day, another important manager from Heck's team turned in his resignation to go to Yahoo.

A few weeks later, Nuance's six-person Montreal R&D team that was overseen by Heck resigned to go to a Yahoo speech lab in Montreal, ``where Yahoo has never previously had any base of operations,'' the suit said. The same day, the last three Nuance R&D engineers in Menlo Park quit to join Yahoo.

Hot market

Yahoo spokeswoman Hollars said it's ``fairly obvious'' that the contest for engineers is heating up.

``Frankly, honestly, we want really great talent,'' she said. ``If they want to come to Yahoo, we're not going to stop them.''

Sometimes, companies act super-aggressively, filing employee raiding suits to scare other workers away from defecting to competitors, employment lawyers said.

Whatever the case may be with Nuance and Yahoo, the unfolding legal fight could provide insights into the inner workings of tech companies as they jockey for talent and advantage in the market. Cases like this often throw into the public realm internal e-mails in which senior executives discuss plans and strategies to compete against rivals, the attorneys said.

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