I finally had a chance to review Kenexa’s claim against Taleo. In question is Patent #5,999,939 and the history of this patent is quite intriguing. The patent was originally filed on Feb 6, 1998 by Interactive Search, Inc, later known as iSearch, a Los Angeles headquartered maker of technology used to operate job sites and online databases. The abstract of the patent is around resume extraction technology — or, more specifically, the ability take an incoming resume and convert it into a structured database over the web. This patent has a history of contention. At one point, even Resumix considered a lawsuit against iSearch for a similar patent they developed back in 1988.
In Feb 2001, iSearch seemingly ran out of cash and was forced to close operation. According to a someone close to the situation, “their production model was an actual factory with worker bees typing fields into the database records from resumes, many of which were lying around on the floor”. The closing was quite contentious with customers. All assets subsequently went into bankruptcy holding as many customers were considering a class-action lawsuit. That never happened, but shortly thereafter, the assets went up for auction and low-and-behold, BrassRing swooped in and won the bid. It is speculated that the reason they purchased the patent was so that no other vendor could sue them for patent infringement on the resume extraction technology, which almost every recruitment vendor was (and is) using in some form or fashion. It is rumored that Deb Bessemer, BrassRing’s CEO, sent letters to all of the major eRecruitment vendors shortly thereafter, notifying them of potential patent infringement and suggested they pay a royalty for using the patented technology in their solutions. Although a well-known industry expert seems to think many of the vendor paid some sort of royalty/licensing fee, the vendors I have spoken with in the past few days suggest most ignored the letter and never paid any sort of license/royalty payment. BrassRing wisely chose not to go after any of their competitors most likely because BrassRing probably did not have the resources to enforce the patent. As a good friend Vinnie Mirchandani said once, “having a patent without the resources to defend it is as good as not having it at all.”
Which brings us to today. In reviewing the 8K SEC filing of Kenexa’s purchase of BrassRing, Patent 5,999,939 is explicitly stated as a key asset of the acquisition. Kenexa paid a handsome price for BrassRing and I think Kenexa not only knew the value and history of the patent but also planned to put it in their back pocket for use at a later date.
So, the question many have asked in the past 72 hours, ”why the lawsuit now”? The patent has been around for nearly 10 years and Kenexa has owned it for over 1 year. My objective opinion is that…
- Kenexa’s stock has been quite depressed over the past 6 months while Taleo’s has been performing quite well. Why not say your competitor is cheating?
- Taleo (and others) has been squarely beating them in the market. Again….”cheaters”…
- Kenexa is facing lots of internal challenges and issues right now, why not create a distraction?
- Last, and most important, Kenexa has both the resources and the will to pursue a patent infringement claim.
What is interesting to me is that Kenexa could have picked any of the major recruitment vendors as the defendant in the lawsuit including Vurv, Authoria or even one of the large ERPs. Why did they pick Taleo?
For those of us who would like to see the market continue its progress, this claim is disappointing. I personally think Kenexa will receive a lot backlash from the market and its customers for “patent trolling” versus actually focusing on where they should — innovating both products and services. If I were a customer, I would much rather see the R&D expense line go up instead of the legal expense. I guess our democratic system and market-based economy, is the reason why Kenexa is able to file the suit, and why Taleo will be allowed to defend it.
Thanks to Elaine Orler, our newest superstar at Knowledge Infusion, and Bill Kutik for helping shape this post. Don’t forget to read Bill’s recent article about “HRMS Happenings” based on his travels to Oracle, SAP & Workday last month.