After losing business to U.S. government and international customers to two small companies in the security detection space, OSI Systems [OSIS] is using the legal system to unfairly target the companies to tarnish their reputations and force them to spend precious funding defending themselves rather than invest in their products, the top executives from SureScan Corp. and Viken Detection allege.
In the case of Viken Detection, which in 2018 year beat out OSI’s American Science & Engineering (AS&E) business unit for a U.S. Customs and Border Protection agency contract for handheld imagers, the company successfully defended a lawsuit alleging misappropriation of trade secrets by AS&E and two subsequent appeals by AS&E were also rejected last June and July by state courts in Massachusetts.
In October, AS&E filed suit against Viken in federal court claiming patent infringement related to two products that Viken has developed that enable privately owned vehicles to be scanned from the top, bottom and sides while the occupants remain in the car. AS&E charges that Viken is using the same backscatter X-ray techniques that it developed and is taking advantage of stolen trade secrets by a former employee that went on to found Viken and is currently one of its owners and chief technology officer.
“Viken’s Osprey-UVX represents a material component of AS&E’s patented inventions, including a material component for use in practicing AS&E’s patented process, and one which Viken knowingly made and adapted for use to infringe AS&E’s patented inventions,” AS&E alleges in the Oct. 19 patent infringement complaint filed with the U.S. District Court for the District of Massachusetts.
Viken responded in a state court in Massachusetts, saying AS&E is trying to undermine the company on various fronts.
“AS&E unlawfully attacked Viken in numerous ways, including threatening baseless litigation against Viken, threatening to sell a competing product at a loss, falsely telling CBP that Viken had ‘stolen’ meaningful AS&E technology, offering to help a former Viken employee who had stolen Viken’s trade secrets, and following through on its threat to file a baseless lawsuit,” Viken said in its counterclaim filed in December.
Jim Ryan, Viken’s CEO, told sister publication HSR in an interview on Dec. 31 that AS&E’s claims “are made up and this lawsuit was used to hurt Viken’s business.” He added that AS&E has already reduced its patent infringement claims “which demonstrated they’ve admitted to us they have no idea what our product does. It was, throw everything against the wall type strategy and see what would stick.” He expects to shortly “cut off” more of AS&E’s claims while Viken continues to battle in court.
Viken has sold several of its Osprey-UVX under vehicle scanners to CBP and expects that agency to begin evaluating its EVX scanner, which provides backscatter X-ray imaging of the top and sides of a vehicle. The company points out that the UVX is the only product of its kind on the market and that its EVX system fits into CBP’s primary inspection lanes whereas AS&E’s Z Portal scanner is too large and has to be used for secondary inspection of passenger vehicles.
Ryan said that other industry players the company is working with agree that OSI System’s legal strategy is “an egregious use of the legal system to deprive the U.S. government and other agencies of vital technologies. It’s become a competitive tactic that’s used by OSI.”
SureScan, which is also in OSI’s cross-hairs, has developed a system for automatically screening checked bags at airports for explosives. The computed-tomography-based technology is typically called an explosive detection system (EDS) when used for scanning checked bags and parcels.
In the U.S., the Transportation Security Administration purchases EDS systems made by Smiths Detection and Leidos [LDOS]. The systems provided by these companies involve rotating gantries used in imaging a bag’s contents.
SureScan’s technology, like a system developed by OSI’s Rapiscan division, is based on a stationary gantry, which involves fewer moving parts, is less costly to operate and maintain, and can scan more bags in less time than EDS systems with rotating gantries. Neither company’s systems have been purchased by TSA for scanning checked bags at airports but both companies have been successfully selling to airports overseas.
Last March, Rapiscan filed a patent infringement case against SureScan, including its use of a stationary gantry in its x1000 EDS system. However, SureScan countered that it had developed its stationary gantry technology 20 years before Rapiscan was granted patents for its technology.
Rapiscan then dropped two of its patent infringement charges but expanded its claims against SureScan from five to 65, “greatly increasing the scope of the case and the cost to defend to SureScan,” SureScan says in a summary outlining the chronology of the legal battle between the two companies.
“The case is baseless,” John Percival, SureScan’s president, told HSR in the same Dec. 31 virtual Zoom interview with Viken’s Ryan. He pointed to a 2012 article by a lawyer from Shook, Hardy & Bacon, the law firm representing Rapiscan, citing cases showing that filing a large number of patent infringement claims “is a litigation tactic and not a remedy for infringement.”
In the article in IPQ, Peter Strand, who isn’t listed as representing Rapiscan in the complaint against SureScan, wrote that “The assertion of a large number of claims can quickly bring all but the most deep-pocketed defendants to their knees. The assertion of myriad claims becomes a tactical weapon, therefore, and not a means to protect patent rights.”
Percival said the tactics described in the article outline what Rapiscan is doing “in a formulaic way, how to go after a small company.”
SureScan is competing “head-to-head internationally” against Rapiscan for EDS sales and has been successful in some cases against them, Percival said. “That’s my guess why they’re going after us.”
OSI did not respond to a query to comment on the charges by Viken and SureScan, which are both small companies. OSI’s security business recorded $742 million in sales in its latest fiscal year.