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November 26, 1998

NESTOR ACCUSES HNC OF PATENT INFRINGEMENT, ANTITRUST

By CBR Staff Writer

Nestor Inc, a Providence, Rhode Island decision support software house, has filed a lawsuit against HNC Software Inc claiming patent and antitrust violations. Nestor, which has a neural network-based fraud detection system called Prism among its products, claims that HNC’s Falcon product infringes Nestor’s 1988 fraud selection system patent used as the basis for Prism. Nestor began selling Prism in 1989. HNC applied for its own fraud detection patent in 1992, which was finally issued by the patent office last month. Nestor has apparently been spurred into action by threats from HNC against any company using a neural network system to analyze transactions and cardholder data in a predictive manner. Nestor president and CEO David Fox claimed We never wanted to fight this matter in the Courts.But now, in addition to its other predatory tactics, HNC has been issued a patent for what we believe is a simple and obvious application of Nestor’s own fundamental patented inventions. Those other predatory tactics include exclusionary agreements, below-cost pricing, disparagement and business disruption, and an attempt to eliminate Nestor as a competitor, the company claims. It says that HNC has obtained monopoly power in the US market. San Diego, California-based HNC sells credit card fraud detection and profitability analysis software through its HNC Financial Solutions division. Its predictive software is used as part of Oracle Corp’s recently launched Oracle Retail vertical market package. In September, HNC acquired Open Solutions Inc for $124m, for its client/server core processing software and services to small and mid-sized banking and credit union institutions.

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