Cisco, Huawei look to settle software-copying lawsuit

FRAMINGHAM (10/03/2003) - Cisco Systems Inc. and Huawei Technologies Co. this week announced an agreement that moves them toward a settlement of a lawsuit Cisco filed in January charging Huawei with pirating its internetworking software and infringing on at least five patents.

The two companies said in a brief statement that they had agreed to stay, or put on hold, Cisco's suit, which was filed in U.S. District Court in Marshall, Texas. The stay will remain in effect pending an outside expert's review of changes that Shenzhen, China-based Huawei has made to its Quidway router and switch products in response to Cisco's claims, according to officials from the networking rivals.

Cisco and Huawei added in their joint statement that they expect the deal "will lead to the end of the lawsuit." However, it could take up to six months to complete the independent review process, said Ron Friedman, associate general counsel at 3Com Corp., which intervened in the suit on behalf of Huawei in June.

Settling the lawsuit would eliminate a potential cloud hanging over the networking equipment joint venture that 3Com and Huawei are setting up in Hong Kong. Friedman said Marlboro, Mass.-based 3Com welcomes the agreement between Cisco and Huawei, and he predicted that the deal won't have any negative affect on the formation of the joint venture.

The joint venture is due to begin operations next month provided the Chinese government signs off on the plan. It will develop enterprise networking products and sell them in China and Japan, with 3Com handling sales in the U.S. and elsewhere.

Separate from the joint venture, 3Com has already begun shipping two Huawei products packaged with its own user interfaces and technical support services. 3Com last week announced a Huawei-built WAN router line, and in July it released a core LAN switch made by the Chinese company.

Ted Malos, director of technology at the Ventura Unified School District in Ventura, Calif., uses both Cisco and 3Com products and plans to evaluate the new WAN routers that 3Com is selling. Malos said Cisco's lawsuit against Huawei "seemed kind of odd" and added that it had not affected his technology purchasing plans.

The suit alleges that Huawei copied portions of Cisco's IOS source code for use in the Quidway product line, which isn't being sold by 3Com, said Zeus Kerravala, an analyst at The Yankee Group in Boston. Kerravala added that Bruce Claflin, 3Com's president and CEO, told analysts earlier this year that the company would avoid reselling any of Huawei's products if they possibly infringed on Cisco's patents.

In filing the lawsuit against Huawei, Cisco officials "were rightly concerned about their intellectual property and patents," said Nick Lippis, an analyst at Lippis Consulting in Hingham, Mass. But, Lippis noted, Cisco also was worried that Huawei's alleged copying of its software code and technical documentation could result in a "flooding of the market with very cheap products."

Cisco sought monetary damages as part of its January complaint, but all the parties to the case last week declined to comment on whether Huawei would have to make any payments if the suit is settled.

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