Nortel sues Arbinet over copyrights

Company slaps suit against client for misappropriation of trade secrets

Nortel Networks Corp. has sued a client, Arbinet-thexchange Inc., alleging copyright infringement and misappropriation of trade secrets through the unauthorized use of Nortel Networks proprietary software, Nortel announced Tuesday.

Nortel also alleges in the lawsuit that Arbinet exceeded its permitted usage level under its "right to use" license and hasn't met contractual obligations regarding the purchase of "certain switching systems," Nortel said in a statement.

Nortel, based in Brampton, Ontario, filed the lawsuit in the U.S. District Court for the Eastern District of Virginia after the companies engaged in a "lengthy period of unsuccessful discussions" but failed to reach an agreement, Nortel said.

Arbinet, based in New Brunswick, New Jersey, runs an electronic marketplace for telecommunications service providers to trade voice traffic and Internet capacity.

"Nortel is sending a clear signal that we will vigorously defend our technology investments," a Nortel spokeswoman said, declining any further comment on the lawsuit. An Arbinet spokesman declined to comment.

However, Arbinet disclosed more details about the lawsuit on July 9 in a registration statement with the U.S. Securities and Exchange Commission (SEC) for an initial public offering of its common stock.

In a letter received by Arbinet on April 13, 2004, Nortel said that it had filed the lawsuit on April 12, 2004, according to the SEC document from Arbinet. "In particular, the complaint alleges that we failed to purchase certain telecommunication switches and/or hardware from or certified by Nortel, in order to use Nortel copyrighted and proprietary software at our Los Angeles, London, and New York EDPs (exchange deliver points,)" the Arbinet filing reads.

The complaint seeks injunctive relief to prevent Arbinet from using Nortel software, actual and exemplary damages and attorneys fees and estimated costs of about $6 million, plus certain software fees, according to the Arbinet filing.

However, as of July 9, Arbinet had not yet been served with the complaint. "We have, however, entered into settlement discussions with Nortel to resolve all disputes between the parties and, based upon discussions to date, believe that a settlement can be reached on terms that will not be materially adverse to us," the filing reads.

The Arbinet spokesman declined to say if the company had yet received the complaint. He also declined to comment on whether the settlement discussions with Nortel are still ongoing or had broken down.

In happier days, Arbinet announced in October 1999 that it had selected Nortel's DMS-Global Services Platform for the carrier-grade expansion of the Arbinet Global Clearing Network. In August 2000, Arbinet announced that it had installed and cut over the routing and switching of members' traffic to the Nortel DMS-Global Services Platform, located in Arbinet’s New York facility. "This fully scalable, carrier-grade international gateway switch is the core component of (Arbinet's) Global Delivery Platform, which physically routes and delivers all telephony traffic traded by Members," Arbinet said in a statement at the time.

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