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Metconnex Sells to JDSU

Craig Matsumoto
10/17/2006
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The collapse of optical startup Metconnex began with a JDSU (Nasdaq: JDSU; Toronto: JDU) lawsuit last year, and has just ended with JDSU picking up the company's patents and technology for $2.5 million.

The deal, being announced Tuesday, officially dissolves Metconnex and kills off its Hi-PLC line of wavelength selective switches (WSSs), a central element to some reconfigurable optical add/drop multiplexers (ROADMs). JDSU will not continue to sell Hi-PLC, nor does it intend to continue any ongoing Metconnex R&D, says JDSU director of marketing Enzo Signore.

None of Metconnex's employees or facilities are included in the deal.

JDSU describes the purchase as opportunistic. Metconnex, unable to withstand the expense of defending itself against the lawsuit, shut its doors in September and was looking to sell its assets. JDSU saw the chance to lace its ROADM portfolio for cheap, although it has no immediate use for the technology, Signore says. (See Metconnex Denies Claims and Competition Kills Metconnex.)

Metconnex's options were limited, considering anyone buying the intellectual property would open themselves to the JDSU suit. Signore says he isn't aware of any other companies that were vying to purchase a piece of Metconnex.

One key aspect to the deal is that it halts all lawsuits between the companies. That means the JDSU suit against Metconnex has been dropped, as has the reciprocal suit filed by Metconnex that charged JDSU with abusing the legal process to crush a competitor.

Metconnex accused JDSU of accelerating Metconnex's demise by getting the startup's two suppliers to stop selling to the company. One, Memscap S.A. (Euronext: MEMS), got hit with a JDSU patent suit. The other supplier, Micralyne, which is partly owned by JDSU, told the Ottawa Citizen its decision was related to credit terms not being met.

Remaining competitors in the WSS market include Capella Photonics Inc. and CoAdna Photonics Inc. The latter claims it had a hand in Metconnex's downfall by stealing a key account with Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), the equipment supplier to Verizon Communications Inc. (NYSE: VZ).

JDSU has a separate ongoing patent suit against Optium Corp. (Nasdaq: OPTM), the 10-Gbit/s transceiver maker that's on the verge of going public, but Signore describes JDSU as more of a bystander in that case. (See JDSU, Emcore Sue Optium and Optium IPO Rolls On.)

That's because Emcore Corp. (Nasdaq: EMKR) owns the patents in question, having purchased them from JDSU in a May 2005 deal that involved some technology licensing between the companies. (See Emcore Buys JDSU's Cable Biz.) The suit against Optium is Emcore's, with JDSU being dragged along for the ride, as Signore describes it. "We're just called in because of the licensing agreement," he says.

— Craig Matsumoto, Senior Editor, Light Reading

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Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 3:37:29 AM
re: Metconnex Sells to JDSU
I should note that JDSU says it doesn't file patent lawsuits just to chase settlements; Enzo Signore says the company only does this after doing due diligence and determining that the case will be won.

Still.... we're told that in Ottawa, this case has drummed up discussion about lawsuits, the potential "appropriate competitive tactics," etc. It's certainly a valid topic that goes beyond the JDSU/Metconnex case. Anybody from Ottawa care to comment?
redface
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redface,
User Rank: Light Beer
12/5/2012 | 3:37:28 AM
re: Metconnex Sells to JDSU
In the case of Metconnex, I did not find any report stating that Metconnex was sued by JDSU for patent infringement. It looks like JDSU sued Metconnex because JDSU thinks Metconnex used IP that belonged to JDSU. It is probable that the founders of Metconnex pursued the specific ROADM approach which became Hi-PLC while working as JDSU employees, and that's what Metconnex got sued for.
slayer666
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slayer666,
User Rank: Light Beer
12/5/2012 | 3:37:27 AM
re: Metconnex Sells to JDSU
The founders of Metconnex (Thomas, and Alan) were senior managers in the R&D product group at JDSU. They were directly involved with ROADM technologies and developed their knowledge of the technologies as a result of working for JDSU.

Their lead VC apparently Emailed one of the founders on his JDSU email account, encouraging him to leave the company and be funded....Apparently JDSU showed up in court with 1000's of pages of evidence. It should be noted that neither of these individules was laid off or dismissed from the company, but left on their oun accord. One apparently screwed up a JDSU design on the way out the door. (Just an accident I'm sure)

While Metconnex technology was better based on size and manufacturability, and was kicking JDSUs free space grating product out in customer designs, the fact is when you exit a company with whom you have signed non-competes, confidentiality agreements etc. you need to get some clearances signed off before you build a product in a similar space (within 2 years)

From a JDSU standpoint, they would have been liable to shareholder class actions if they simply let senior staff leave and compete.

Good things happen to good people.
redface
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redface,
User Rank: Light Beer
12/5/2012 | 3:37:26 AM
re: Metconnex Sells to JDSU
Slayer666:

Thanks for your clarification. So Metconnex was sued out of business not for infringing on JDSU patent, but for other forms of IP infringement.

In terms of technology, did Metconnex really have a much superior technology compared to JDSU? Then why did JDSU not want to take over Metconnex's technology instead of shutting down the entire operation? How did Metconnex product compare to other players such as CoAdna and Capella? CoAdna claimed that it accelerated Metconnex's demise by stealing its key ROADM customer.
slayer666
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slayer666,
User Rank: Light Beer
12/5/2012 | 3:37:19 AM
re: Metconnex Sells to JDSU
The main difference between Metconnex stuff and JDSUs was size. Aside from that, I am not sure if they had more features. I do know that a couple of optical vendors had Metconnex qualified and designed into live product, and JDSU solution is not a drop-in due to size and probably control issues...

Metconnex used 2 PLC-AWGs back-to-back with micro-mirrors in the middle. One AWG Demuxes the wavelengths, the other muxes them back up. If you pop a mirror in the path, you can drop the lambda you want, and also add traffic back into the muxing AWG. The nice part about this solution is that to assemble things, you need to align in X-and-Y. While the Z Axis isn't trivial, it is probably manageable...

JDSUs solution uses a free space grading, and micro-mirrors. The incoming lambda's get shot in free space at the grading and bounced back at a micro-mirror (array). Depending on the tilt angle of the mirror, they will be reflected back at a different area/distance and will drop the appropriate lambda. Barry Keyworth (JDSU Guy) gave a presentation on this at a photonics conference. You need to keep tight control on X-Y and Z in this assembly, so I think it would be nasty.

I think the problem was that Barry's solution went through to product due to ??? in JDSU and Thomas's didn't, so he left and built it. When the Metconnex solution became more successful, they had to kill it.

JDS should do the right thing and build what their customer's want! They now own all the IP.
Balet
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Balet,
User Rank: Light Beer
12/5/2012 | 3:37:16 AM
re: Metconnex Sells to JDSU
Good description of both products.
The main Metconnex advatage was not IP but just their pricing. JDSU has much larger overhead and charges much more for their MEMS product even the costs are about the same.

With Verizon's pressure all over the board on pricing and their vendor selection mainly based on pricing not even on performance or quality, the system OEMs are forced to buy less expensive options. Now, they don't have too many left. May be CoAdna, which is nicely ramping up, and surpisingly Capella getting out of their damp hole with big C customer. That was a real surpise.


Balet
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Balet,
User Rank: Light Beer
12/5/2012 | 3:37:15 AM
re: Metconnex Sells to JDSU
It is not as far I saw inside the boxes.

Just very usual approach used by blocker people for years, Mux/DMux by either single conventional grating or 2 AWGa in case of Metconnex wit switching elements of MEMS or LC.
Nothing is really active, may be OPM function for someone.
redface
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redface,
User Rank: Light Beer
12/5/2012 | 3:37:15 AM
re: Metconnex Sells to JDSU
Balet:

Capella uses servo control for fiber alignment - so the device constantly optimizes power output for each channel during operation. Is it the same with other approaches, namely Metconnex, JDSU, CoAdna?
Mako
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Mako,
User Rank: Light Beer
12/5/2012 | 3:37:13 AM
re: Metconnex Sells to JDSU
Agree that all WSS products cost more or less the same. Metconnex pricing was loss leader to buy market share. Now that the WSS market is starting to mature I expect we will see prices rise to generate gross margins necessary to maintain a business, particularly since there are no significant volumes yet.
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