A small Danish company is suing Avago Technologies Pte. for fraud and breach of contract, claiming Avago is asserting patents that could unfairly shut out competition for 40Gbit/s and ultimately 100Gbit/s modules.

It's not a frivolous lawsuit. The Danish company, IPtronics A/S , makes laser-driver chips that are used in QSFP modules all over the place. Almost. "We supply pretty much the whole industry that's not Avago," IPtronics Chairman Martin Rofheart says.

This all started in 2010, when Avago sued IPtronics for patent infringement. For what Rofheart says are procedural reasons, IPtronics didn't get a chance to fire back until last week, when it filed its lawsuit in California federal court.

The suit claims that Avago, as part of an Institute of Electrical and Electronics Engineers Inc. (IEEE) agreement, was contractually obligated to disclose any patents essential to the small form-factor (SFF) standards.

"Avago failed to disclose that they were 'of the mind,' as a lawyer would say, that the patent would cover an aperture of every size," says Rofheart. (The aperture part is key to the suit -- more on that in a bit.)

The case points to a sticky aspect of standards-setting. Most standards bodies require companies to share any essential patents, those that the standard can't be implemented without. The sharing doesn't have to be free; the technology can be licensed for fair, reasonable and non-discriminatory terms. (Lawyers abbreviate it as (F)Rand.)

A similar legal fight brewed up around chipmaker Rambus Inc. (Nasdaq: RMBS) in the early 2000s. Rambus was alleged to have crafted key patents knowing full well that they'd be essential to memory standards that were being developed in the late '90s.

Rambus ultimately prevailed in that case, and a Federal Trade Commission antitrust investigation ultimately went for naught as well.

IPtronics isn't prepared to go Rambus on this case and drop monopolization accusations on Avago, Rofheart says. But he does contend that Avago isn't acting fairly.

Lasers and apertures
Avago's patent describes a laser module based on a vertical-cavity surface-emitting lasers (VCSEL). (If you want to look it up, it's No. 5,359,447: "Optical Communication With Vertical-Cavity Surface-Emitting Laser Operating in Multiple Transverse Modes.")

Rofheart explains the patent this way: It covers the creation of an optical interface module by using VCSELs, multimode light, multimode fiber and a laser-driver chip. (The patent doesn't use the term "laser driver" but spells out technology that does the same thing, IPtronics says.)

Avago already used this patent to sue Emcore Corp. (Nasdaq: EMKR). Emcore fought back, even bringing the case before the ITC, but eventually lost -- because of that aperture thing.

Avago's patent happens to specify that the laser have an aperture larger than eight microns. That's why Emcore lost, according to Rofheart. A smaller-aperture laser wouldn't violate the patent, so the ITC ruled that Emcore had a workaround.

Avago covered up that possibility in its 2010 suit against IPtronics. Evoking a "doctrine of equivalents" -- a bit of legal logic saying certain similar works are pretty much equivalent to what's in the patent -- Avago asserted that the '447 patent also applies to apertures not larger than 8 microns.

Under that argument, any VCSEL-based arrangement similar to the one in question would violate the patent, which, according to IPtronics, means any short-reach, multimode, VCSEL-based module is in violation.

"That door has now been closed," Rofheart says, no pun intended. (Get it? Aperture? Closed ... ?)

That would be trouble for IPtronics's clients, the module companies also selling 40Gbit/s QSFPs based on four 10Gbit/s VCSELs. And the argument will probably extend into 100Gbit/s as well, for both 10x10Gbit/s designs and for upcoming 4x25Gbit/s ones, Rofheart claims.

Avago didn't return an email from Light Reading asking for comment. But Rofheart is doing all he can to get the word out about IPtronics's case.

His opinion is that Avago filed the suit figuring a Danish company wouldn't want a long fight and wouldn't bother brushing up on its U.S. legal options. "It's our thinking they would like to take the VCSEL node all for themselves, and with one arrow, they can hit pretty much every competitor," says Rofheart, who's based in the United States.

— Craig Matsumoto, Managing Editor, Light Reading