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Corvis Having a Rough Week

Light Reading
News Analysis
Light Reading
4/29/2003

The long history of acrimony between Corvis Corp. (Nasdaq: CORV) and archrival Ciena Corp. (Nasdaq: CIEN) has taken a new twist. Yesterday a federal jury said Corvis has wrongly used a patent owned by Ciena (see Jury Sides With Ciena Against Corvis and Corvis 'Disappointed' by Patent Verdict).

Ironically enough, Corvis founder David Huber is one of the inventors listed on the patent, which covers a technology named "WDM optical communication system with remodulators" (Patent 5504609). But here's the lowdown: Though Huber founded both Ciena and Corvis, he did not have a license for 5504609 when he left Ciena to start Corvis.

This patent feud began in July 2000, when Ciena sued Corvis for allegedly infringing on four of its patents, including:

  • Patent 5557439 -- expandable wavelength division multiplexed optical communications systems;
  • Patent 5784184 -- WDM optical communication systems with remodulators and remodulating channel selectors; and
  • Patent 5938309 -- Bit-rate transparent WDM optical communication system with remodulators.
Last month, a federal jury found that Corvis did not infringe on two of the patents listed in the Ciena complaint. However, Corvis's inverse multiplexing transceiver product was found to infringe the Ciena patent on bit-rate transparent devices.

The federal jury's findings on Monday were even more serious because at issue is a system patent rather than a patent on a very specific technology application. Working without an application technology patent could be likened to driving a car with a misaligned front end -- it's uncomfortable, but definitely doable. Working without certain technologies covered by system patents, however, would be like trying to drive a car with no tires.

"The jury has ruled on a patent that affects virtually all of [Corvis's] WDM systems," says Ciena spokesman Glenn Jasper. Corvis did not immediately return calls seeking comment.

Now that the jury has reached a verdict, the judge will hear post-trial motions for several months. Following that, unless a settlement is reached beforehand, the trial moves on to the point of deciding what damages will be awarded to Ciena.

Besides being beaten in court, Corvis is also having a rocky week on Wall Street. The company reported a net loss of $47 million, or 12 cents a share, on revenues of $1.5 million for its fiscal first quarter ended March 29, 2003 (see Corvis Posts $47M Q1 Loss).

Corvis's first-quarter revenues were down some 83 percent from its year-ago quarter and the company is expecting even lower revenues during its second fiscal quarter.

The company also confirmed today that it has begun yet another round of layoffs that will take its headcount below 350 over the next few months; and it may even shut down its subsidiary in France. Corvis employed as many as 1,625 people just two years ago.

Despite its troubles, Corvis sits atop the pile of cash it made at the height of the telecom bubble. Its cash and investments totaled $448.6 million as of March 29. Meanwhile, shareholders have watched the company that once had a market capitalization of $36 billion sink to abysmal depths. The company is worth about $301 million today, meaning investors might get more for their buck if Corvis were shut down and sold for parts than if it stayed in business another day.

— Phil Harvey, Senior Editor, Light Reading

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likebizy
likebizy
12/5/2012 | 12:09:11 AM
re: Corvis Having a Rough Week
The company may be worth more to the shareholders if they closed the doors. Your grasp for the obvious is astounding!!!!!!!!!!!
DCITDave
DCITDave
12/5/2012 | 12:09:10 AM
re: Corvis Having a Rough Week
I disagree. There is nothing astounding about my grasp of the obvious.
porn starr
porn starr
12/5/2012 | 12:09:09 AM
re: Corvis Having a Rough Week
it really is time to liquidate

The industry will be better off once it can place a tombstone over companies like this. It has burned through $576 million in cash over the last 2 1/4 years, and has nothing to show for it except embarrasingly low sales. We can't start a recovery when we have to read press releases about public companies barely doing a million in sales each quarter.

lite-brite
lite-brite
12/5/2012 | 12:09:09 AM
re: Corvis Having a Rough Week
Phil,

May I say that regardless of the base of the criticism of your reporting, you guys do a pretty good job of keeping light on the retorts.

Good on ya!
l-b
ThouShaltNotJudge
ThouShaltNotJudge
12/5/2012 | 12:09:07 AM
re: Corvis Having a Rough Week
The subject line of this post deserves a rating of 5!.
ThouShaltNotJudge
ThouShaltNotJudge
12/5/2012 | 12:09:06 AM
re: Corvis Having a Rough Week
I've taken a shot or two at Phil in the past, but if nothing else, he's a champ at maintaining his equanimity. kudos Mr. Harvey.
erbiumfiber
erbiumfiber
12/5/2012 | 12:09:04 AM
re: Corvis Having a Rough Week
OK, this is totally picky and obnoxious, but one "infringes" a patent or a patent is "infringed." The word "on" has crept into the expression as used by non-patent people; we don't know how or why. Since there will be more tedious moments to report about in this litigation (and others), you will be able to use this handy tip over and over and over again.

Nothing is more tedious than the "damages phase" of patent litigation so let's hope an out-of-court settlement is forthcoming. It has been nearly three long years just getting to this point (the original trial had been scheduled for April Fool's Day, 2002- was that a message from the judge?!).

Annoyingly for us patent types, all interesting parts of discovery, motions, trial testimony, etc. have been sealed (e.g., anything to do with anything technical, other than the judge's ruling on the patent claims- the "Markman opinion"). Too bad, but that's what usually ends up happening. Often the courtroom is cleared of spectators so you can't even go watch all the action... Oh well, one can always hit the oral arguments at the Federal Circuit if an appeal is taken...
Sparxe
Sparxe
12/5/2012 | 12:09:01 AM
re: Corvis Having a Rough Week

Phil,

Would you mind telling us how a company with $438 million in cash, real estate, patents (they are not all tainted) and 18,000 miles of optical network is worth $301 million?

Times are hard enough at CORV without your fuzzy math...

Sparxe Nj
opticalphaggot
opticalphaggot
12/5/2012 | 12:09:00 AM
re: Corvis Having a Rough Week
Phil can indeed add, but not just that, he uses good analogies in his journalistic style so that idiots like me can understand what Dubya-DM is. He has more spin then an electron and his news has as much weight as a photon! Best of both worlds I must say.

Oh yeah, Sparxe, we have something in common. We both like Kool Aid, but for different reasons.
linearefekt
linearefekt
12/5/2012 | 12:08:55 AM
re: Corvis Having a Rough Week
Hard to imagine a settlement at this point. After award of the gleaming Fed carrot in 6-8 months Ciena may be in the mood to settle but for now the FUD the suit casts weighs considerably more than its composite photons.

BTW, whats wrong with a little spin? You go Phil!

LE
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