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Optical/IP

Corvis Having a Rough Week

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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dave77777 12/5/2012 | 12:06:19 AM
re: Corvis Having a Rough Week Thank for proving my point about clueless pundits lilgatsby.

>>What's "Funny" is that you don't consider a $1.5m Qtr (2nd in row) as a "meaningful" signal.
Anyone who's not blind who invested in the last year had to EXPECT a 1.5M qtr. Why do you think the company sells at a discount to cash? Do your homework!

>>I'd like to know in what business cycle is Corvis operating?
ULH/LH optical network systems. You really shouldn't have to ask this question.

>>they must have a sellable or desired product...not the case, ol' sport.
When this company went public, they couldn't make product fast enough to fill orders. They have the products; they are simply waiting for a re-emergence of ULH/LH capex, "ol' sport".

I'm not bitter; Corvis is trading right about where I own it. If you bought at $20 - $100, you shouldn't be bitter; you just shouldn't be allowed to handle your own money.



PastTense 12/5/2012 | 12:06:11 AM
re: Corvis Having a Rough Week There needs to be a mechanism by which the person who develops the technology has portability rights. Huber started developing his ideas at General Instrument. He developed them further at Ciena, and further still at Corvis. He's the guy with the ideas, he's the guy who figured it all out. Ciena won the lawsuit simply because that's where Huber parked his butt prior to Corvis.

When you leave a company that gave you a 401k and contrinuted to it, you are allowed portability of those accounts. Patents should be the handled same way.

Huber is a sucky salesman but a brilliant technologist. He (and his shareholders) shouldn't have to pay Ciena one red cent.
puddnhead_wilson 12/5/2012 | 12:05:58 AM
re: Corvis Having a Rough Week >There needs to be a mechanism by which the person who develops the technology has portability rights. Huber started developing his ideas at General Instrument. He developed them further at Ciena, and further still at Corvis. He's the guy with the ideas, he's the guy who figured it all out. Ciena won the lawsuit simply because that's where Huber parked his butt prior to Corvis.

Ciena owns the patent because he was an employee and elected officer of Ciena at the time and to allow a person rather than a corporation to own a patent would be to allow a person to steal the intellectual property owned by public shareholders of Ciena.

This is corporate law/capitalism 101 -- isn't this obvious?
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