BRAMPTON, ONTARIO--It was a case of up one instant, down the next: The ink was drying on an IPO filing by Optical Networks Inc. http://www.opticalnetworks.com for $115 million (see ONI Goes For IPO), when Nortel Networks Corp.http://www.nortelnetworks.com made another kind of filing: It slapped ONI with a lawsuit for misappropriation of trade secrets, infringement of patents, unfair business practices, and unfair competition. Nortel is demanding injunctions against ONI and a jury trial. A Nortel spokesperson said it was "purely coincidence" that the lawsuit, filed Friday in northern California, coincided with ONI's filing.

Nortel's complaint accuses ONI of hiring at least 30 staffers away from Nortel and its contractors as part of "an on-going campaign" to acquire technology. Nortel claims ONI based its Dynamic Transport System (DTS) on knowledge gleaned from these former Nortel employees--knowledge that forms the basis of Nortel's OPTera family of products. "At least five patents have been violated," said David J. Chamberlin, senior communications manager at Nortel. Both the OPTera and DTS series include optical metropolitan area access and edge devices.

Nortel says ONI has systematically hired Nortel help at each stage of product design, from R&D through product development and marketing. And as a result, Nortel claims ONI has made "unlawful gains and profits," for which Nortel seeks compensation, punitive injunctions, damages, and royalties if its case is upheld in court.

This isn't Nortel's first legal stab at ONI. In October 1999, Nortel filed and won a partial injunction banning certain ONI employees from hiring away their ex-colleagues and contractors from Nortel.

It is not clear just how the lawsuit will affect ONI's bid to go public, or how it may impact its prospective customers, including Colt Telecom Group PLC http://www.colt-telecom.com, Marietta Fibernet http://city.marietta.ga.us/CityofMarietta.nsf/Web+Pages/Marietta+FiberNet, and Williams Communications Group Inc. http://www.williamscommunications.com--none of which had comments at press time. ONI also could not be reached for comment at press time.

by Mary Jander, senior editor, Light Reading http://www.lightreading.com