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Nortel Drops 40-Gig Bomb on OIF

Nortel Networks Corp.'s (NYSE/Toronto: NT) lawyers appear to be working overtime these days.

In a move that has mystified the optical networking community, Nortel recently claimed intellectual property rights relating to the SFI-5 interface -- a standard being developed by the Optical Internetworking Forum (OIF) for interconnecting SerDes and framer chips at OC768 (40 Gbit/s) line rates.

The upshot? Last week, the OIF summarily shut down the current development process for the SFI-5 standard.

This could turn out to be a huge deal, industry insiders tell Light Reading. Nortel's move could set back the development of 40 Gbit/s systems by months or more, further delaying technology that has already been pushed out by a struggling economy (see 40 Gbit/s: Ready for Prime Time? and 40 Gbit/s Takes the Slow Lane). Standards are put in place to help components and systems vendors ensure interoperability and hence speed up product development times.

Nortel says it's just a misunderstanding, however. The company says a new OIF process has been created that requires them to disclose all intellectual property initiatives related to a standard in development. They say they're simply disclosing the patent applications as a matter of procedure.

"The OIF has just created a new policy for disclosing IPR (intellectual property rights) and there has been some confusion regarding how the policy was to be implemented into the standards process," wrote Ann Fuller, a Nortel spokeswoman, in an e-mail to Light Reading. "It was a learning experience for everyone. Now we are all working to resolve this confusion and ensure the process moves forward."

But the fact remains that standards activity has been put on hold, at least temporarily. In an email to OIF members dated March 27, 2002, OIF's president, Sid Chaudhuri from Tellium Inc. (Nasdaq: TELM), wrote:

    Notice of Ballot Termination This is to notify you that the OIF Board of Directors has declared that the Principal Ballot for SFI-5 (2001.145.10 Serdes Framer Interface Level 5 (SFI-5): Implementation Agreement for 40Gb/s Interface for Physical Layer Devices) is hereby terminated, and shall for all purposes be considered null and void. The reason for this is a written notice disclosing intellectual property rights on this specification was just received yesterday from OIF Member Nortel Networks Limited. Nortel has also indicated that it is prepared to license such intellectual property rights. (The actual letter has been uploaded as contribution 2002.146 - Nortel IPR disclosure on SFI-5) Since neither this Ballot, nor the Straw Ballot which preceded it, were conducted with the Members' knowledge of this disclosure regarding Nortel's intellectual property rights, the OIF Board has decided that it is in the best interests of all concerned to terminate the current Ballot. Once the technical committee (TC) has had a chance to understand the new information, the TC must decide whether the SFI-5 document should go to principal ballot under these new circumstances. If the TC Committee does approve this document going to Principal Ballot, it then goes to the Board of Directors for their approval.
Questions remain. Why would Nortel participate in a standards process while working to make proprietary intellectual property claims on said standard? Nortel's comments don't necessarily explain why it waited until the process had reached an advanced stage before speaking out. The company can hardly claim to be ignorant of the activities of the OIF, since one of its VPs, Gerry Barañano, is also VP of marketing for the OIF.

Initially, the industry was buzzing with conspiracy theories. "You don't send the technical guys in to help define the standard and then turn around and try to screw money out of it," says an executive from a network processor vendor, who did not wish to be named.

There's no denying that the process for creating standards is open to manipulation: Big companies want their own approach to be standardized, while the smaller fry want changes that could take away some of the incumbent's competitive advantage. Take a look at the wrangles surrounding the standard for resilient packet ring (RPR), for example (see RPR Moves Forward).

In Nortel's case, some think the motive -- if indeed there was one -- was financial. There's considerable money to be made from exercising intellectual property rights. Nortel's lawyers have been turning up the heat in other cases, such as the patent-infringement case against ONI Systems Inc. (Nasdaq: ONIS) (see ONI/Nortel Lawsuit Moves to Next Level).

Yet, confoundingly, Nortel stands to gain little financially -- at least not in the immediate future -- because carriers aren't actually deploying 40 Gbit/s systems yet. "The only reason I can see is financial gain, and what financial gain is Nortel going to get out of this because there's no 40-gig market," says one industry source, who wished to remain anonymous.

Nortel maintains that things have been blown out of all proportion -- it disclosed the patent applications as a result of a new OIF policy. The company says it seeks to resolve the confusion that has arisen.

It's not yet clear whether the company's explanation will be accepted by the members of the OIF, many of which are competitors. Nor is it clear whether the OIF's 40-Gig standards process will manage to get back on track. This story will be updated when more information becomes available.

— Pauline Rigby, Senior Editor, Light Reading
http://www.lightreading.com
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oxc 12/4/2012 | 10:40:35 PM
re: Nortel Drops 40-Gig Bomb on OIF NORTEL uses their IP arsenal not to avoid war but to shake unstable ground in a down industry. Don't get me wrong, its an interesting strategy but questionable use of ethics that may tarnish brand. My sense is that they forfiet rights to royalties and loose credibility in fighting future patent battles, like with ONI.

--Gaza.
AutoDog 12/4/2012 | 10:40:34 PM
re: Nortel Drops 40-Gig Bomb on OIF Another item of note: Peter Dartnell of Nortel Networks is the technical editor of the SFI-5 document! This is the exact spec his lawyers wish to torpedo...

For Pete's sake (sorry, couldn't reisist) can this be anything but a malicious move on Nortel's part? Given the Nortel's position in the OIF and the timing of their actions, this is a blatant raised middle finger to the other OIF members and the industry.

Bring your rotten vegetables to OIF in Boston later this month...
kephill 12/4/2012 | 10:40:32 PM
re: Nortel Drops 40-Gig Bomb on OIF What is wrong with Nortel protecting its intellectual property rights? Nothing! It owes a duty to its shareholders to asserts its rights.
kz1x 12/4/2012 | 10:40:31 PM
re: Nortel Drops 40-Gig Bomb on OIF They aren't that smart, trust me. To act in a fashion so as to limit public discourse via the enforcement of patent law would require coordination between more than three people.

Nortel management is incapable of this.
oxc 12/4/2012 | 10:40:31 PM
re: Nortel Drops 40-Gig Bomb on OIF Clearly patents serve a business strategic purpose and *nothing* is wrong with asserting rights, God bless America. NORTEL's strategy has consequence and risk. Patent wars get ugly when responsible players push back and shareholders loose to legal fees and industry gridlock.
optical_man 12/4/2012 | 10:40:30 PM
re: Nortel Drops 40-Gig Bomb on OIF Yeah! Nortel finally has blown it's last chance at anyone believing they want Open Standards of any sort.
Was a nice idea floated by JR, but the old guard would have nothing to do with it. Proprietary Canadian Manufacturing Company ROCKS ON!
Bumper_car 12/4/2012 | 10:40:30 PM
re: Nortel Drops 40-Gig Bomb on OIF Anybody that thinks that "open standards" means that someone does not own some sort of patent on some part of the technology in that standard is very nieve. Nortel was working on 40G technology before OIF was formed. OIF is an industry interoperatibility forum, not a "standards" organization. Nortel was being circumspect in revealing that it had already applied for patents relative to what OIF thought they were breaking new ground on. You would be surprised how many of the smart people in the various industry interoperability forums are actually only re-inventing the wheel. A lot of times, other people have already been there, sometimes a long time ago.
kephill 12/4/2012 | 10:40:30 PM
re: Nortel Drops 40-Gig Bomb on OIF Nortel is merely following the rules by disclosing they have an intellectual property right in the proposed solution. Nothing unethical. Maybe Nortel should just stop R&D and waive all its patents. That is what you and LR really want.
optical_guy 12/4/2012 | 10:40:30 PM
re: Nortel Drops 40-Gig Bomb on OIF ooops, to many damn acronyms:

Its a real thing of beauty here....wonder how long it will be before anyone at *OIF* wants to participate with Nortel again.
optical_guy 12/4/2012 | 10:40:30 PM
re: Nortel Drops 40-Gig Bomb on OIF Did you really read the article? The issue is not one of a company protecting its IP. The issue is a company acting as a primary participant in an industry forum for the development of open standards, inserting their IP into the standard, then calling foul and killing the standards efforts.

Its a real thing of beauty here....wonder how long it will be before anyone at OFC wants to participate with Nortel again.

OG
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