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Tunable Wars

Craig Matsumoto
11/21/2008

6:00 PM -- So, is it a good thing or a bad thing that JDSU (Nasdaq: JDSU; Toronto: JDU) is getting so aggressive over tunable-laser patents?

Defending one's turf is nice and all, but JDSU is already involved in at least two tunable-laser pattent battles. That the company went on to file a complaint with the U.S. International Trade Commission (ITC) on Nov. 7 could be taken as bad news, at least from the point of view of a JDSU investor.

Pessimistic interpretation No. 1: Maybe JDSU did it because market share is slipping. "We think Bookham's new Indium Phosphide based tunable laser products are rapidly gaining market share," Morgan Keegan & Company Inc. analyst Paul Bonenfant wrote in a note issued late last week.

Then, you've got the PR ramifications. JDSU "likely counts every major optical network equipment supplier among its customers," which would include four of the proposed respondents in the suit: ADVA Optical Networking (Frankfurt: ADV) , Ciena Corp. (NYSE: CIEN), Nortel Networks Ltd. , and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA).

The proposed respondents also include competitors, as you'd expect: Bookham Inc. (Nasdaq: BKHM; London: BHM), CyOptics Inc. , and Syntune AB .

JDSU was already in court for the two patents in the ITC suit -- Nos. 6,658,035 and 6,654,400 -- plus a third, No. 6,687,278. In March, Bookham, after receiving warnings about allegedly infringing those patents, filed a suit seeking to invalidate them. JDSU has countersued, and the lawyers have been scrumming ever since.

Separately, JDSU sued Syntune in July over those three patents.

Santur Corp. has been spared from all of this, but that's because its micro-electro-mechanical system (MEMS) tunable laser doesn't use a monolithically integrated approach as the others do. (See Santur Girds for Battle.)

— Craig Matsumoto, West Coast Editor, Light Reading

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Riverhigh
Riverhigh
12/5/2012 | 4:07:15 PM
re: Tunable Wars
Bookham settles patent litigation with JDS; will pay up to $8 million

Bookham, the San Jose maker of optical components, said in a filing today it has settled litigation it had set in motion last year when it asked a federal court in San Jose and the International Trade Commission to declare invalid three patents held by JDS Uniphase related to tunable laser products.
As a result of the settlement, Bookham will pay out $3 million in two parts to JDS with the first half due Wednesday and the second a year later. Also, beginning April 10, 2010, Bookham will pay JDS a royalty of up to $1 million per year for up to five years. The parties also agreed to refrain suing each other over patent claims for four year.

Interesting to see what happens with Syntune, Cyoptics, etc,
Camil_mat
Camil_mat
12/5/2012 | 3:26:23 PM
re: Tunable Wars
JDSU's attempt to go after Bookham is going to force most Bookham customers to develop alternative supply arrangements. JDSU may not win the battle in court but they will erode Bookham's market share.

JDSU has deep pockets and a big legal team. They can squeeze Bookham out of key accounts.





deauxfaux
deauxfaux
12/5/2012 | 3:26:22 PM
re: Tunable Wars
This would be a very effective way of killing off BKHM, since it is the most profitable part of their product line. If deals with OEMs can be struck which eliminate liability, and provide some additional pricing concessions; BKHM could find itself in trouble
Stevery
Stevery
12/5/2012 | 3:26:21 PM
re: Tunable Wars
How do you think the customers will react to being sued by Jdsu ? Bad timing to piss off key accounts like Nortel, Ciena, tellabs and Adva. They can make Jdsu pay dearly if they so choose to.

How I think they'll react: They will force BKHM to get reasonable and sell/merger themselves at reasonable terms, because they're not stupid enough to think that BKHM is a sustainable company.
optigong
optigong
12/5/2012 | 3:26:21 PM
re: Tunable Wars
How do you think the customers will react to being sued by Jdsu ? Bad timing to piss off key accounts like Nortel, Ciena, tellabs and Adva. They can make Jdsu pay dearly if they so choose to.
Steve0616
Steve0616
12/5/2012 | 3:26:21 PM
re: Tunable Wars
I would be really surprised if provisions for patent indemnity are not explicitly stated in the customers' purchase orders; so they would naturally expect Bookham to furnish the umbrella. This should be standard practise with products so heavily steeped in IP.

Of course, suing the customers piles more monkeys on Bookham's back as it can ill afford to defend against three patent infringements at this stage...one is costly enough! So, Bookham has to either get JDSU's patents invalidated, or license...and both of those are nails in the coffin for Bookham.
HomerJ
HomerJ
12/5/2012 | 3:26:19 PM
re: Tunable Wars
Mess with JDSU's legal team at your peril.

See Metconnex October 2006.
Camil_mat
Camil_mat
12/5/2012 | 3:26:16 PM
re: Tunable Wars
Bookham seemed to be rebounding earlier in the year. Recall that earlier this quarter, they showed some sign of profitability and appeared to have gained some market share although theirs is still quite small compared to Santur.

Even if they make a licensing deal with JDSU, their customers won't wait. I wonder what JDSU wants to get out of this.

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