Cisco forgives Huawei

CHICAGO: Cisco Systems Inc., the world's largest maker of gear that directs Internet traffic, said it has dropped its copyright lawsuit after China's Huawei Technology Co. Ltd. agreed to make some product changes.

The settlement comes after Huawei eradicated some of the programming code in question from its products. It changed its command line interface, user manuals, help screens, discontinued the sale of product at issue in the case and agreed to sell only new, modified products globally, Cisco said.

"Protecting our intellectual property is of paramount importance to Cisco," Mark Chandler, Cisco vice president and general counsel, said in a statement. "We are pleased to conclude the litigation as a result of the steps that were taken to address Cisco's concerns."

Cisco declined to disclose terms or conditions related to its dropping of the lawsuit. The settlement comes as several hot issues swirl around tech companies operating in China, including an administrative and legal system sometimes perceived as insensitive to theft of trade secrets.

The U.S. Semiconductor Industry Association, for instance, has made piracy and intellectual property theft in China its top priority.

Huawei competes with Cisco in the routers and switches market, which accounted for 65 percent of Cisco's $5.6 billion revenue.

Cisco, based in San Jose, California, sued privately held Huawei in January 2003, accusing China's largest maker of telecommunications gear of copying its intellectual property, documents and other material and infringing on several patents. The case had been pending in U.S. District Court in Marshall, Texas.

Most of Huawei's sales come from the telecom sector, and the company wants to boost corporate business, where Cisco reigns. It formed a joint venture with Cisco rival 3Com Corp. to serve those customers.

"3Com is extremely pleased that the litigation between Cisco and Huawei is now ended, and looks forward to continue competing on the merits of the products from its joint venture with Huawei," the company said in a statement.

3Com, which formed its joint venture with Huawei last November, intervened in the lawsuit last summer.

Neal Goldman, senior vice president and general counsel at 3Com, said the case has been dismissed with prejudice which means Cisco cannot file another lawsuit based on the same or similar facts.

"This enhances our competitive position worldwide," Goldman said. "If anybody in America had any concerns about this issue, this issue is gone."

Cisco's lawsuit had been suspended since last October after Huawei agreed to stop selling disputed products and submit any modified gear to an independent expert for review. Cisco said that review was completed, but it declined to provide details.

Last October, Huawei agreed to stop selling disputed routers and switches and to modify its products, including changing user manuals and parts of Huawei's source code.

Source code, the underlying blueprint of computer software, determines how programs work. A router connects computer networks for transmitting data and information, while a switch directs network traffic.

Although Huawei and other low-cost rivals do not pose a serious threat to Cisco now, analysts ultimately expect them to squeeze Cisco's core businesses of switches and routers, which account for about 75 percent of its sales and profits.