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Brocade claims $112m win over rival A10 in tech blueprints spat

Lee Chen comes out swinging after patents, copyright trial

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Storage networking biz Brocade claims to have won $112m in damages after taking rival A10 Networks to court alleging patent and copyright infringement. A10 has said it will appeal against the jury's verdict that it infringed some of Brocade's intellectual property.

Specifically, A10 was accused of plonking technology from Foundry Networks, which Brocade bought for $2.6 billion in 2008, into its own products. Foundry was co-founded in the 1990s by Lee Chen, who went on to set up A10 in 2004. According to Brocade, Lee Chen, now A10's CEO, will have to personally pay damages as a result of the court case, held in San Jose, California, where both companies are headquartered.

Brocade claimed that:

  • A10's AX load balancer products infringed Brocade's patents for its Global Server Load Balancing and High Availability technology.
  • A10 misappropriated four Brocade Serveriron product trade secrets for use in its AX series products.
  • A10 copied Brocade Serveriron source code in various A10 products.
  • An engineer working for Brocade and Foundry Networks breached his contract when he was directly recruited by Lee Chen.

Brocade's Serveriron product range was acquired when Brocade bought Foundry. Lee Chen and his company may have been sued over the alleged use of technology originally owned by Foundry Networks, a company Lee Chen helped set up. The Foundry acquisition had odd aspects: Brocade dropping its original $3 billion bid to $2.6 billion.

When Brocade began legal action against A10 in 2010, F5 Networks did so too. At that time Lee Chen stated:

Two of A10's competitors — F5 Networks, Inc. and Brocade Communications Systems, Inc.— have recently chosen to compete not in the marketplace but in the courts. As the owner of valuable intellectual property rights, A10 respects the intellectual property rights of others and takes these recent allegations very seriously. But, after carefully reviewing the complaints filed in these actions, we believe that A10 has acted firmly within its rights and there is certainly no wrongdoing.

Now the privately-owned A10 has come out swinging. In a statement after the court hearing, the company said:

[The jury found] no liability for most of the copyright claims and certain state-law claims and no willful patent infringement, and finding damages of only $1 for the trade-secret claims and interference-with-contract claims. Although the jury found that A10's AX product infringed four patent claims from patents owned by Brocade ... it awarded less than $2 million total patent damages.

The jury did find that 145 lines of A10's implementation of the public "Aho-Corasik algorithm" constituted copyright infringement, and assessed $60 million in damages. These lines of code were removed from A10's product last year. The jury rejected Brocade's claim that A10's current source code infringed Brocade's copyright. None of A10's employees was found liable for any of Brocade's intellectual property claims.

A10 will take all appropriate action to set aside the adverse verdict and to reverse the award of damages. A10 currently intends to seek judgment in its favor as a matter of law.

Lee Chen added: "We will take the appropriate legal actions, and continue to stand by our position that we do not infringe any of Brocade's intellectual property."

Tyler Wall, general counsel at Brocade, said after the verdict: "Brocade is grateful for the jury's service and close attention to the evidence. Brocade stands firm in its commitment to protect its intellectual property assets and our innovation."

The legal bill on A10's doorstep will be a useful input to Brocade's corporate wallet, if it gets it: $112m is roughly a fifth of a quarter's revenue and three times its last quarterly profit.

Can Lee Chen survive as A10 CEO, despite his fighting talk? He is the sole founder and so will have a lot of shares. A10 took in $23m of C-round funding in July 2008, taking total funding to $39m. The investors were Mitsui & Co. Ltd., Triton Ventures, H&Q/Asian Pacific, Harbinger Venture, Enspire Capital and CIDC. They will have board representation, probably collectively hold more shares than Chen, and could feasibly force Lee Chen's removal from the CEO chair - if A10 can't get this week's verdict and damages overturned. ®

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