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Court says startup swiped IP for high-frequency trading tech

Zeptonics zapped by Australian court

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Zeptonics, the Australian company that last year promoted the “world's fastest switch”, has suffered a legal reversal after Australia's Federal Court decided some of the the company's technology, namely that used in its ZeptoLink, ZeptoNIC, ZeptoAccess KRX and Crosswise ATS products, was not its own.

The case of Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458, decided this week, found that Zeptonics' founder Matthew Hurd, who previously worked at Zomojo, used Zomojo technology to create Zeptonics' products.

The judgement includes some stinging criticism of Hurd, with Justice Gordon writing he “ … set out on a covert course of conduct that was nothing more than a flagrant and deplorable attempt to appropriate benefits for himself which were properly those of his employer.”

The judgement also offers this assessment (at clause 7) of the key questions in the case:

“ Did Hurd breach the Service Agreement, one or more of ss 181(1) and 183(1) of the Corporations Act 2001(Cth) (the Corporations Act) and his duties of fidelity and good faith to Zomojo? The answer is yes.”

Zomojo's director and co-founder Dr Greg Robinson has said, in a statement, that “We are pleased the Federal Court has clarified these matters in such a clear cut decision, and hope we can now put this disappointing saga behind us. ”

The case is offers a fascinating insight into the opportunities on offer in the market for super-fast technology to enable high-frequency securities trading (HFT). Practitioners of HFT simply cannot tolerate the latency offered by conventional networking kit, as a few milliseconds' delay can be the difference between a profitable trade and an unwelcome loss. Traders happily pay for kit that helps them to compete more rapidly and effectively.

Zomojo and Zeptonics both targeted the HFT market and the case came about because Zomojo's chance of doing so successfully was made harder by Zeptonics' entry to the market with the four products mentioned above.

The ZeptoMux, billed as the world's fastest switch, is not the subject of any orders.

The Reg understands Zeptonics has manufactured a batch of 50 of the switches, some of which are in testing or production. Some are operating without their nameplates, as their users wished to maintain secrecy about just what gives them tiny trading advantages. ®

Update

Zeptonics has sent The Reg a statement that says, in part "We are complying with the court orders but believe there are substantial grounds for appeal, which we are currently exploring."

"Zeptonics takes pride in our integrity, people, processes and technology and will continue to do so."

The statement also points out that "ZeptoMux, the world’s fastest switching device at 130ns, is acknowledged to be the work of Zeptonics and is not subject to any court orders."

"Our products are a result of the technical excellence of the Zeptonics team whose experience, skills and expertise are reflected through products that have been acknowledged and lauded not only by customers but also in a number of public forums such as trade shows, Tech23 and interactions with media," the statement continues, adding "Zeptonics’ innovative products are the result of starting from a clean slate and have cost millions of dollars to develop." ®

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