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Cisco employees file countersuit in trade secret case

Former Lucent Technologies employees now working for the networking giant file a countersuit against their former employer this week, responding to charges from Lucent.

    It's getting ugly in the once-staid optical networking industry.

    Former Lucent Technologies employees now working for Cisco Systems filed a countersuit against their former employer this week, responding to charges Lucent made in a June complaint filed in U.S. District Court in Boston, Mass.

    The legal squabble centers on Cisco's strategy to enter the market for fiber-optic networking technology, a once esoteric niche of the communications industry that has blossomed as a means to deliver a lot of digital information quickly. As part of Cisco's effort, the company purchased an optical manufacturing facility in Salem, N.H., in May this year and hired several employees from rival Lucent, including a group of engineers now known in industry circles as the "Lucent 10."

    Separately, Ciena this week filed a patent infringement suit against start-up Corvis, a company preparing to go public in the coming weeks. The complaint alleges that Corvis infringed on three Ciena patents related to that company's optical networking technology. Corvis' founder and chief executive, David Huber, was also a founder of Ciena.

    These latest legal moves follow Nortel Networks' lawsuit against ONI Systems, filed in March, for alleged appropriation of trade secrets and infringing on Nortel patents.

    The lawsuits are a manifestation of two trends at work in the communications industry. First, communications network operators are in the early stages of what is expected to be a costly 20-year cycle to upgrade their networks to the latest technology, based largely on fiber optics. Second, as a result, companies that make equipment for those tasks are scrambling to find enough engineers to make a credible product in an ultra-competitive job market.

    "Because the stakes are getting higher in terms of market opportunity, the lawsuits are indicative of competition increasing," said analyst Raj Mehta of market research firm RHK.

    Some analysts say the flurry of legal action is simply a natural result of the current competitive environment and will likely fade away over time. "Poaching good talent is nothing new," said Martin Pykkonen, equities analyst with CIBC Oppenheimer. "(Lawsuits) are not going to derail somebody."

    Lucent filed the original suit to prevent its former employees from disclosing "proprietary information," according to a representative.

    In the counterclaim, the former Lucent employees denied they were solicited by Cisco to join the company and said they left for reasons including "Lucent's numerous business difficulties, questionable business practices and objectionable working environment," according to court documents filed yesterday.

    The employees' claims will likely turn up the heat in an already sweltering battle between Lucent, Cisco, Nortel and others for lucrative contracts with customers. Cisco hopes to gain market share in telecommunications equipment from the likes of Lucent and Nortel, expanding from its roots as a provider of networking technology to corporations.

    The counterclaim comes the same week that Lucent announced earnings and lowered forecasts for its coming quarters.

    The former Lucent employees are represented, in part, by a San Francisco law firm, Brobeck Phleger & Harrison. Lucent did not sue Cisco itself, but the former employees.

    But Cisco will pick up their new employees' legal tab, according to the company. "Cisco stands by its employees, and Cisco's agreed to pay for these employees' defense," said Kent Jenkins, a Cisco spokesman.

    "It's disappointing that Cisco would respond to Lucent's reasonable efforts to protect its trade secrets by making false allegations about Lucent's integrity. Lucent hasn't sued Cisco," said John Skalko, a Lucent spokesman. "Lucent has simply taken steps to ensure that certain former Lucent employees who now work for Cisco not be permitted to disclose trade secrets to their new employer."

    Corvis declined to comment on the Ciena suit, citing its pre-public offering "quiet period." Ciena said in a statement that it would "seek to protect and enforce its intellectual property rights and technology leadership on behalf of its shareholders."

    A hearing on a preliminary injunction in the Lucent case is scheduled for Monday, according to Lucent.'s Wylie Wong contributed to this report.