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Friday, October 03, 2003

Trying to Stay on Top

So Huawei and Cisco have reached an agreement. It's hard to see who will be the main beneficiary here. In the short term it's a victory for Cisco, but at the price of seeing Huawei coming out of China to offer competition. Presumeably later, as Huawei gets its own market share, a clearer identity and more experience it will develop its own legitimate products and then will really be able to comptete. This is another of the details about patents, they sometimes only offer limited protection when a rival has sufficent resources and determination to get round the problem.

won a victory in its battle over technology piracy claims on Wednesday when Huawei, the emerging giant of the Chinese communications equipment business, agreed to modify some of its products. The legal fight is the most prominent recent dispute over intellectual property rights involving the fast-growing Chinese technology industry.

For Cisco, protecting its technology has become increasingly important as Huawei has moved beyond the domestic market to sell switches and router equipment in North America and Europe. The companies said that Huawei had "voluntarily made changes to certain of its router and switch products". The changes will be reviewed by an independent expert. If the changes are accepted by the independent expert, the two sides said they expected the legal action to end.

Cisco had accused the Chinese company of "systematic and wholesale infringement" of its intellectual property, including copying parts of the source code underlying the software that operates its routers. It also claimed that Huawei had gone as far as lifting some passages from its product manuals verbatim. Resolving the legal dispute could free Huawei to compete far more aggressively in overseas markets. It has agreed a partnership with 3Com, the US networking equipment company, to produce and sell equipment jointly.

A preliminary court injunction in the Cisco case has limited Huawei's international expansion. The injunction prohibited the Chinese company from selling products worldwide that included source code that infringed a protocol developed by Cisco. Huawei was also forbidden to let engineers who had seen the Cisco code work on developing a rival version and was ordered to stop distributing user man- uals and online help pages in the US. Wednesday's agreement with Cisco goes much further, blocking any global sales of Huawei products that infringe on Cisco's intellectual property. Huawei has agreed to sell only products that have been amended to deal with the Cisco complaint. The changes that will be submitted for independent review cover amendments to part of Huawei's source code, user manuals and online help screens.

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