© 2015 The Texas Lawbook.
By Jeff Bounds
A Plano maker of telecommunications equipment last week scored an $8.16 million patent infringement verdict against a rival – and, perhaps more importantly, has set itself up to potentially eliminate some of its competitor’s technology products from the market.
An eight-person jury in Marshall deliberated about three and a half hours before handing Genband US LLC the victory on Friday, Jan. 15, over London-based Metaswitch Networks. In addition to ruling that Metaswitch had infringed on seven Genband patents, the panel also rejected Metaswitch’s claims that parts or all of those patents were invalid.
“This case addressed widespread infringement by one competitor of another competitor’s patented technology,” said Doug Kubehl, a Dallas-based partner at Baker Botts who led Genband’s legal team. “It provided a unique opportunity for Genband to address several significant infringement issues in a single case. The jury awarded damages consistent with Genband’s request.”
But the real dagger could potentially be yet to come.
Scuttlebutt at the Marshall courthouse held that Genband’s real goal was securing a permanent injunction, which could potentially remove some of Metaswitch’s competing technology from the market entirely, according to Michael Smith, a Marshall-based partner at Siebman, Burg, Phillips & Smith who was not involved in the case.
Kubehl declined to comment about that, noting that U.S. District Judge Rodney Gilstrap, who oversaw the litigation, has yet to set a schedule for motions and other post-trial matters.
Smith noted that injunctions can be more important than the monetary damages a jury awards a patent plaintiff.
In 1999, for instance, Dallas-based Texas Instruments won a $25.2 million infringement verdict in East Texas against the South Korean automotive giant, Hyundai.
TI used that verdict as a springboard to seek an injunction against Hyundai, Smith noted. The case settled before an injunction could materialize.
But the prospect of an injunction “helped translate into a $1.5 billion, five-year cross-licensing deal,” said Smith, who was part of TI’s trial team.
TI’s dispute with Hyundai stemmed from a dispute about an existing cross-licensing transaction between the companies, which are not competitors.
“Here, Genband probably doesn’t want to offer a license,” Smith said. “They likely want the injunction to get the competitor to stop making its product.”
In a statement on the Metaswitch web site, the company’s CEO, Martin Lund, said the business “intends to challenge the jury’s verdict in further proceedings in the district court and, if necessary, on appeal.”
The jury’s decision will not have a significant impact on Metaswitch, Lund’s statement says.
“The verdict in no way affects Metaswitch’s operational or financial stability, its commitment to continued innovation, or the ongoing development of, and support for, its products,” the statement said.
As is common with patent disputes in the telecommunications industry, Metaswitch responded to the infringement suit that Genband launched in January 2014 by suing the Plano company in March of that year.
Metaswitch’s infringement case is set for trial starting Monday, March 14, before Judge Gilstrap in Marshall.
Kubehl is the lead attorney on that case for Genband, court records show.
Charles Verhoeven, a partner in the San Francisco office of Quinn Emanuel Urquhart & Sullivan, is leading Metaswitch’s trial team in that case, court records say. Neither he nor fellow Quinn Emanuel partner Kevin A. Smith – who was in charge of Metaswitch’s defense in last week’s trial – responded to an email seeking comment.
Phone calls over the Internet
Broadly speaking, the Genband patents in dispute at last week’s trial covered inventions that allow consumers and businesses to make phone calls over the Internet, a type of technology called “voice over Internet Protocol,” or “voice over IP.”
A pair of the Genband patents in question covered features of the company’s first product, a system that helped bridge old phone networks, – which moved calls over copper wires, – and the Internet, which sends data over fiber-optics. That type of system is called a “media gateway.”
“Genband still sells that product, which is now called the G6,” Kubehl said. “It is very unusual in this space for a product to really stand the test of time.”
Other Genband intellectual property in dispute at the trial covered two broad types of technologies, according to Kubehl:
• “Softswitches,” which in this case bring calling features from traditional phone networks, such as 1-800 calls, to calls made on the Internet;
• “Session border controller,” which protect a company’s internal network from outside security threats.
Genband is a rare survivor of the boom that hit the Texas telecommunications equipment industry in the late 1990s.
Founded in Austin in 1999 under the name General Bandwidth, the company encountered tough sledding when the bust set in during early part of the last decade.
Companies that supply calling and data services were supposed to be General Bandwidth’s customer base, but their spending on their networks went off a cliff. So did the venture capital that had been so plentiful during the telecommunications bubble.
After getting new leadership in 2004, General Bandwidth changed its name to Genband, moved its headquarters to North Texas and forged a series of acquisitions and partnerships over the succeeding years.
Today, the company is a major player in its field. It has customers in more than 80 countries and annual revenue of nearly $1 billion, according to CNBC, which in May 2015 ranked Genband 22nd in a list of “most disruptive” businesses.
Under the stewardship of David Walsh, who was named president, chairman and CEO in 2013, Genband is a majority-owned subsidiary of JPMorgan Chase, according to the Genband web site.
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