News

Cisco sues Chinese company; alleges IOS copying

• By John K. Waters
• January 29, 2003

Cisco Systems is suing a Chinese technology company for allegedly stealing its software, a move officials say is the first of its kind for Cisco.

The San Jose, Calif.-based network equipment maker filed suit last week in U.S. District Court in Marshall, Texas, charging that China's Huawei Technologies unlawfully copied the source code of Cisco's Internet Operating System (IOS). Cisco also charged that Huawei copied portions of copyrighted technical manuals and included them in its own user manuals. Cisco is seeking injunctions to block the manufacture and sale of Huawei equipment, as well as triple damages.

Cisco is suing Huawei Technologies and its subsidiaries, Huawei America Inc. and FutureWei Technologies Inc. Cisco filed the lawsuit in Texas because Huawei America is based in Plano.

Cisco is the network-computing industry's leading router maker, commanding roughly 70% of the market. Cisco routers are widely used on the Internet and in corporate intranets, and the IOS is the primary control program used in most of that hardware.

The IOS is considered to be an extremely powerful and complex operating system, with an equally complex configuration language. Cisco is charging that Huawei included the IOS code in the operating system for its Quidway routers and switches. Huawei's operating system contains a number of text strings, file names and even bugs that are identical to those found in the IOS source code, Cisco alleges.

Huawei is China's largest telecom equipment maker and Cisco's best-known competitor in Asia. Founded in 1988, the company expanded into computer-networking gear in recent years. Huawei is challenging Cisco's dominance in the East by offering similar internetworking equipment at much lower prices. The company's customer list includes China Telecom, China Mobile, China Unicom, China Netcom Thai AIS, South Korea Telecom, SingTel, Hutchison Global Crossing, PCCW and Brazil's Telemar, among others. Huawei reported sales last year of $2.7 billion, down 12% from a year earlier.

Mark Chandler, Cisco's general counsel, said in a statement that the lawsuit is a first for Cisco. ''Cisco's technological leadership is the result of significant investment in research and development, and it is Cisco's responsibility to protect its intellectual property,'' Chandler said. ''Cisco does not take any legal action lightly. However, Huawei has unlawfully copied Cisco's intellectual property and refused Cisco's numerous attempts to resolve these issues. As a result, Cisco has no choice but to protect its technology and the interests of its shareholders through legal action.''

A source inside the company told eADT that Cisco complained to Huawei about the alleged misappropriation of its intellectual property last year after hearing about similarities between the two companies' products from customers. Cisco had been in talks with its Chinese competitor for months before filing the lawsuit. After making numerous attempts to resolve the dispute, management felt it had no choice but to sue, the source said.

Cisco said it has also sent a cease-and-desist letter to Spot Distribution in the United Kingdom. Spot is distributing the Huawei products that Cisco claims infringe on its intellectual property rights.

Huawei has denied charges of technology theft in the past, claiming that it is too busy with its own research and development. The company's Web site proclaims that 46% of its 22,000 employees are engaged in R&D. Numerous calls to Huawei's Western offices in Santa Clara, Calif., were not returned by press time.