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Ericsson slapped with preliminary injunction in Airvana trade-secrets suit

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Airvana Network Solutions scored a victory in its $330 million trade-secrets lawsuit against Ericsson (NASDAQ:ERIC), winning a preliminary injunction barring the Swedish infrastructure vendor "from using, operating, testing or deploying certain Airvana-based EV-DO hardware unless it is executing software that is licensed from Airvana."

Airvana is better known today for making femtocells, but it was a pioneer in EV-DO networking technology. Its lawsuit dates back more than a year, to Feb. 8, 2012, and concerns Ericsson's sale of EV-DO hardware based on Airvana designs. Airvana alleged breach of contract, trade secret misappropriation and unfair competition in the suit.

In a 41-page ruling issued on March 19, New York State Supreme Court Justice Barbara Kapnick in Manhattan ruled that Airvana had demonstrated "a likelihood of success on the merits" in its claim for breach of contract.

"When we filed this action against Ericsson last year we did so very reluctantly, and only because we felt that Ericsson's actions threatened Airvana with irreparable harm and left us no choice but to try to defend our rights through legal proceedings," said Randy Battat, CEO of Massachusetts-based Airvana.

In its original 72-page legal complaint, Airvana accused Ericsson of violating terms of a deal that required Ericsson to ship Airvana-designed products with Airvana's software, on which Ericsson would pay royalties. Airvana alleged that Ericsson tried to work around that arrangement by collaborating with South Korea's LG on a knock-off version of the software to ship with Airvana's hardware, giving it leeway to avoid making royalty payments to Airvana.

Kapnick's ruling indicated she did not accept Ericsson's contention that it had modified Airvana's designs to the point where the new hardware was no longer based on Airvana's design, Reuters reported.

Airvana also alleged in its original filing that Ericsson intended to sell a competing EV-DO hardware product Ericsson made in-house using software it developed with LG. The court will conduct a separate, related hearing in April on a second preliminary injunction motion filed by Airvana against Ericsson related to that product, the Digital Baseband Advanced (DBA), which is marketed and sold by Ericsson.

As with the EV-DO products that are subject to this week's ruling, Airvana contends the DBA product is also based on Airvana's hardware design. The company is asking the court for the same relief ordered this week, which would enjoin Ericsson using, operating, testing or deploying the DBA without Airvana-licensed software.

Ericsson spokeswoman Kathy Egan told Reuters the company is "in the process of reviewing the court's decision."

Airvana's EV-DO hardware and software licensing arrangement was originally brokered with Nortel Networks. However, Ericsson purchased Nortel's North American CDMA and LTE business in 2009 after Nortel filed for bankruptcy and inherited the deal with Airvana.

Battat said last year that Airvana calculated the $330 million it is seeking in damages based upon years of discounts the company gave Ericsson.

For more:
- see this Airvana release
- see this Reuters article
- see this Bloomberg article

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