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November 29, 1995

BAY AND 3COM SETTLE DIFFERENCES WITH PATENT CROSS-LICENCE PACT

By CBR Staff Writer

Bay Networks Inc, San Jose and Santa Clara-based 3Com Corp have settled their long-standing dispute over patents, and, deciding that they are not in business simply to enrich lawyers, have taken the only step that makes sense for large companies and signed a co-operative mutual patent licence agreement, which will run for the next five years. The dispute dates back to March 1993, when 3Com filed a lawsuit against SynOptics Communications Inc – as it was prior to the merger with Wellfleet Communications Inc that formed Bay – alleging that SynOptics had infringed its patent covering repeater technology for secured local networks. SynOptics subsequently countersued, alleging that 3Com had itself infringed a topology-related network management patent, and another covering Asynchronous Transfer Mode technologies. The issue was finally resolved last September, when the companies mutually agreed to drop the suits: following this, they began to discuss formalising the arrangement for the future, and discussions culminated in the five-year mutual patent cross-licence agreement. Under the terms of this deal, both companies will have access to each others’ current and future patents for the next five years. Any patents taken over as a result of either Bay or 3Com acquiring another company will also be covered. In addition, a royalty agreement has been incorporated, under which cross-royalty payments will be based on publicly reported research and development costs, although the total amount to be paid by either company over the five years cannot exceed $12m. Both Bay and 3Com say that they agreed the deal because it enabled them to get on with business without worrying about potential patent infringements. They further say that they are not worried about losing their competitive edge by giving a rival access to their patents: 3Com’s vice-president, general counsel and corporate secretary Mark Michael commented that, while Bay will gain access to the patents, they’re not being given the technology – the code, the ASIC, what have you. They may not even be in a position to capitalise on the patents. 3Com says it now has more than 120 patents awarded or pending, of which 25 were acquired with the takeover of Chipcom Corp.

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