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October 28, 1999

Nortel Sues Optical for Poaching Staff, Trade Secrets

By CBR Staff Writer

Nortel Networks Inc will appear in court today to seek an injunction against Optical Networks Inc for poaching 19 of its specialist engineers, claiming Optical networks is trying to steal Nortel technology. Nortel is accusing Optical Networks of: systematically tapping into Nortel Networks organization and raiding its resources in order to gain access to trade secrets and other confidential information. According to a Nortel spokesperson the engineers have broken non-disclosure agreements signed while at Nortel.

The technology in question is Nortel’s dense wavelength division multiplexing technology (DWDM) used in its OpteraMetro switch which is deployed to direct large amounts of traffic through metropolitan networks. This technology is believed to be the next wave of infrastructure equipment that will be used to support the internet.

This is a brazen attempt to take advantage of the millions of dollars of investment that we have put into developing this technology, said the Nortel spokesperson. He added that although DWDM technology is now standardized, Nortel’s use of this technology within its products is proprietary and is what makes these products perform with the capability that they do. Nortel is seeking the injunction to prevent the former Nortel engineers from disclosing any more of Nortel trade secrets and to stop Optical Networks from poaching its staff. Optical Networks refused to comment on the story.

In a separate announcement, Nortel’s parent company, BCE Inc, Canada’s biggest telecommunications conglomerate, posted strong results in its third quarter but said it might consider spinning off a strong contributor to its bottom line – affiliate Nortel Networks.

In a telephone conference call, BCE President and CEO Jean Monty said the high discount on the conglomerate’s share price has been a hot topic with investors who have been wondering whether it would help to spin off 41%-owned Nortel, one of the world’s biggest telecom equipment makers. If the discount is not reduced over time by the operational initiatives that I have just referred to, we might consider structural changes to the group, including the possible spin out of Nortel, Monty told analysts in a conference call.

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