Brocade, McData Smoke'um Peacepipe

Rival SAN switchmakers Brocade Communications Systems Inc. (Nasdaq: BRCD) and McData Corp. (Nasdaq: MCDTA) have called a halt to a longstanding patent dispute. But it's not clear whether the truce will last.

In a document filed with the Securities and Exchange Commission (SEC) today, McData says it's struck a confidential agreement with Brocade in which the two companies will dismiss claims in a civil suit that's been ongoing in U.S. District Court in Colorado since February 2002. Terms include a three-year "standstill" in patent litigation by both sides. No patent licensing is involved.

Is all forgiven and forgotten? While current claims have been dropped, the filing makes it clear that litigation will halt for three years. After that, it's technically possible that issues could resurface.

The technology market in general is fraught with patent litigation, and storage networking has its full share. At least one expert says he sees no letup in the volume of suits and countersuits. "Things have been heating up more very recently, within the last half year. Before that, the trend seemed to be toward settling," says Brian Johnson, an attorney with the Cleveland-based firm of Calfee, Halter & Griswold.

Johnson says he can't say whether the upswing in technology litigation mirrors the macroeconomic situation, but it's a possibility. "Before the bubble burst, no one was settling. Then they had no money to support ligitation." The recent market uptick could be giving companies the resources to follow through.The McData/Brocade suit started when McData filed a motion against Brocade, claiming Brocade's SilkWorm 3800 and SilkWorm 12000 switches infringed on McData's U.S. Patent number 6,233,236, which defines "Method and Apparatus for Measuring Traffic Within a Switch."

The disagreement centered on an OEM deal Brocade and McData struck in 1999, which apparently covered a number of technologies owned by both companies. Brocade maintained the technology in question, which has to do with frame filtering on SAN switches, was covered under the agreement, but McData disagreed (see McData Fires Lawsuit at Brocade, McData vs. Brocade: Ding Ding!, and Brocade 1, McData 0). The legal volleying included counter-charges by Brocade that McData "misappropriated trade secret information."

No one seems to recall exactly why Brocade and McData, longstanding rivals in the Fibre Channel switch market, would draw up a cross-licensing agreement in the first place. Spokespeople for both companies have no comment, as the new agreement apparently binds them to secrecy.

Neither McData, which holds 37 patents, nor Brocade, with three, is a stranger to patent litigation. Both were sued last year by Raytheon Co. (see doclink 27278}), and both have settled their respective disputes. Brocade also has been sued by Vixel Corp. (Nasdaq: VIXL), and the process is still in the early stages (see Vixel Slings Suit at Brocade).

Mary Jander, Site Editor, Byte and Switch0