The conclusion of the Cisco case, filed in January 2003, followed a 10-month review in which a neutral third party verified that Huawei’s modified products did not infringe Cisco’s intellectual property rights.
The case was one of several in recent years that highlighted growing concerns about corporate espionage in Silicon Valley. A spate of cases involving Chinese nationals and companies raised particular concerns about China’s role in the theft of US technology.
But Beijing has made a show of stepping up enforcement of IP rights since China joined the WTO. Cisco said on several occasions that the Chinese authorities were receptive to its concerns.
The two companies make routers and switches that manage and direct the flow of data traffic over communications networks. While most of Huawei’s customers are telecoms companies, it has tried to boost sales to US corporate customers, a market dominated by Cisco.
Huawei, one of China’s most successful tech companies, last year formed a joint venture with 3Com, another Cisco rival, to help it break into that market.
Analysts expect that growing competition from low-cost network equipment makers such as Huawei will eventually put pressure on Cisco’s router and switch sales, which account for about 75 per cent of its total revenue. Cisco filed its lawsuit last year, alleging Huawei had engaged in a pattern of “blatant and systematic copying” of trade secrets that enabled the Chinese company to produce routers and switches that operated exactly like Cisco products but cost much less.
Huawei acknowledged it had inadvertently obtained a small amount of Cisco’s key source code and that the software had found its way into the Chinese company’s products. Huawei agreed to stop selling that equipment and to introduce modified products worldwide.
At the heart of the dispute were allegations by Cisco that Huawei had misappropriated portions of the US company’s source code, the software that forms the basis for the operating system that manages its products.