Jury finds Avaya manipulated market for its own software patches

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Can a provider of telecom equipment control third parties’ access to its intellectual property to such an extent that it directly manipulates the repair market for that equipment, perhaps to the point of monopoly? This has been one of the key issues in an eight-year battle between equipment maker Avaya and a repair service provider now called Continuant.

A federal district court jury in Camden, New Jersey, awarded Continuant $20 million in part of a lawsuit brought on by Avaya to stop Continuant from repairing its equipment without authorization. That jury found that Avaya tied the issuance of patches to its equipment’s software to post-warranty maintenance contracts, which excluded repair services from acquiring those patches elsewhere.

It’s difficult to argue that a manufacturer does not have the right to designate and authorize exclusive, warrantied repair facilities. Avaya is the license holder for telephony equipment software including patents dating back to the days of Western Electric, patents passed down to successor company Lucent Technologies, and then transferred to Avaya after Lucent’s merger with Alcatel. Needless to say, Avaya owns a chunk of one of the most prized intellectual property portfolios in history, and some of that portfolio pertains to the software that supports its platforms.

As Avaya explained in its original 2006 complaint, it provides diagnostic and repair software to its authorized repair facilities, and to its customers, through a direct channel into a private network–specifically, not over the Internet. Continuant’s predecessor company, called TLI, was one of those facilities. It had logged into the private network to receive software patches. Avaya alleged that, after it discontinued authorization for TLI, it continued to log into that private network, download patches, and then distribute them to its own customers.

With its countersuit since that time, Continuant has been fighting a somewhat public battle against Avaya, casting itself in the David role against Goliath, and garnering the support of the Association of Service and Computer Dealers International. That campaign prompted Avaya to post public warnings about so-called “unauthorized maintenance providers (UMP)” (.pdf). One of those warnings reads, in part, “Avaya maintenance agreements ensure your enterprise will always have access to the latest software patches, and you’ll avoid software audits of your Avaya infrastructure.”

There’s an obvious carrot and stick present in that statement, and it may very well have sullied what would otherwise have been a clear victory for Avaya.

The jury’s verdicts, delivered Thursday, were actually mostly in Avaya’s favor, and reading the list from the beginning might make one think Avaya had reason to celebrate. Did Avaya monopolize the post-warranty PBX maintenance market? The jury said no. Is there a competitive market–absent the presence of a monopoly player–in patches for Avaya PBXes? No, said the jury.

Did Avaya conspire to retrain trade in post-warranty PBX maintenance? No. Did Avaya monopolize the maintenance market for Avaya-brand PDS dialers? Again, no. Did it attempt to monopolize that market? No.

Could there be a competitive market for patches for PDS dialers? Here, the jury said yes. Did Avaya tie the availability of those patches to purchases of post-warranty maintenance contracts? Yes, said the jury. And that’s where Continuant suffered, by the jury’s estimate, $20 million in damages.

In the face of a contrasting verdict for PBX patches, it’s difficult to say a precedent could be set here. Conceivably, it could be taken to mean that a manufacturer’s responsibility to distribute software patches for its own equipment extends beyond its rights to intellectual property, in certain cases. Such a discussion would probably be heard during an appeal. For its part, Avaya had yet to release a statement by press time.

For more:
– read The News Tribune article
– download the Avaya intellectual property doc (.pdf)

By Jarrett Neil Ridlinghafer 
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