When Ericsson(s eric) bought Nortel’s wireless business in 2009 it instantly propelled itself to the top of the North American mobile infrastructure heap, largely because the deal exposed the Swedish vendor to the dominant network technology in the U.S., CDMA. But the CDMA portfolio Ericsson bought wasn’t entirely Nortel’s own. Rather than develop CDMA’s 3G component, EV-DO, internally, Nortel licensed the technology from radio specialist Airvana. Now Airvana is claiming that Ericsson is reneging on its licensing deal and is instead selling a “knock-off” version of its EV-DO technology to Verizon Wireless(s vz)(s vod), Sprint(s) and other CDMA operators.
Airvana is better known today as a femtocell technology company today, but its early pioneering work on EV-DO a decade ago caught the attention of Nortel, which was trailing behind its primary CDMA competitor Lucent Technologies in 3G development. The licensing agreement wound up being very lucrative for Airvana and effectively made Nortel its only customer.
According to Airvana’s lawsuit, filed today in a New York state court (pdf), Ericsson sought to renegotiate its licensing deals with Airvana shortly after the Nortel acquisition closed. Airvana didn’t want to come to new terms, and, according to the filing, Ericsson soon started developing an “in-house” version of EV-DO to sell to its new CDMA customers, all of whom were experiencing huge surges in mobile data demand. In late 2011, Airvana said, Ericsson revealed that it had designed its own EV-DO products in collaboration with LG and planned to start testing them in Sprint’s network this year. But Airvana claims that’s all a front, and that the new EV-DO platform is a thinly veiled version of Airvana’s own product software developed from its source code. Airvana is asking for $330 million in damages and demanding Ericsson stop selling its new EV-DO product line.
We reached out to Ericsson for a response, and spokeswoman Kathy Egan Wummer said that while she could not speak directly on the lawsuit, Ericsson wouldn’t be backing off any of its current or future customer contracts to deploy EV-DO gear:
“We are aware that Airvana has initiated legal proceedings against Ericson. While we will not comment on ongoing litigation, we can say that we are committed to supporting our customers and will take appropriate action to protect both their interests and those of Ericsson. Accordingly, we will vigorously defend our right to deploy the Ericsson EV-DO Global System in customer networks according to existing commitments.”
There’s no way to know whether the lawsuit presents a serious threat to Ericsson. But if it does, it puts the vendor in a tough position since the 3G market is in astate of flux. It needs EV-DO technology today to meet current 3G network demands, driven by devices like the iPhone(s aapl). But EV-DO sales will soon start petering off as operators move to LTE. Operators certainly won’t shut down their EV-DO networks when LTE arrives, but they will stop adding 3G capacity.
Image courtesy of Nikhil Verma