Metaswitch Attacks Ribbon but Is Anybody Buying Ringside Seats?

By Shrey Fadia December 03, 2018

After losing sequential court battles against Ribbon Communications (News - Alert), Metaswitch took a different tack recently when it filed an anti-trust lawsuit against its competitor.

Metaswitch announced on November 19th, 2018 that it has filed an antitrust action that “could help ensure that tens of millions of Americans have access to cost effective and reliable upgrades of their fixed-line telephone networks.”

The wide-ranging lawsuit was brought in the United States District Court for the Southern District of New York against Ribbon, and shareholder JP Morgan (News - Alert) (NYSE: JPM), which owns directly or indirectly approximately 48 percent of the outstanding shares of Ribbon and has the right to designate five of Ribbon’s eight current directors, according to Ribbon’s most recent proxy filing.

Current Ribbon President, CEO and director, Franklin “Fritz” Hobbs, currently serves as a Senior Advisor at One Equity Partners, JPM’s former private equity unit.

In its press release, Metaswitch said, “Many U.S. and Canadian communities, especially those that are rural, currently rely on land-line telephone networks that need modernization in order to ensure the continuity of reliable service, including for critical emergency calls to police, fire departments and 911, as well as enable high-speed internet access.”

The company also called Ribbon its “only significant remaining competitor in the U.S. and Canada that competes to transform and modernize these land-line telephone networks for the use of VoIP, and alleges that Ribbon has aggressively consolidated the industry through serial acquisitions and is “illegally using exclusionary and deceptive tactics to eliminate its last major competitor in the market.”

The federal antitrust action is seeking treble damages from Ribbon for alleged violations of the Sherman Act, damages under the Lanham Act and various state statutes, as well as permanent injunctive relief seeking to prevent Ribbon from continuing its unlawful conduct. Metaswitch is requesting a jury trial and also seeking pre- and post-judgment interest and reimbursement of Metaswitch’s costs and expenses and attorneys’ fees.

One thing is for certain: the legal fees are mounting for both companies, and Ribbon sees the latest action by Metaswitch as a stalling tactic, given the damages the court found Metaswitch owes to Ribbon for the infringement of seven patents.

Ribbon originally filed a patent lawsuit against Metaswitch in 2014, and that suit resulted in a jury verdict finding that Metaswitch infringed seven Ribbon patents and owed damages to Ribbon. In a follow-on lawsuit, Ribbon contended that, despite the jury verdict, Metaswitch continued to use Ribbon’s patented technology and owed damages for that ongoing use.

Ribbon also contended in a separate lawsuit pending in Texas state court, that Metaswitch has been engaged in an orchestrated campaign to steal and use Ribbon’s trade secrets, with a trial set for next April.

In March 2018, Ribbon brought two other patent lawsuits based on what the company claims is Metaswitch’s unauthorized use of ten additional Ribbon patents.

A press release issued last week by Ribbon states the company “has and will continue to seek help from the courts to receive compensation for Metaswitch’s widespread use of Ribbon’s trade secrets and patented technology,” responding to this latest litigation tactic as one engineered to “try to avoid payment for its use of Ribbon’s intellectual property.”

Ribbon stated, “Metaswitch’s most recent lawsuit against Ribbon, under the guise of antitrust violations, attacks Ribbon for bringing suits to protect Ribbon intellectual property rights, even though the Supreme Court has made clear that such suits are protected by the First Amendment and immune from antitrust scrutiny.  Metaswitch’s lawsuit also rehashes allegations that it previously lost in federal court and complains of a Ribbon merger that the federal government already cleared from an antitrust perspective. Ribbon defeated Metaswitch’s claims in earlier cases, including Metaswitch’s claims alleging that Ribbon infringed Metaswitch patents, and Ribbon will vigorously defend itself against Metaswitch’s latest claims.”

Ribbon CEO Franklin Hobbs stated, “It is disappointing that Metaswitch is attempting to relitigate claims that it already lost in federal court. Ribbon will not be deterred by these actions, and we look forward to having Ribbon’s intellectual property rights vindicated and Metaswitch finally paying for its misappropriation of Ribbon technology.”

Metaswitch CEO Martin Lund stated in his company’s announcement, “this litigation seeks to ensure Americans’ access to desperately needed land-line network upgrades, particularly in rural areas where cellular service can be less reliable. If left unchecked, Ribbon will be free to raise prices for more than 700 local network operators who will have no choice but to either slow down much-needed upgrades or to pass on the impact of increased costs to consumers.”

Metaswitch’s complaint also alleges that after Metaswitch refused to be acquired by Ribbon in 2013, Ribbon launched an anticompetitive campaign to “kill Metaswitch” by “asserting certain intellectual property rights in bad faith and in contravention of royalty-free licensing obligations, systematically maligning Metaswitch to customers with false and misleading information, and coercing customers to choose Ribbon instead of Metaswitch with anticompetitive pricing practices, among other things.”

Where does healthy competition stop and anti-trust violations begin?

If history is any indication, Ribbon will likely prevail again in the courts, even as Metaswitch continues to try and fight back in the coming year or years ahead.

How do their customers feel about the sword rattling? Even as the technologies in real-time communications continue to change (virtualizing, becoming more open, and going more openly “over the top”), only time, the evolution of technology and networks, and the US justice system will tell.

Edited by Erik Linask
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