QPSX to take court action over alleged Ericsson breach

"It is now in the hands of the lawyers," Graham Griffiths, QPSX chief executive officer, said today after announcing the company has issued a notice of breach of contract to Ericsson over aspects of a licensing deal involving technology used in asynchronous transfer mode (ATM) networks. QPSX, an Australian Stock Exchange-listed technology commercialisation company, said the notice related to the provision of royalty statements and other matters.

"It is now in the hands of the lawyers," Graham Griffiths, QPSX chief executive officer, said today after announcing the company has issued a notice of breach of contract to Ericsson over aspects of a licensing deal involving technology used in asynchronous transfer mode (ATM) networks.

QPSX, an Australian Stock Exchange-listed technology commercialisation company, said the notice related to the provision of royalty statements and other matters.

QPSX said Ericsson had not remedied the breach, forcing the commercialisation company to initiate proceedings in the Federal Court of Australia, seeking, amongst other things, a declaration as to the interpretation of the agreement, specific performance of the agreement and damages in respect of the breaches of the agreement.

The agreement grants to Ericsson a non-exclusive license to QPSX's patented Segmentation and Reassembly (SAR) Technology, which is used in Asynchronous Transfer Mode (ATM) networks.

Ericsson does not dispute the validity of the existing agreement. However, Ericsson's interpretation of the contract is different from that of QPSX. Ericsson now interprets the agreement as not applying to its entire global ATM Product portfolio. QPSX and its legal counsel Mallesons Stephen Jaques consider that the wording of the agreement does not support Ericsson's view.

The agreement executed with Ericsson grants to Ericsson a non-exclusive licence to use the QPSX Patents "to manufacture all ATM Products and sell or use those products globally". The term ATM Products is defined in the agreement to mean "products that incorporate QPSX Technology in the whole or in part and/or comply with AAL5 (compliance with which ATM Standard requires the use of the QPSX Patents)". The QPSX patents expire in 2008/2009.

QPSX has requested Ericsson to comply with its obligations under the agreement and to provide quarterly royalty statements, which may not clarify the proportion of the total Multi-Service Networks products made or sold by Ericsson that implements the AAL5 protocol.

These royalty statements are likely to reflect Ericsson's views as to the scope of the agreement and as a consequence, until resolution of the dispute, QPSX will not be in a position to comment on the financial impact of the agreement. Griffiths however emphasises that the financial damage is substantial since the contract with Ericsson is a major one.

Griffith is expecting the court proceedings to start within a month. This after the series of "serious negotiations" with Ericsson since last year failed to satisfy both parties.

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