Emulex Faces Patent Infringement Lawsuit
Emulex Corp.’s most crucial business link, Digital Equipment Corp., has filed suit against the Costa Mesa-based company claiming patent infringement.
The suit, filed Friday in U.S. District Court in New Hampshire, seeks an injunction against Emulex’s marketing and selling of disk controllers--devices that allow computers to “talk” to one another--compatible with certain Digital computer systems.
It also asks for unspecified damages in lost sales that a Digital spokeswoman estimated could be “in the millions.” Emulex is a leading manufacturer of components compatible with Digital computers.
“We’re very aggressively protecting our patents,” said Mary Ann Burek, a spokeswoman for Digital in Maynard, Mass. “They (Emulex) have used our patent to make their disk controllers work,” she said. Digital is ranked second to IBM in worldwide manufacturing of computer systems and posted net income of $328 million in fiscal 1984 on operating revenues of $5.6 billion.
According to one analyst, the suit represents a new aggressive stance for Digital. In the last year, Digital has sued two Japanese makers of computer terminals for alleged patent infringement.
“As sales are dropping off throughout the market, companies are looking for any way they can to leverage more sales,” said Jim Renalds, an analyst with Dataquest, a marketing-research firm in San Jose. “You can expect these claims to continue as competition heats up.” The lawsuit also comes just weeks after Emulex hired two former Digital executives--Bill Mathrani, as a vice president in the storage-products unit, and Stan Reese, as vice president in the communications-products unit. Emulex says the hirings were part of a corporate reorganization that divided the company into three divisions.
Emulex has two major divisions that make products compatible with Digital mainframes. A third division, bought last year, makes products compatible with IBM hardware. That division, Personal Systems Technology, helped Emulex diversify into what the company describes as “lower-cost, higher-volume product lines.”
Emulex Chairman Fred Cox and President Stephen Frankel both declined comment on the lawsuit. “We have no direct knowledge of such a lawsuit,” said Jennifer Heinly, public relations administrator for Emulex. She said there would be no comment on a suit until it had been reviewed by the company’s attorneys.
Emulex has recently been hit with declining profits. For the third quarter of fiscal 1985, the company reported a 48% drop in net income to $1.7 million from $3.3 million during the year-ago quarter. Company officials said the earnings drop resulted from inventory “adjustments,” when the company phased out $1 million in outdated inventory.
Emulex, which employs 850 worldwide--about 600 in Orange County--has kept its payroll steady in 1985 and has no plans for layoffs, Heinly said.
