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WideBand Solutions, Biamp Systems to Appeal Ruling in ClearOne Trade Secret Misappropriation Case

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April 24, 2009

WideBand Solutions, Biamp Systems to Appeal Ruling in ClearOne Trade Secret Misappropriation Case

By Patrick Barnard
Senior Web Editor, TMCnet
WideBand Solutions and Biamp Systems, both providers of audio conferencing solutions, have announced that they have decided to appeal a decision handed down in federal court in Utah that the two companies misappropriated trade secrets belonging to audio conferencing solutions company ClearOne.

Earlier this week a federal circuit court in Salt Lake City awarded ClearOne with approximately $9.7 million in damages as part of its trade secret misappropriation case against WideBand (News - Alert) Solutions and Biamp Systems, which was first filed in 2007. In addition the court granted a permanent injunction prohibiting WideBand from using and/or selling ClearOne’s (News - Alert) proprietary telephony code and other products.

Last November a federal jury ruled in favor of ClearOne’s claim that three men working for WideBand Solutions, including a former ClearOne employee, had “willfully and maliciously” stolen ClearOne's trade secrets and used them for financial gain.

According to a press release from ClearOne, Biamp was named in the case because it bought signaling technology from WideBand that was based in part on ClearOne’s “Honeybee code,” even though officials at Biamp knew that the technology was not WideBand’s to sell.

The ruling names three of WideBand's principals, Dr. Jun Yang (a former ClearOne employee), Andrew Chiang (previously affiliated with an entity that sold certain assets to ClearOne), and Lonny Bowers. Also named is a company owned primarily by Yang called Versatile DSP, Inc.
In a statement posted on its Website, WideBand officials announced that they intend to appeal the court’s decision. They claim the press release issued by ClearOne earlier this week “failed to reveal a significant part of the most recent court order.”

“In the court’s findings, the judge wrote as part of the order that WideBand could not use, ‘the Honeybee Code (including its unique algorithms or sub-algorithms that are not in the public domain).’ This is significant in that we have continually stated that our products do not use any attributes of the Honeybee Code that are not in the public domain,” officials say in the statement. “Additionally, it has always been our position that our products have never used the antiquated Honeybee Code used in the IS Speakerphone and, in fact, we have been steadfast in the position that all attributes of the Honeybee Code are in the public domain.”

Officials go on to reassure customers that WideBand “is not shipping any products that would disregard this latest ruling.”

Meanwhile, in a press release from Biamp Systems, company officials claim they “had no knowledge of any misappropriation of the ClearOne Communications code,” and will immediately file an appeal.

“Biamp has a long history of continuous innovation. This can be seen in all our products, including our proprietary TrueSound AEC algorithm,” said Ralph Lockhart, president, Biamp Systems. “As a company we would not, nor do we need to, resort to misappropriation of intellectual property to advance our technologies or gain market share.”

Officials at Biamp claim the judgment “does not affect any of Biamp’s products or technologies including the Biamp TrueSound AEC algorithm used in Biamp conferencing products including AudiaFLEX, NexiaTC and NexiaVC.”
In a release issued earlier this month, officials at Biamp claim the company “has not sold or marketed products with the accused WideBand code since 2006, and had stopped using it before the lawsuit was ever filed.” They also claim that Biamp never possessed or had access to the source code for the AEC algorithm.

“Since 2006, all of Biamp’s products have contained its own code, which Biamp developed internally,” the release states. Biamp officials claim the injunction will have no impact on the company’s operations.

“ClearOne has pursued a communications strategy which portrays Biamp as the primary target in the case, and misleads the public about Biamp’s role in this lawsuit,” Lockhart said. “Biamp believes this is a desperate attempt to create confusion in the marketplace, and in the minds of our customers. For our company, it is important to clearly communicate the facts.”
“This injunction does not affect any of Biamp’s existing products, and does not have any implications for our past or current customers,” he added. “We maintain our innocence, and continue to stay focused on technological innovation, and supporting our customers, regardless of ClearOne’s actions.”

As per the ClearOne press release, the court found that Biamp earned over $1.5 million “by purchasing the WideBand technology at half the price offered by ClearOne and then selling the technology at the same price it charged when dealing with ClearOne.”

Apparently the court wanted to make an example out of Biamp in order to send a message deterring other companies from engaging in similar conduct.

In addition to the two companies, the court also ordered each of the individual defendants to pay damages, as there was “evidence of deliberate copying” of ClearOne's trade secrets. Specifically, the secret elements of ClearOne’s Honeybee Code were found on the defendants’ computers at WideBand’s offices. There was also evidence that the defendants tried to hide the code after it had been discovered.

The injunction, which was expanded by the court in February, specifically prohibits WideBand from using or selling “(a) the AEC2w object code licensed to Biamp, (b) the computer code licensed to Harman Music Group, Inc. that was the subject of an October 30, 2008 preliminary injunction order, (c) WideBand’s FC101 product, (d) WideBand’s WC301 product, (e) WideBand’s WC301A product, and (f) WideBand’s Simphonix product” because each of these products utilizes elements of the Honeybee code in some way, shape or form. What’s more the company can no longer continue to use the brand names that were associated with those products.

ClearOne, which was represented by the Utah law firm of Magleby & Greenwood, P.C., says it intends to request an additional award to cover the cost of its legal fees.

Patrick Barnard is a contributing writer for TMCnet. To read more of Patrick’s articles, please visit his columnist page.

Edited by Patrick Barnard

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