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SDL Settles with Spectra-Physics in Technology Transfer Lawsuit

Photonics Spectra
Jul 1997
Kathleen G. Tatterson

"Never underestimate the power of incumbent technologies to be improved and to hold their ground."

David Shaver, MIT Lincoln Laboratories, on the semiconductor industry's incorrect belief that lasers could not produce features smaller than 1 µm.
SAN JOSE, Calif. -- A dispute over optical semiconductor technology transfer between litigant Spectra-Physics Lasers Inc. of Mountain View, Calif., and SDL Inc. has ended in a comprehensive settlement.
Spectra-Physics had alleged that SDL had renounced its obligations to transfer technology that was developed as a result of a 1983 joint venture between Spectra-Physics and Xerox Corp., leading to the establishment of Spectra Diode Labs, now SDL. According to the agreement, Spectra-Physics and its subsidiary, Opto Power Corp., will not receive transfer of claimed optoelectronic technology from SDL. Furthermore, SDL agrees to provide a one-time payment of $28 million in settlement of all disputes.
"I think it's a fair settlement," said Patrick Edsell, president of Spectra-Physics. "From a Spectra-Physics perspective, I think both parties will benefit." The company estimates its loss from the settlement at about $15 million, not including legal fees.
John Tracy, president of Opto Power, echoed Edsell's sentiment on the agreement's fairness. "It's too premature to see how it will affect the industry, but all parties are glad that it's over, and we're ready to move on and compete in the marketplace."
Donald Scifres, SDL's president and chief executive officer, had no comment when contacted by Photonics Spectra.
The lawsuit had also addressed the issue of a disclosure in SDL's stock prospectus when it first sought public offering in 1995. Spectra-Physics had argued that an earlier transfer agreement provided a free worldwide license to most of SDL's technology relating to optical semiconductor devices; however, SDL contended in its prospectus that giving Spectra-Physics access to its technology "could significantly impair [SDL's] competitive advantage in certain technology areas." Opto Power competes directly with SDL in the field of optical semiconductors.
Industry players do not believe the settlement will cause great waves in the laser business. "The two companies have used their technologies in accordance to what the settlement is," said Bernard Couillaud, chief executive officer of Coherent Inc.'s Laser Group. "The good news for SDL is that they will keep their 'know-how,' and they can continue to develop products without worrying about patent infringement."
He added that the companies should have no problem coming up with the money for the settlement. "Now they can focus on their businesses," he said.

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