Subject: [NEXTEL-1] Verizon Suit Says Nextel Had Access To Secrets

From: [email-masked]
Date: Sun, 29 Jun 2003 15:29:24 -0400

Verizon Suit Says Nextel Had Access To Secrets
By Yuki Noguchi
Washington Post Staff Writer
Sunday, June 29, 2003; Page A15

When, in the course of heated corporate
rivalry, does sizing up the competition
cross the line into stealing trade secrets?

That is at issue in a new legal battle
between Verizon Wireless, the nation's
largest cell phone company, and Nextel
Communications Inc., the Reston-based
company whose walkie-talkie feature has
given it an advantage over its competitors.

According to a lawsuit Verizon filed in
federal court in Alexandria on Friday,
Nextel "through a series of false and
deceptive acts improperly came into
possession" on June 10 of two prototype
phones featuring a new walkie-talkie
feature Verizon plans to introduce this
year.

Verizon said in the court papers that its
records show hundreds of test calls were
made on its network using the phones.
Those calls allowed Nextel to penetrate
Verizon's protected network computers
and obtain "valuable, confidential, and
proprietary business information, including
but not limited to certain trade secrets," in
violation of a Federal Communications
Commission law, the suit alleged.

Nextel then leaked information about the
new products to one or more
telecommunications analysts, the suit
added, to "improperly influence industry
reviews" of the new product.

Nextel, which has 2,000 employees in the
Washington area, called the allegations
baseless and said it was "baffled" by the
suit. "We are still in the process of
reviewing the filing, but we believe it is
entirely without merit and we will defend
Nextel vigorously," the company said in a
statement.

Nextel spokeswoman Audrey Schaefer
declined to comment on whether Nextel
obtained two of Verizon's push-to-talk
handsets.

More than 90 percent of Nextel's 11.1
million subscribers use the push-to-talk
radio service. Wall Street analysts believe
that other wireless carriers coming out
with similar push-to-talk features could
eventually hurt the company's financial
health.

"The issue here is that there was no way
to get their hands on them," except
through illegal back-channels, said Jim
Gerace, a spokesman for Verizon. There
are a limited number of such model
phones in existence, for testing, and all of
them are closely monitored by the
company, he said. "I think the complaint
clearly demonstrated that they went beyond the line of healthy competition."

A Nextel official, who requested anonymity, said the lawsuit "is one of the most
bogus things I've heard. They've given it to people to test it. They were trialing
it." It is typical for companies to get as much intelligence as possible on the
competition, the official said. "I don't think anyone went and stole a phone."

Susan Kalla, an analyst with Friedman, Billings Ramsey Group Inc., said: "It's
common practice to test other companies' products." Rivals "normally buy them or
get them from someone who worked at the company," and then test them to see how
the new entry stacks up, she said.

"The point is someone took possession of phones and tested them. I doubt this is
normal," said Jonathan Atkin, an analyst with RBC Capital Markets, who said he has
not tested the Verizon walkie-talkie phone in question, but has tried another
company's. "Usually, they wouldn't give it to you without a guy with a white coat
standing next to you."

http://www.washingtonpost.com/wp-dyn/articles/A46061-2003Jun28.html

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