The digital divide between Avaya, Continuant

Legal battle shows fierce fight behind telecommunications software, maintenance

Staff writerDecember 15, 2013 

After being sued and then filing a countersuit, after spending “tens of millions of dollars” on attorneys and travel, and after commuting from Washington to a federal courtroom in New Jersey every week since the trial began in September, Continuant CEO Doug Graham thinks he can see the end.

He figures the case will go to the jury in February.

He hopes he knows how that jury will rule with a win over telecommunications giant Avaya.

Graham flies to New Jersey every Sunday and returns every Thursday. Fridays he goes to work and Saturdays he spends with his family, including his seven children, in Olympia.

“There’s a lot to do when you only work one day a week,” he said recently at Continuant’s Fife headquarters, a former warehouse transformed into a technological nerve center – and home to 270 employees.

THE CASE

Avaya charged that the independent Continuant has no right to repair or maintain Avaya systems.

Continuant claims that this denial represents monopolistic intent that violates antitrust laws.

Given the ongoing litigation, Avaya has chosen not to comment for this report.

However, on its website it does address the larger issue by saying, in part, “Unauthorized maintenance providers (UMP) typically do not broadcast the fact that they are not authorized to access Avaya’s intellectual property, but it’s a very real risk that clients need to be aware of. Service companies include ... Continuant.”

In a filing to the Security and Exchange Commission for the first quarter of this year, the company stated, in part, that Continuant “violated federal intellectual property laws by improperly accessing and utilizing the company’s proprietary software, including passwords, logins and maintenance service permissions.”

The filing also noted the claims alleging it had violated antitrust laws, and said, of the litigation, “an outcome cannot be predicted and, as a result, the company cannot be assured that this case will not have a material effect on the manner in which it does business, its financial position, results of operations, or cash flows.”

To what degree might its financial position and cash flow be affected?

Continuant is asking for $144 million.

THE INDUSTRY VIEW

“It seems to be a case of Avaya trying to flex its muscles and intimidate a third-party maintainer,” said Joe Marion, president of the Association of Service and Computer Dealers International and the North American Association of Telecommunications Dealers.

The nonprofit association represents about 500 dealers nationwide.

“We believe that third-party maintainers should not be denied any of the tools or diagnostics or parts necessary for companies to make a choice,” Marion said last week from his headquarters in Florida.

The case, he said, is “ very significant. The ramifications do extend beyond telecommunications.”

“What Continuant does is offer an alternative,” Marion said. “You name the product. It’s computers. It’s iPhones. Any manufacturer of any product. It’s not just computers. If there’s no alternative, the manufacturer could charge anything. Ford. Toyota. You name the product. Continuant is being bullied around by Avaya.”

Said the Digital Right to Repair Coalition in a statement last month: “We all know auto manufacturers would like to command ‘Dealer-only’ repair, but consumer resistance and antitrust laws have kept such monopolistic behavior in check. Continuant’s countersuit against Avaya is an antitrust action for a reason: Avaya does not want to allow competition for repair.”

CONTINUANT PERSPECTIVE

“They sued us seven-and-a-half years ago,” said CEO Graham. “Then a week before the trial they dumped the bulk of the charges.”

Years ago, Avaya had asked that Continuant sign a noncompete agreement. Continuant would not sign, and the company lost customers.

“We almost went broke,” Graham said. “We lost 85 percent of our revenue stream. We ended up able to survive and thrive. We focused on having the best customer service.”

Continuant sued Avaya in 2003 for antitrust violations. The company later dropped the suit when Graham found “we didn’t have the financial wherewithal. When they sued us in 2006, we countersued with the claims we had stopped pursuing.”

And after the trial began this fall in federal court in Camden, N.J., and after Avaya attorneys had presented their case against Continuant, the Continuant legal team rested without presenting any witnesses.

Continuant is now presenting its own antitrust case — now, after seven years and three federal judges, and after spending, Graham said, “tens of millions of dollars on the legal team, travel and hotels.”

“If I had known back then what I know today, who knows if I’d have been as brave? You can’t really comprehend how tough it is. I was a little Pollyanna-ish thinking the justice system would take care of me. Avaya, with their unlimited legal budget — they were able to stop the growth of our company. Our growth came from other manufacturers.

“If they beat us because they’re better than us, then more power to them. If the only way they can beat us is through intimidation, to run us out of business, that’s just not right. It sure isn’t what made America, America.”

He says his company continues to maintain an annual growth rate of 5 percent to 10 percent.

UNEASY THE CROWN

Perhaps it’s because he was a wrestler in high school and at West Point. Perhaps it’s his service as a Blackhawk pilot. Maybe it’s just his nature — but Graham, 54, is stubborn.

“It didn’t surprise anybody that when they pushed, I pushed back,” he said.

He has discovered that stubborn comes at a cost.

“That’s the constant weight. It’s one thing for me to put myself in the poorhouse, and it’s another for me to think about doing it to people who rely (on Continuant).”

He describes the lowest point, early in the case as he lay in bed in his hotel room following a brutal deposition.

“I realized those guys played for keeps. They’re good, they’re smart and there’s lots of them. It was one night — I just had an overwhelming dread that I was going to go down, my employees were going to go down. In the league I was now in, being right was probably the smallest factor. It was unbelievable dread.”

He pulled a blanket over his head.

“Someone was praying for me. I got up. I started with Psalm 23. All of a sudden, out of the blue, there was a supernatural presence of God. You just think — nothing can harm you. I went to sleep and I slept like a baby and I’ve slept like a baby ever since.”

Graham applauds his insurer, Safeco, for staying with him. He has grown to appreciate his legal team from K&L Gates. He thanks his employees.

“Most people want to be a part of something important,” he said. “They want to be part of a mission — even though there is risk. The best part of people comes out in times like this.”

C.R. Roberts: 253-597-8535
c.r.roberts@thenewstribune.com

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