Update: Ikos sued Axis after failed acquisition attempt

Update: Ikos sued Axis after failed acquisition attempt
By Michael Santarini, EE Times
February 16, 2001 (7:53 p.m. EST)
URL: http://www.eetimes.com/story/OEG20010215S0038

SAN MATEO, Calif. — The chief executive of Axis Systems Inc. is calling foul on Ikos Systems Inc., which filed a patent infringement lawsuit against Axis on Feb. 7. Earlier that same day, Ikos had offered to acquire startup Axis, then filed the suit after it was turned down, said Mike Tsai, president and chief executive of Axis, a supplier of hardware verification solutions.

Meanwhile, Tsai admitted that his company was unaware of the Massachusetts Institute of Technology (MIT) patent that serves as the basis of the Ikos lawsuit, suggesting that Axis may have unknowingly violated the patent when designing its emulators.

"On Feb. 7, Ikos invited me to a breakfast meeting," said Tsai. "During that meeting, Ikos praised our technology, expressed concern that Axis was offering emulation solutions to our mutual customers and suggested that we work together. Then they proposed to acquire Ax is. After I politely turned down their offer, they indicated that they would compete aggressively against us. In the afternoon of the same day, they filed the lawsuit."

Ramon Nunez, Ikos' president and chief executive officer, declined to confirm whether a meeting had taken place between the two companies.

Tsai said that his company has been challenging Ikos' position in the emulation market since Axis introduced its emulation technology at the Design Automation Conference last year.

"I think Ikos is worried because we are growing extremely fast," said Tsai. "We are probably the fastest-growing company in the EDA industry right now. We have been profitable for five consecutive quarters and have a $20 million run rate in our fourth year on the market." Tsai said he politely declined the merger offer because Axis plans to make an initial public offering in the near future.

Gary Smith, chief EDA analyst for Gartner Dataquest, said he wouldn't be surprised if Axis is picking up market share in t he hardware-assisted verification market. With just its acceleration technology, Axis owned 4 percent of that segment in 1999, trailing Aptix with 14 percent, Ikos with 16 percent, Mentor Graphics with 25 percent and market leader Quickturn with 40 percent, Smith said.

"Axis didn't even have an emulator in 1999, so I think it — as well as Tharas Systems — is growing a whole lot faster now," said Smith, who said he expected this segment of the verification market to grow 40 percent in 2001.

Nunez said Ikos is indeed bumping into Axis when talking to customers.

"The fact of the matter is we have been concerned by the move into emulation by Axis during DAC of last year," said Nunez. "During that time, we began the investigation on our own of what kind of technology was behind that product. We concluded that analysis in December. We don't like to pursue litigation unless it is clearly black and white — this is clearly black and white."

The suit filed by Ikos and the MIT in the U. S. District Court of Delaware alleges that Axis' Xcite-1000 and Xcite-2000 emulators infringe the Virtual Wires technology patent filed by MIT in 1994. Nunez said Axis emulators violate that patent as well as three Ikos patents that improve the Virtual Wires technology.

"In this MIT licensing, we also reserve the right to defend the patent," said Nunez, whose company is seeking an injunction to block Axis' further alleged infringement, as well as damages for an unspecified amount.

Tsai declined to comment on the technical merits of the Ikos and MIT joint claim, saying the company has not had time to fully review it. Tsai did, however, say the company was not aware of the MIT patent, which indicates that Axis may have unintentionally violated it.

"We just received the complaints and are still in the process of studying the patents," said Tsai. "We never knew MIT had a patent [in this area], and now we are studying it very carefully."

Asked if Axis could have unknowingly violated the MIT paten t, Tsai said: "We cannot comment on that because it is complicated. We certainly want to make a careful study before we make any kind of statement on that."

Steve Wang, Axis cofounder and vice president of marketing, said that Axis itself has been diligent about patenting at every step of product development. The company currently owns three patents and has six more pending.

"We agree that it is important for companies to protect their patent portfolios," said Wang. "But in our view this is really a PR front more than it is a legal case."

Lawsuits have been used in the past in the EDA industry to stifle competition, Wang said.

"This tactic has been around forever," said Smith of Dataquest. "Patent law sucks — it stifles innovation."

The recent court decision pitting Festo Corp. against Shoketsu Kinzoku Koygo Kabushiki Ltd. "is huge," said Smith. "It sets a precedent that will allow a lot of companies, especially the emulation guys, to attack patents that are too general."