Orbcomm Asia Ltd. filed a $50 million breach of contract lawsuit earlier this month against Orbcomm Inc. and its Orbcomm LLC and Orbcomm Holdings LLC affiliates. The suit alleges Orbcomm failed to deliver exclusive rights it promised Orbcomm Asia for the development of the Orbcomm business in the Asia-Pacific region.

The dispute dates back to 2001, when Orbcomm emerged from bankruptcy through funding from a group of investors, including Orbcomm Asia. According to the complaint, filed July 11 with the U.S. District Court for the Eastern District of Virginia, Orbcomm Asia invested roughly $1.2 million in Orbcomm, which the company claims gave it rights to develop the Asia-Pacific market.

“The purpose of [Orbcomm Asia’s] investment was to enable Orbcomm to purchase certain assets and territorial rights of Orbcomm Global LP [the former bankrupt company]” including the low earth orbit mobile satellite constellation and several ground stations. “When [Orbcomm Asia] made the investment, [Orbcomm Asia] and Orbcomm understood and agreed that Orbcomm would subsequently transfer to [Orbcomm Asia] part of those assets and grant to [Orbcomm Asia] territorial rights to distribute Orbcomm services in the Asia- Pacific region.

Under the deal, Orbcomm Asia would enter into arrangements with local representatives within the countries of the Asia-Pacific region and together, Orbcomm Asia and the local representatives would obtain the necessary regulatory clearances to allow for Orbcomm services to be deployed, said Patrick Fazzone, attorney with Tighe Patton Armstrong Teasdale PLLC, which is representing Orbcomm Asia.

“In our view, there was a binding commitment by Orbcomm to enter into a license agreement providing access to the satellites in those territories to Orbcomm Asia,” Fazzone told Satellite News. “That was breached. Over a period of time, Orbcomm did not take the steps it obligated itself to take to enter into that licensing agreement.”

Orbcomm Asia has been acting as though it was licensed to operate in those territories, based on agreements approved by Orbcomm’s board of directors and a memorandum of understanding executed in May 2001, Fazzone said. However, “no access rights were ever granted formally by Orbcomm,” even though Orbcomm’s board of directors had begun the process to grant those rights, he said.

Orbcomm plans to challenge the lawsuit.

“There is no merit to these claims,” Laura Conover, Orbcomm spokeswoman, told Satellite News. “Orbcomm intends to vigorously defend this lawsuit and pursue its own claims against Orbcomm Asia.” Conover declined to offer any additional comments on the claims Orbcomm has against Orbcomm Asia.

Cease And Desist

Orbcomm sent a cease and desist letter to Orbcomm Asia informing the company it does not have the licensing rights to facilitate the deployment of Orbcomm in the Asia Pacific region, Fazzone said. This would allow Orbcomm to develop its own marketing strategy in the region, he said.

“By being told they can no longer develop this market, Orbcomm Asia is forestalled from going out and dealing with the country representatives that they have been in contact with,” Fazzone said. “That means some other group would get the rights if we don’t prevail to develop the market, to the detriment of Orbcomm Asia. As an example, in China, Orbcomm Asia had made significant progress in developing an arrangement whereby a prominent local company would go and obtain the regulatory license. What has happened is Orbcomm Asia has been told to cease and desist and Orbcomm has gone into the market and tried to develop its own local venture partner.”

Orbcomm is “basically leaving Orbcomm Asia out in the cold,” Fazzone said.

–Gregory Twachtman

(Laura Conover, Orbcomm, 732/761-8998, ext. 12; Patrick Fazzone, Tighe 202/454-2856)