ECI Telecom has declined to comment on the ultimate fate of the technology created by its former partner, defunct core router vendor Chiaro Networks. But although ECI gained ownership of Chiaro’s intellectual property when the latter went out of business early this year, ECI is unlikely to sell the product, according to Chiaro’s former chief executive Ken Lewis.

ECI agreed to resell Chiaro’s gear in December 2004, simultaneously extending to the startup a $6 million loan, using essentially all of Chiaro’s assets as collateral.

Chiaro never repaid any of that $6 million, according to Lewis. When the router maker began to run out of funds late last year, ECI suspected it wouldn’t be repaid and reported a $3 million impairment charge.

When it became clear that ECI wasn’t interested in acquiring Chiaro, the latter approached other vendors. Near the end, it came close to a sale, Lewis said, and was negotiating a term sheet with an undisclosed equipment vendor that ultimately backed out. “They decided they just couldn’t absorb the [profit-and-loss] hit,” he said.

Chiaro shuttered its business shortly before the holidays, giving ECI, the sole secured creditor, complete control of Chiaro’s assets, including its customer base (of unknown size) and the intellectual property behind its highly scalable Enstara IP/MPLS core router platform.

In an interview with Telephony Friday, Lewis said he doesn’t expect ECI to continue selling its Enstara core router, mainly because ECI is more focused on metro and access networks. “I think they’ll use the technology where it makes sense for them,” he said.

Over the past few months, ECI has declined repeated inquiries regarding whether or not it still sells the Enstara platform. The product is not listed on ECI’s Web site. In recent regulatory filings, ECI wrote, “We believe the fair market value of Chiaro’s remaining assets is not less than the carrying amount of the loans provided to Chiaro and the receivable due.”

Lewis said he didn’t know if Chiaro’s intellectual property was worth at least $6 million.

The former CEO attributed Chiaro’s failure in part to bad timing. Formed in 2000 but launched publicly in 2003, the company collected $210 million in bubble-era investment but faced a hostile market in the IP core, competing with the likes of Cisco Systems and Juniper Networks. “We were 18 months too late for the bubble and 18 months too early for the recovery,” he said. “Our product popped out during the [telecom industry’s] nuclear winter. As it started to upswing, we were running out of gas.”

Chiaro’s product development cycle also posed problems, he added. “With a product like we had, you really need to be working on your second generation of hardware while you’re still trying to launch the first. You can’t wait until you’re successful and then let the cash from that success fund the next generation, because then you’re behind.”

As for Lewis’ own future career plans, he said, “I’d like to do another [startup]. Even if I knew the outcome would be like it was this time, I’d probably do it again.”