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 |  Wall Street Journal -
Nov-04-2009TSMC Wins Trade-Secrets Verdict Over SMIC(topic overview)
CONTENTS:
- OAKLAND, Calif.A jury ruled Tuesday in favor of Taiwan Semiconductor Manufacturing Co. in a long-running legal battle against rival Chinese chip maker Semiconductor Manufacturing International Corp., which TSMC had accused of stealing trade secrets and violating a prior settlement between the companies. (More...)
- TSMC is asking the Alameda County Superior Court panel to award it more than $1 billion in lost profits and damages, and the judge to permanently bar SMIC from selling the contested products in the United States, according to TSMC's lawyer Jeffrey Chanin of Keker & Van Nest. (More...)
- Brian Ferrall, an attorney at Keker and Van Nest (San Francisco) representing TSMC, said the jury ruled in TSMC's favor on 19 of 20 questions, with the jury unanimous on nearly all questions. (More...)
- TSMC also granted SMIC a six-year patent license so long as no breach of the 2005 settlement occurred, Chanin said. (More...)
- Chanin said the trial is scheduled to continue for three more days, after which the jury is expected to decide damages. (More...)
- The jury deliberated for three days and came to the verdict Monday afternoon, but waited until Tuesday morning to read it, citing child-care issues. (More...)
- HONG KONG, Nov 4 (Reuters) - Trading in shares of integrated circuits maker Semiconductor Manufacturing International Corp ( 0981.HK ) was suspended on Wednesday pending a statement with price sensitive information, the Hong Kong exchange said. (More...)
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OAKLAND, Calif.A jury ruled Tuesday in favor of Taiwan Semiconductor Manufacturing Co. in a long-running legal battle against rival Chinese chip maker Semiconductor Manufacturing International Corp., which TSMC had accused of stealing trade secrets and violating a prior settlement between the companies. An Alameda County Superior Court jury still must rule on what damages SMIC might have to pay in the case, but they could be hefty. [1] A California jury ruled on Tuesday that SMIC ( 0981.HK ) stole and used trade secrets from rival Taiwan Semiconductor Manufacturing Co (TSMC) ( 2330.TW ), possibly putting SMIC on the hook for more than $1 billion in damages, a lawyer for TSMC said on Tuesday.[2]
The jury found that SMIC has been misappropriating TSMC's trade secrets since a 2005 legal settlement was reached between the two foundries. Jeffrey Chanin, lead attorney for the law firm representing Taiwan Semiconductor Manufacturing Co., said that the jury found that Semiconductor Manufacturing International Corp. (Shanghai) breached the settlement "in all the ways that TSMC has alleged, and that TSMC did attempt in good faith to resolve SMIC's breaches before filing this lawsuit," claiming breach and misappropriation.[3] Jeffrey Chanin of Keker & Van Nest told us Tuesday that the trade secrets theft that Shanghai-based Semiconductor Manufacturing International Corp. (SMIC) was found to have committed against his client Taiwan Semiconductor Manufacturing Co. (TSMC) is the biggest he's ever seen. It wasn't just one individual involved, he said.[4]
TAIPEI -(Dow Jones)- Taiwan Semiconductor Manufacturing Co. (TSM) won a lawsuit against China's Semiconductor Manufacturing International Corp. (SMI) on patents and trade secret infringement, TSMC spokesman J.H. Tzeng said Wednesday.[5]
In 2003, TSMC sued SMIC for theft of trade secrets and patent infringement stemming from chip sales in California. The companies settled the case two years later after SMIC agreed to pay $175 million, turn over misappropriated documents, stop using the information to make its chips and not disclose the trade secrets, Chanin said.[6] SMIC did not return the documents in question and disclosed some of the trade secrets in a patent application that used TSMC information, prompting the filing of the current lawsuit in 2006, Chanin said.[6]
On Tuesday, the jury returned a verdict in favor of TSMC. The jury found that SMIC had stolen and used TSMC's trade secrets and breached certain terms of the 2005 settlement. It also rejected SMIC counterclaims alleging that TSMC violated terms of the settlement.[4] The jury found that rival semiconductor manufacturer SMIC, represented by Wilson Sonsini Goodrich & Rosati, misappropriated trade secrets and broke a 2005 settlement between the two companies by continuing to use the information.[7] The Wilson trial team, led by Palo Alto, Calif., partner David Steuer, tried to convince the jury that the recipes for making semiconductors that SMIC allegedly stole weren't actually trade secrets, noting that some are now available on the Internet. The jury found that 61 of the 65 alleged trade secrets at issue in the trial were, in fact, trade secrets when SMIC took them with the help of former TSMC employees.[7]
TSMC had claimed that 65 different trade secrets were misappropriated by SMIC, and the jury ruled in TSMC's favor on 61 of the 65 trade secrets contested in the trial.[3] The jury in the two-month-long TSMC vs. SMIC trade secrets trial ruled in TSMC's favor this morning after several days of deliberation.[3]
The California Superior Court jury ruled on Tuesday (Nov. 3) that SMIC has been misappropriating TSMC trade secrets since January 2005, after the firms reached an agreement to settle allegations of corporate espionage and intellectual-property infringement, according to the attorney.[8] TSMC filed suit against SMIC in California Superior Court in Oakland, Calif., in August 2006. The two companies in January 2005 settled another suit filed by TSMC in 2003 that claimed SMIC systematically pilfered TSMC trade secrets by hiring hundreds of its engineers and asking a few senior people to take information with them as they left.[8]
SMIC promised in 2005 settlement it would purge itself of all TSMC's proprietary information. TSMC alleged that SMIC was still using some of its trade secrets in most of its legacy processes and that the Chinese foundry has also used TSMC technology as the baseline for 130- and 90-nm processes.[8] TSMC filed the lawsuit in 2006 to seek compensation from SMIC for damages caused for breach of a 2005 settlement, and an injunction to prevent SMIC from using certain patents and trade secrets to compete unfairly against TSMC.[5]
The jury also found that SMIC breached the terms of a 2005 settlement over similar claims, for which it had agreed to pay $175 million and to surrender all TSMC documents and stop using TSMC technology and processes, lawyers for the companies said.[6] The whole company was involved in stealing TSMC's methods for building semiconductors. The two companies tried to put their differences aside in a settlement reached in 2005, in which SMIC paid $175 million and agreed to certain conditions.[4]
TSMC is asking the Alameda County Superior Court panel to award it more than $1 billion in lost profits and damages, and the judge to permanently bar SMIC from selling the contested products in the United States, according to TSMC's lawyer Jeffrey Chanin of Keker & Van Nest. [6] The damages phase begins, in which TSMC will be seeking $2 billion. Chanin conceded that SMIC doesn't have $2 billion, but he told us that the amount was appropriate given the verdict. David Steuer of Wilson Sonsini Goodrich & Rosati, who represents SMIC, tipped his hat to his adversary. "They did a very good job," said Steuer. "I congratulate them.[4]
Check out the verdict form, here. "It's a vindication for TSMC, which has only been interested in protecting its IP," said Chanin, who rejected SMIC's argument that the suit represented an attempt by TSMC to put its Chinese rival out of business. "We gave them a good chance to come clean, and they chose not to," Chanin said. "It took a U.S. court to hold them responsible."[4] TSMC is asking the court to issue an injunction when the trial concludes that would prevent SMIC from continuing to sell in the U.S. wafers made using the technology at issue, Chanin said.[8]
TSMC has won a nearly complete victory in the trade secrets trial ongoing in Oakland, Calif. After deliberating for several days, the 12-member jury delivered a verdict Tuesday morning, finding in TSMC's favor on the major issues.[3] An Alameda County jury handed Keker & Van Nest and semiconductor giant TSMC a clear victory in a hard-fought trade secrets trial on Tuesday morning.[7]
"We tried hard to present a good defense to the jury," a downcast Steuer said on Tuesday. "That's the way trials go sometimes." Wilson has already appealed some of the trade secret issues, and a separate trial has yet to be held on an unclean hands defense the firm wasn't allowed to use during this trial.[7]
The client respects the jury and the process." Steuer also noted that his client would continue pursuing separate trade secrets counterclaims against TSMC.[4] Chanin said the jury agreed with TSMC on 61 of the 65 instances that TSMC presented as evidence of the misappropriation of trade secrets.[8] "We are talking about a potentially large amount," Chanin said. "For TSMC there is also a desire to have fair competition" and not have SMIC continue to use its trade secrets, he said.[8]
SMIC attorney David Steuer said the result was "disappointing" but added that SMIC has pending claims against TSMC for misappropriation of trade secrets that will be tried in a separate case.[6]
Brian Ferrall, an attorney at Keker and Van Nest (San Francisco) representing TSMC, said the jury ruled in TSMC's favor on 19 of 20 questions, with the jury unanimous on nearly all questions. [3] "We are very pleased. They the jurors were asked 18 to decide issues and they decided all in our favor," said Jeffrey Chanin, a partner at the law firm Keker and Van Nest LLP, which represents TSMC.[8]
TSMC also granted SMIC a six-year patent license so long as no breach of the 2005 settlement occurred, Chanin said. [6] Throughout the course of the litigation, Wilson Sonsini lawyers mounted several defenses. At one point, they claimed that TSMC's general counsel had doctored the settlement agreement, but Judge Steven Brick ruled against them.[7] To add insult to injury, the jury was not convinced by Wilson Sonsini's counterclaim that TSMC failed to meet and confer in good faith after the settlement was allegedly breached.[7]
"There were a lot of pretrial rulings that affected the presentation of evidence that we had to work around and ultimately we weren't successful with the jury in doing that," Steuer, of Wilson Sonsini Goodrich & Rosati, said.[6]
In closing arguments, Wilson's Steuer said that TSMC was using red herrings to distract the jury from the real issues.[7]
Chanin declined to speculate on the amount TSMC would be awarded, saying it was for the jury decide. He added that SMIC has said publicly that the amount being sought is between $1 billion and $3 billion.[8] "There's been a lot of misdirection -- if we want to talk about red herrings, there was an abundance of fish on the other side," Chanin said. "It was an effort to tar TSMC in the minds of the jury and it didn't work."[7] The jury is expected to consider damages next week, Chanin said. Superior Court Judge Steven Brick will rule on the request for a permanent injunction after the jury decides on damages, he said.[6] Through the nine-week trial, held in Alameda County Superior Court, Chanin worked with Keker partners Brian Ferrall and Ashok Ramani.[7] Last September, the companies went to trial in California's Alameda County superior court.[4]
Chanin said the trial is scheduled to continue for three more days, after which the jury is expected to decide damages. [8] The damages trial on Tuesday's verdict will begin Thursday before the same jury.[7] The damages phase of the trial begins Thursday and is expected to go to the jury early next week.[3]
The jury trial is being broadcast by the Courtroom View Network (CVN, New York), largely on a pay-per-view basis.[3]
The jury concluded that SMIC broke the settlement agreement for the first time on Feb. 4, 2005, just five days after the agreement was signed.[7] "SMIC's cross-claims for breach of the settlement and bad faith were rejected. The jury was polled and was unanimous in its decision," he said.[3]
The jury deliberated for three days and came to the verdict Monday afternoon, but waited until Tuesday morning to read it, citing child-care issues. [7] Chanin said the damages claim is expected to go to the jury next Monday or Tuesday.[3]
At trial, the Keker lawyers, led by San Francisco partner Jeffrey Chanin, riffed on the very simple theme that SMIC was a thief.[7] The case will now proceed to the damages phase, at which Keker lawyers could ask for as much as $2 billion.[7]
HONG KONG, Nov 4 (Reuters) - Trading in shares of integrated circuits maker Semiconductor Manufacturing International Corp ( 0981.HK ) was suspended on Wednesday pending a statement with price sensitive information, the Hong Kong exchange said. [2] TSMC claimed SMIC didn't comply with the agreement, and filed the current lawsuit in 2006.[7] TSMC accused SMIC of hiring away about 180 TSMC's employees to staff SMIC's Shanghai operations in 2000, and of telling new hires to bring documents showing how to set up a foundry, make chips and other design rules from TSMC.[6]
SOURCES
1. TSMC Wins Trade-Secrets Verdict Over SMIC - WSJ.com
2. UPDATE 1-SMIC shares suspended pending statement | Reuters
3. Jury Finds in TSMC's Favor in TSMC vs. SMIC Trade Secrets Trial - 2009-11-03 14:53:28 CST | Semiconductor International
4. Keker & Van Nest Prevails at Semiconductor Trade Secrets Trial
5. TSMC: Firm Wins Suit Against SMIC On Patent, Trade Secrets Use
6. UPDATE 1-California jury finds SMIC stole trade secrets | Reuters
7. Law.com - Keker Wins High-Stakes Trade Secret Theft Case
8. EETimes.com - Jury finds for TSMC over SMIC in trade secrets case
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