TSMC vs. SMIC Trial Commences in Oakland
The intellectual property trial between TSMC and SMIC began Wednesday with opening remarks by attorneys. The two companies entered into a comprehensive legal settlement in 2005, with SMIC paying TSMC $175M to resolve allegations that SMIC obtained TSMC's process recipes and other trade secrets. However, further conflicts between the rival foundries resulted in the current lawsuit.
David Lammers, News Editor -- Semiconductor International, 9/10/2009
The intellectual property trial between Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC, Hsinchu, Taiwan) and Semiconductor Manufacturing International Corp. (SMIC, Shanghai, China) got underway Wednesday, with opening statements revealing sharply different views of the long-running intellectual property dispute between the rival foundries.
Opening statements were delivered before Judge Steven Brick in the Superior Court of California, Alameda County in Oakland, Calif. The jury trial, which is expected to last 50-60 days, is being broadcast by the Courtroom View Network (CVN, New York), largely on a pay-per-view basis.
TSMC's legal team, led by Jeffrey Chanin of the firm Keker & Van Nest (San Francisco), argued Wednesday that after the 2005 settlement SMIC executives ordered SMIC staff to destroy any documents relating to TSMC. The 2005 settlement called for SMIC to place documents and other relevant material into a document bank, he said. Instead, according to Chanin's opening statement, SMIC allegedly changed the name of computer files that included TSMC property, engaged in document destruction, and thereby violated the 2005 settlement, setting up the current lawsuit initiated in 2006 and now coming to trial.
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The SMIC legal team, headed by David Steuer of the Wilson, Sonsini law firm (Palo Alto, Calif.), countered Wednesday by saying that it will seek to prove that TSMC did not seek to settle the disagreements "in good faith" with SMIC after the 2005 settlement agreement, as called for by the "in good faith" provisions in the settlement. That included an offer by SMIC to place the dispute in the hands of a third party, who would then offer suggestions on how to resolve differences. Instead, SMIC's attorney argued that TSMC launched the current lawsuit as a means of damaging SMIC's ability to compete with TSMC, which allegedly feared SMIC's fast rise into the top tier of foundries.
The SMIC attorney also said he will call a series of expert witnesses to show that what TSMC claims to be trade secrets are in reality process-related information that is readily available within the industry's published literature, with ion implant recipes as a promised example to be provided later in the trial.
In his opening remarks, Chanin of the TSMC legal team reviewed TSMC's view of the early years of SMIC, founded in 2000. SMIC CEO Richard Chang sold his Taiwan-based company, World Semiconductor Manufacturing Corp. (WSMC) to TSMC, and then quickly moved to Shanghai to set up SMIC. According to TSMC, in February 2000 a former WSMC fab manager, Marco Mora, sent an email to a then-TSMC employee, Katy Liu, asking that she transfer TSMC's process recipe documents and technical training manuals to TSMC. Copies of those emails were displayed in the courtroom.
Steuer of the SMIC legal team said that although Mora acted "inappropriately," the end result was that Liu did not act on the request — an issue that he said was settled by the 2005 agreement and $175M payment to TSMC, which he called "a colossal sum." He quoted from an email by a TSMC executive, Elizabeth Sun, who allegedly argued that TSMC should file another lawsuit to "let them (SMIC) bleed more." Other TSMC managers, Steuer alleged, advised "painting a negative picture of SMIC in the media" and creating fears among SMIC's customers that they could suffer from the IP dispute.
The SMIC attorney said he will show evidence that "TSMC wanted to destroy SMIC and pick up the pieces" in an acquisition of SMIC. "Why? Because SMIC is in China, and in China TSMC cannot open up an operation with leading technology" due to Taiwan government technology transfer restrictions, Steuer said in his opening remarks.
"This case is all about China," he concluded.
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