TSMC vs. SMIC Trade Secrets Trial Heats Up
The TSMC vs. SMIC trade secrets trial going on now in an Oakland, Calif., courtroom featured several hours of testimony from SMIC corporate secretary Anne Chen, who testified that TSMC attorneys and executives failed to negotiate in good faith during a series of meetings in July and August 2006. TSMC is claiming that SMIC used TSMC's 130 nm technology, following a 2005 agreement in which SMIC paid $175M to TSMC.
David Lammers, News Editor -- Semiconductor International, 10/8/2009
Emotions flared during yesterday's session of the TSMC vs. SMIC trade secrets trial, now ongoing in California Superior Court in Oakland, Calif.
Taiwan Semiconductor Manufacturing Co. Ltd. (Hsinchu, Taiwan) claimed in a July 3, 2006 letter to representatives of Semiconductor Manufacturing International Corp. (SMIC, Shanghai, China) that SMIC breached a 2005 settlement agreement between the two foundries. TSMC alleged that SMIC was using TSMC's 130 nm process recipes, and had failed to deposit all TSMC-related process information — particularly the 130 nm process recipes that SMIC allegedly used to create a process-compatible 130 nm offering — in an escrow deposit of information mandated by the 2005 settlement. That 2005 agreement required SMIC to pay $175M to TSMC. The two parties agreed that, following a "meet and confer" process, that TSMC could reopen the legal battle if it claimed a breach of the settlement.
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SMIC attorney Anne Chen being cross-examined by Ashok Ramani. |
SMIC lawyer and corporate secretary Anne Chen said that in a series of meetings between lawyers for the two foundries, held in Hong Kong and Tokyo during August 2006, that SMIC was bending over backwards to find out the exact nature of TSMC's complaint. "I was surprised by the July 3 letter, because I thought we had settled the case in 2005. My reaction was that TSMC did not really state the basis for their claims, as to why we were in breach."
At the early August 2006 meetings, TSMC's outside counsel Jeffrey Chanin, of the firm Keker and Van Nest (San Francisco), presented Powerpoint slides detailing the alleged theft of 130 nm process information. SMIC asked for a copy of the Chanin presentation, but TSMC declined to provide one. Chen, who is the corporate secretary of SMIC based in Hong Kong, also said while SMIC CEO Richard Chang attended some of the August 2006 meetings, TSMC executives declined to attend.
These "meet and confer" sessions were part of the 2005 settlement, which called upon both parties to act in good faith to settle any disputes. Chen said SMIC proposed that a third party expert be called in to assess the TSMC claims and recommend ways that SMIC could resolve differences, which TSMC allegedly did not respond to.
By late August, after several meetings, Dick Thurston, vice president and general counsel of TSMC, wrote to Chen informing her that TSMC would file a lawsuit in California. Chen said that after she received the Aug. 25 letter, she was "shocked and furious, because we were arranging a further meeting."
Later, during cross-examination of Chen by Ashok Ramani, another lawyer at Keker and Van Nest, Chen briefly lost her composure. She said that she was a commercial lawyer, not a litigation lawyer, and accused the TSMC trial attorneys as being "very tricky. You put words in our mouths and distort what we say."
At that point, Chen was advised to limit her answers to yes or no responses. She later asked the judge, "Can I tell the jury?" her version of events. Judge Steven Brick said, "No. Miss Chen, you are in a court of law. Please comply with the rules."
The issue of whether or not TSMC was acting in good faith or not during the summer of 2006 is a major leg of SMIC's defense. SMIC's lead trial attorney, David Steuer of the Wilson, Sonsini law firm (Palo Alto, Calif.), told the jury that the current litigation is part of TSMC's effort to "take down the competition" based in China, a lucrative market. "In the summer of 2006, SMIC ran into a brick wall" in efforts to negotiate with TSMC, Steuer argued.
TSMC attorney Chanin argued that the new litigation was due to TSMC's assessment in early 2006 that SMIC was offering a 130 nm technology that was claimed to be compatible with TSMC's 130 nm process. "SMIC knew exactly what it was doing," Chanin said, referring to the alleged copying of TSMC's 130 nm process. "That is why we are back in a courtroom. SMIC had to abide by its promise," he said.
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TSMC claims SMIC sought to duplicate TSMC's 130 nm process. BKM1 was SMIC's code name for TSMC. |
Earlier this week, Matthew Reed, another Wilson, Sonsini attorney who has conducted much of the witness examination for SMIC, grilled an expert witness called by TSMC. Richard Fair, a professor at Duke University with 38 years of experience in semiconductor process technology, was called upon by TSMC to give his assessment of whether SMIC had copied TSMC's 130 nm process.
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Expert witness Richard Fair testified about SMIC's alleged process misappropriation. |
"SMIC used many steps which were exact copies," Fair testified.
Chanin said "Fair's opinion that TSMC's trade secrets were used in SMIC's 0.13 micron process has not been challenged because it is undeniable."
Reed challenged Fair's impartiality by asking how much he had earned from his expert testimony from Keker and Van Nest, the TSMC outside counsel. Fair testified that he has received $450,000 thus far, and had billed the firm for $49,000 for work performed in August 2009, and was preparing an invoice for work done in September and October.
When Reed concluded that Fair had accumulated over $500,000 for his examination of the SMIC technical documents and process recipes, Fair responded, "Mr. Reed, I have spent over 1100 hours of my life" to earn the half million dollars.
Later, asked to detail an implant recipe, Fair said in spite of "my IQ" that he did not remember the exact numbers in the dopant recipe, noting that he had studied ~6000 documents over several years. Sheuer, in remarks to the jury, gently mocked Fair for his reference to his own IQ.
Much of the testimony this week involved TSMC's efforts to keep its trade secrets out of the public eye, including patents, conference papers and other publicly available sites. One incident involved Professor C.J. Lin, who before moving to Taiwan's National Tsing Hua University had worked in process development at TSMC for a decade. While at the university, Lin posted a TSMC training document on its 180 nm technology on a university Web site for engineering students learning device design. After receiving a letter from a TSMC attorney, Lin deleted the file.
TSMC's lawsuit includes a "trial technology list," referred to as a TTL throughout the trial. That list includes some 65 trade secrets selected by the TSMC legal team from among hundreds which TSMC claims SMIC has misappropriated.
TSMC rested its case Wednesday. When the trial resumes next Wednesday, SMIC is expected to present a series of expert witnesses challenging TSMC's trade secret claims.
The jury trial is being broadcast by the Courtroom View Network (CVN, New York), largely on a pay-per-view basis.
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