April 04, 2005
Theft of Trade Secrets
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There have been two recent high profile cases of misappropriation of trade secrets in the EDA and Semiconductor industry, namely Lexar vs Toshiba and Synopsys vs Nassda. These individual cases are summarized below.
On March 23, 2005 Lexar Media, Inc., a marketer and manufacturer of high-performance digital media and accessories, today announced that after a six week trial, the jury found Toshiba Corporation and Toshiba America Electronic Components, Inc. liable of breach of fiduciary duty and theft of trade secrets and awarded Lexar over $380 million in damages. A day later the jury awarded Lexar an additional $84 million in punitive damages. The total amount is believed to be the largest intellectual-property verdict in California history and the third largest IP verdict in the United States.
Toshiba had invested in, held a board seat at and became a strategic partner of Lexar thereby gaining extensive access to Lexar confidential information. At the same time Toshiba was negotiating with and later entered into a joint venture with SanDisk, a Lexar competitor, to manufacture NAND flash memory.
Based on the jury's verdict and findings, Lexar intends to ask the Court for an injunction that bars the sale of Toshiba's products in the United States. Lexar will ask that the injunction include products that have been found to incorporate Lexar's trade secrets, including Toshiba's large and small block NAND flash chips, its CompactFlash, Secure Digital and xD Picture Card products.
Separately Lexar's case for patent infringement against Toshiba on more than ten of its patents remains pending in Federal Court.
Eric Whitaker, Lexar's EVP and general counsel, commented "This verdict validates Lexar's core intellectual property and contributions to the flash memory industry. It holds Toshiba accountable for its conduct - building Lexar's trust to acquire our technology and then betraying that trust to partner with our competitor and compete against us. It sends a clear message to Toshiba that this type of corporate conduct will not be tolerated - as a strategic partner and board member, Toshiba was required to act with the utmost good faith and fell far short of that standard."
The total award is 10 percent larger than Toshiba's estimated net profit of 45 billion yen ($423.2 million) for it fiscal year. On March 25, 2005 Toshiba issued a press release according to which:
orders that established as facts that: (i) the first 60,000 lines of source code of HSIM and all the ideas and concepts reflected therein, to the extent they were not publicly known, were copied or derived from Synopsys' source code or other Synopsys' materials while the individual defendants were employed by Synopsys and (ii) Nassda and the individual defendants acted in concert to intentionally alter, destroy, lose or misplace items requested in discovery and conceal evidence. Separately Synopsys had filed a complaint alleging HSIM software infringed their patent “Hierarchical Power Network Simulation and Analysis tool for reliability testing of Deep Submicron IC Designs”.
approximately $67.5 million in the quarter ended September 30, 2004.
On January 11, 2005 Synopsys Inc. and Nassda Corp. reported that the Federal Trade Commission had requested additional information and documentary material in connection with its review of the proposed acquisition of Nassda by Synopsys. As a result, the waiting period under the Hart-Scott-Rodino Act of will be extended. Nassda and Synopsys said they would respond promptly to the request.
storage devices and the Internet to quickly and surreptitiously acquire and distribute this type of information is almost without limit.
The Economic Espionage Act of 1996 ("EEA") contains two separate provisions that criminalize the theft or misappropriation of trade secrets. The first provision is directed towards foreign economic espionage and requires that the theft of the trade secret be done to benefit a foreign government, instrumentality, or agent. The second provision makes criminal the commercial theft of trade secrets, carried out for purely economic or commercial advantage.
The commercial theft of trade secrets is described below (source: Department of Justice website)
A defendant convicted for commercial theft of trade secrets can be imprisoned for up to 10 years and fined $250,000 or both. Organizations found guilty under the EEA can be fined can be fined up to $5 million. The penalties for foreign economic espionage are considerably higher.
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-- Jack Horgan, EDACafe.com Contributing Editor.
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