Thu, Nov 05, 2009 - Page 12 News List

TSMC wins trade secrets lawsuit in US against SMIC

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Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest custom-chip maker, won a jury verdict that Semiconductor Manufacturing International Corp (SMIC, 中芯國際) had improperly used its trade secrets and breached a US$175 million settlement.

TSMC’s US unit accused its rival, China’s biggest chipmaker, of causing more than US$1 billion in damages by using 65 of its trade secrets and breaching a 2005 agreement, Jeffrey Chanin, an attorney for the Hsinchu-based company, said in an interview.

That agreement resolved claims that SMIC had earlier infringed trade secrets for chip-making processes, Chanin said.

A state court jury in Oakland, California, on Tuesday found that SMIC improperly used most of the 65 trade secrets and violated the deal starting in February 2005, a jury verdict form supplied by Chanin showed.

TSMC is seeking payment for lost profits on US sales since about 2002 and unjust enrichment on SMIC sales of chips that infringe on its trade secrets, Chanin said. The jury will decide how much damages should be paid after hearing evidence from both sides starting today, he said.

The ruling won’t change the “status quo” in the industry given TSMC’s size, said Sophie Chuang (莊孟紓), an analyst at SinoPac Securities Corp (永豐金證券), who rates the stock “hold.”

“Semiconductor Manufacturing isn’t a big player,” she said.

TSMC, which commands more than half of the custom chipmaking market, rose 0.7 percent to close at NT$59.60 in Taipei trading.

SMIC shares, which were suspended in Hong Kong on Wednesday, fell 2.6 percent to HK$0.38 on Tuesday.

SMIC, based in Shanghai, denied wrongdoing and said TSMC breached its agreement to negotiate disputes over the settlement and sued to stifle competition, court filings in Oakland show.

“We’re disappointed,” Matthew Szymanski, Shanghai-based vice president of corporate relations at SMIC, said in a phone interview yesterday.

“There are many appealable issues and we’re considering all of our options,” he said.

TSMC spokesman Tzeng Jin-hao (曾晉皓) acknowledged the verdict yesterday.

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