TSMC expects to prevail against SMIC in trade-secret case

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 9/19/2007

Hsinchu, Taiwan-based semiconductor foundry Taiwan Semiconductor Manufacturing Co. (TSMC) is reporting that the California State Superior Court of Alameda County issued an order on September 7 regarding TSMC’s pre-trial motion for a preliminary injunction against Shanghai, China-based pure play IC foundry Semiconductor Manufacturing International Corp. (SMIC), and the document was released to the public on September 13.

The motion for a preliminary injunction was denied, but according to the filing, “TSMC has demonstrated a significant likelihood that it will ultimately prevail on the merits of its claim for breach of paragraphs 15 and 29 of the settlement agreement.” The companies inked their settlement agreement on January 31, 2005.

Further, the court found that “TSMC has demonstrated a significant probability of establishing that SMIC retains and is using TSMC information in SMIC’s 0.13-micron and smaller technologies that should have been returned under paragraphs 15 and 29 of the (2005) Settlement Agreement” with SMIC,” and “although irreparable harm would result if SMIC were to disclose TSMC information to third parties, there is no threat that such disclosures are imminent.”

Therefore, the court ordered that, effective immediately, SMIC must provide 28 days advance notice before disclosing or transferring any process steps or process flows that concern 0.13-micron or smaller logic technology to any third party not wholly owned by SMIC as of the date of the settlement agreement.

A trial is expected to be set for late 2008 with full discovery to begin immediately.

The full text of the court’s order is available on the Court’s website, under case number RG06286111.

The troubles between the companies began in March 2004 when TSMC filed court papers in U.S. district court detailing alleged corporate espionage on the part of SMIC, its mainland China competitor.