TSMC Wins Case on Chinese Rival SMIC in U.S. Court Over Trade Secrets

Taipei, Nov. 5, 2009 (CENS)--Taiwan Semiconductor Manufacturing Co. (TSMC) has won a lawsuit victory over Semiconductor Manufacturing International Corp. (SMIC) in a trade secret case, likely to receive an estimated US$1-3 billion in compensation.

After reviewing 65 instances that TSMC presented as evidence of SMIC's misappropriation of TSMC trade secrets, the Superior Court of California jury agreed with TSMC on 61 and granted the victory to TSMC on Nov. 3.

Industry executives estimated the court to award TSMC US$1-3 billion in compensation, the largest-ever amount of damage compensation in a high-tech trade secret case at U.S. court. They believed the compensation would give a boost to TSMC's 2010 earnings.

If the compensation is ruled at US$3 billion, the amount is equal to one third of TSMC's 2008 revenue and 2.2 fold SMIC's revenue in the same year. Industry watchers estimated SMIC would pay the compensation over a 10-year installment.

TSMC filed suit against SMIC in California Superior Court in Oakland, Calif., in 2006, alleging SMIC breached an agreement the two chipmakers reached in January 2005 to settle allegations of corporate espionage and intellectual-property infringement.

In addition to seeking the compensation, TSMC has sought injunction that permanently prohibits SMIC from selling products competing to TSMC's in the U.S. territory.

TSMC's share price closed up NT$0.4 at NT$59.6 yesterday on Taiwan's stock exchange market and its American Deposit Receipt (ADR) price rose 1.16% in Nov. 3 trading session on the lawsuit victory.

Upon learning the verdict, SMIC said it feels regretful on the ruling and will continue making appeal to courts on the case.

SMIC has appealed to China's Supreme People's Court in Beijing over its suit against TSMC after a Beijing court produced a ruling in June this year that was not in favor of SMIC on the case. The supreme will hold first hearing late this month.

Industry watchers pointed out the lawsuits are part of the long-standing knot between TSMC Chairman Morris Chang and SMIC Chairman Richard Chang. TSMC left no executive seat for Richard when taking over Richard-founded chipmaker Worldwide Semiconductor Manufacturing Co. several years ago.