Three new trade secret complaints show China is still very much in the semiconductor industry's crosshairs 12 Dec 17
Micron, Applied Materials and Taiwanese chipmaker Nanya are among the plaintiffs alleging trade secret misappropriation in new suits filed over the last week in the US and Taiwan. All complaints allege China to be the ultimate destination for stolen information related to various semiconductor technologies. The cases suggest that it is not just the US where we can expect to see an increase in this type of IP enforcement.
Micron Technology was once an acquisition target for the ambitious Chinese semiconductor investment vehicle Tsinghua Unigroup, though the $23 billion bid seems to have been a non-starter for regulatory reasons. In a lawsuit filed in California’s Northern District last week, the Idaho-based chipmaker says it is the victim of a joint effort by Chinese upstart Jinhua Integrated Circuit and the major Taiwanese foundry UMC to access its DRAM chip technology by luring its Taiwanese employees:
Beginning at least as early as 2015, UMC and the founders of Jinhua developed and set in motion a plan to induce former [Micron] employees to misappropriate Micron trade secrets and deliver those trade secrets to UMC, which UMC would then transfer to Jinhua. Under the UMC-Jinhua arrangement – to which they agreed in principle by January 2016 – UMC would provide Jinhua with advanced DRAM technology in exchange for $300 million in R&D equipment, $400 million in development fees, co-ownership of the resulting technology, and the potential for additional future licensing revenues.
Micron brought the case under the Defend Trade Secrets Act (DTSA), which allows for civil trade secrets disputes to be litigated in federal courts. While the DTSA was expected to pave the way for more suits to be brought, it looks like the efforts of prosecutors in Taiwan were instrumental in making this case. In its complaint, Micron makes extensive reference to criminal indictments made by Taiwanese prosecutors in August after a year-long investigation.
Indeed, authorities in Taiwan appear to be very focused on the trade secrets threat. Just last week the Taiwan IP Court handed down a record $50 million damage award in a trade secrets dispute between two local optoelectronic companies. That case, as well as the indictments against UMC, indicate that it is not just mainland Chinese companies that are under intense scrutiny as part of this enforcement effort.
Another case last week saw a fresh criminal prosecution in Taiwan against an ex-employee of Nanya Technology. This Taiwanese company is also in the DRAM business. Prosecutors say a former engineer there used information about the business’s 20 nanometer chip designs to help land a job with a subsidiary of the aforementioned Tsinghua Unigroup.
Applied Materials, which makes tools used in semiconductor manufacturing, was behind a third major new trade secrets indictment which garnered headlines last week. In a criminal case, US prosecutors charged four former executives with using confidential Applied Materials specs to solicit investment for a startup competitor which would have been based in both the US and China.
Interestingly, the Applied Materials trade secrets reportedly concerned so-called MOCVD technology used in LED manufacture. That’s the same technology that’s the subject of a patent infringement dispute reported by IAM yesterday between US company Veeco and Chinese rival AMEC. In that case, a counter-assertion in China has led to the US company alleging IP infringement being slapped with a surprise injunction in its biggest revenue market.
While infringement cases in China are skyrocketing, it doesn’t seem likely that companies alleging out-and-out theft of technology will be interested in enforcing their rights there. The country has no trade secrets law as such, and plaintiffs in such cases reportedly only had a 14% winning rate over the last five years. In addition, the last year has brought confirmation, for now at least, that ITC 337 complaints can be used as a remedy for trade secret misappropriation which occurs entirely in China. Filings there and in US courts - as well as the aggressiveness of criminal authorities in Taiwan - will be important to watch for indications on where trade secret enforcement is heading.
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