Jacob Schindler

A month after finding itself on the receiving end of a trade secret lawsuit from Micron, Taiwan’s UMC has asserted patents in China against the US chip major. This latest litigation means another US semiconductor company finds itself staring down the barrel of a patent lawsuit in Fujian, a hub of China’s domestic memory sector. 

The conflict began when public prosecutors in Taiwan indicted three UMC employees, who used to work for Micron, under the island’s Trade Secrets Act. In December, Idaho-based Micron filed a US civil suit against Taiwan’s UMC and a mainland Chinese partner accusing them of trade secrets misappropriation. That lawsuit is playing out in the Northern District of California, pursuant to the relatively new Defend Trade Secrets Act. The complaint claims that executives at UMC and Jinhua Integrated Circuit conspired to gain access to confidential information about Micron’s DRAM semiconductor technology by luring away former employees.

In a sign of the times, it appears that UMC has now responded with a countersuit - not in the US or Taiwan, but mainland China. The suit asks Micron subsidiaries in Xi’an and Shanghai to pay $42 million in damages for infringing patents related to DRAM DDR4 technologies, solid state drives and graphics cards. UMC is also seeking an injunction.

The case was filed in the Intermediate People’s Court of Fuzhou, in Fujian province. That is also where Jinhua is based. Situated directly across the Taiwan Strait, Fujian is home to several of China’s efforts to close the technology gap with foreign semiconductor producers. The coastal city of Xiamen is home to one of Qualcomm’s local China partnerships, as well as to notable patent buyer Sanan Optoelectronics. In 2016, the Obama administration blocked a bid by Fujian Grand Chip Investment Fund to acquire German semiconductor equipment manufacturer Aixtron.

Fujian is also the site of another ongoing chip-sector patent fight, this one between Veeco, a New York-based producer of LED equipment, and Chinese rival AMEC. The story is somewhat similar: Veeco sued AMEC in a US district court, AMEC responded with a suit in China. The result so far has not been encouraging for the US party. The Chinese litigation has moved much more quickly than its US counterpart – within five months of the filing, the Higher People’s Court of Fujian ordered an injunction against numerous Veeco products.

A China-based lawyer has confirmed to me that this was a preliminary injunction – something that is very hard to get in a Chinese patent case under normal circumstances. One thing that isn’t clear is why this ruling was made by Fujian’s higher court – intermediate courts like the one where Micron has just been sued are the normal first instance venue. Whatever the reason, Veeco’s investors did not like the news of the injunction one bit.

Courts in this part of China are likely to have some experience in the chip sector, and it does not seem a stretch to say they may take a tough line on these types of infringement cases. Look at the SEP injunction issued by a court in Shenzhen last week – an official press release cast the high-profile decision as evidence of the city’s “innovation-driven development strategy”. There is no doubt regional competition in China between would-be ‘IP hubs’. As that continues, it looks as if litigation risks for major players like Micron will continue to grow.