TSMC expands IP legal battle against SMIC
Mark LaPedus
03/23/2004 4:22 PM EST

HSINCHU, Taiwan--Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) has expanded its legal battle with Chinese foundry rival Semiconductor Manufacturing International Corp. (SMIC), alleging that SMIC stole TSMC's 0.18-micron process and related chip-production technologies.

In December, TSMC filed a suit against SMIC over foundry patents and misappropriation of trade secrets. The complaint claimed that SMIC hired over 100 TSMC employees and asked some of them to provide SMIC with TSMC's trade secrets. The suit alleges that an SMIC official asked a then-TSMC manager to obtain TSMC process information and forward it to SMIC of Shanghai (see December 21, 2003 story). SMIC denied those charges, it was noted.

On Monday (March 23), TSMC filed new papers in the U.S. Federal Court, claiming that it has "eyewitness affidavits and new technical verification of trade secret misappropriation by SMIC." This filing is in response to SMIC's February 17th motion to dismiss TSMC's trade secret misappropriation and unfair competition claims filed by TSMC.

In its new filing, TSMC also claimed that SMIC lured away certain key employees with offers of SMIC stock and stock options. SMIC expected those employees to bring "presents" of TSMC's latest proprietary technologies and improvements when they came to work for SMIC, according to TSMC.

"TSMC's filing included affidavits of former SMIC engineers who personally witnessed SMIC's misconduct," according to the Hsinchu, Taiwan-based silicon foundry giant. "According to the filing, one witness estimated that 90 percent of SMIC's 0.18-micron logic process was copied from TSMC," the company said.

"Other witnesses declared that SMIC attempted to disguise the origin of the information by internally referring to TSMC and its technology by the code name 'BKM1,' referring to 'Best Known Method 1'. Still another sworn statement reveals that SMIC's use of TSMC technologies was 'no secret' and was openly discussed by SMIC engineers," according to TSMC.

The new complaint expands upon TSMC's original charges. In its original complaint, TSMC attached a copy of an email seized by the District Attorney in Hsinchu, Taiwan, which allegedly substantiated a solicitation by a SMIC corporate officer to a then-active TSMC employee.

The document requested her to steal six TSMC process flows, together with process targets and equipment types; and concluded with the remark: "Sorry for the long list, but we need a lot of material to set up the new operation."

"TSMC's new evidence confirms that SMIC got what it asked for," according to the company. "The most recent filing also states that TSMC verified SMIC's use of stolen trade secrets through forensic examination of an SMIC manufactured device bought on the open market," according to TSMC. That chip was reportedly designed by Broadcom Inc.

"That chip contains features that are strikingly similar to TSMC's, but bearing little similarity to comparable features in a chip made by Chartered Semiconductor, SMIC's only reported licensor of 0.18-micron logic processes," according to TSMC.