Small Software Developer Sues Tech Giants Over Use of Code

Silvaco Data Systems, a small Santa Clara, Calif., software developer, apparently wasn't satisfied after it forced the now-defunct Circuit Semantics Inc. to stop licensing and maintaining a stolen trade secret in 2003.

Because now, in what legal experts say is a rare move, Silvaco is suing a slew of CSI customers, including Hewlett-Packard, Intel and Agilent Technologies, for using its code.

Although no trial date has been set -- and Silvaco attorney Chris Scott Graham of Dechert said claims against one of the defendants, Specular Networks, were dismissed Aug. 11 because of a "business resolution" -- outside legal watchers are intrigued with the action.

"It is highly unusual," observed James Pooley, a partner with Pooley & Oliver in Palo Alto, Calif., and a veteran IP litigator.

"If you do [sue customers], you do it very carefully," Pooley added. "That's because the competitor's customers are your customers. They are serving the same community you are serving, and you don't want to make enemies."

"California law does make it illegal to use or disclose a secret if you have reason to know it was acquired unlawfully, so if Silvaco can prove that they may have a case," Mark Lemley, a Stanford law professor who is of counsel with Keker & Van Nest wrote in an e-mail to The Recorder. "But there may be other procedural hurdles, [namely] why did they wait so long to sue the customers?"

That's exactly the argument the defendants appear to be latching onto.

Silvaco claims its trade secret battle with CSI over the DynaSpice product, which Silvaco said included trade secrets from Silvaco's SmartSpice product, was widely publicized in the software industry. Thus CSI's customers should have been fully aware of the situation, according to Silvaco's complaint, which called the customers' misappropriation "willful and malicious."

But while lawyers for the defendant companies would not comment, court papers filed by Agilent attorneys in March flat out deny Silvaco's claims and raise the timeliness issue.

"Silvaco is also guilty of laches and unclean hands in that it failed to take action against Agilent within a reasonable time of learning that Agilent had taken a license to DynaSpice technology," Agilent attorney Daniel Weinberg of Orrick, Herrington & Sutcliffe wrote in papers filed in March in Santa Clara County Superior Court.

"Instead of acting promptly, Silvaco delayed without excuse in writing a cease-and-desist letter to Agilent."

Silvaco is seeking exemplary damages in a sum equal to twice the amount of the award of damages and attorneys fees, according to the Hewlett-Packard complaint.

Meanwhile, Tuesday was CSI's last official day of business. The company announced it is handing over ownership of its Dyna product line -- including DynaSpice, a software program used to design integrated circuits, which was at the heart of the trade secret allegations -- to Silvaco, in accordance with the parties' settlement.

This handover comes three years after Silvaco accused CSI of telling its customers that they were still allowed to use the DynaSpice product -- even though Silvaco won a court order in August 2003 prohibiting CSI from making that claim.

If Silvaco is successful in its trade secret suits, "it would certainly make people pay more attention" with respect to ownership and indemnity issues, said Pooley.

The cases noted here are Silvaco v. Agilent, 1-04-CV-031949; Silvaco v. Hewlett-Packard, 1-05-CV-053615 and Silvaco v. Circuit Semantics, 1-03-CV-005469.