Lawyers Square Off in Closings for Semiconductor Trade Secrets Trial

Zusha Elinson

10-30-2009

Lawyers for two giant semiconductor companies faced off calmly in closing arguments in a trade secrets and breach-of-settlement trial Wednesday in Alameda County Superior Court, but the bitterness of a years-long international grudge match between Taiwan's TSMC and China's SMIC was hard to miss.

Keker & Van Nest's Jeffrey Chanin, who represents TSMC, compared SMIC to a thief whose "strategy has been to play a game of catch me if you can and play dumb when caught." Wilson Sonsini Goodrich & Rosati's David Steuer told the jury that TSMC's lawsuit was nothing more than "a mean-spirited attempt to destroy a competitor."

The nine-week California trial has unfolded before Judge Steven Brick, who on Wednesday was attired in his trademark bow tie and dark-rimmed glasses. The case centers on a settlement agreement that TSMC and SMIC came to in 2005, in which SMIC agreed to pay $175 million to settle allegations of rampant trade secret theft.

TSMC filed another lawsuit in 2006, claiming that SMIC breached the settlement by continuing to use stolen trade secrets that relate to the recipe for making semiconductors. SMIC has mounted different defenses and counterclaims, but focused in closings on accusing TSMC of failing to iron out disagreements about the settlement in good faith before filing another lawsuit.

Both Chanin, a San Francisco Keker partner, and Steuer, a Palo Alto, Calif., Wilson partner, are courtroom veterans -- and neither stumbled on Wednesday.

Dressed conservatively, Chanin delivered his argument in a calm, friendly, slightly didactic tone. He argued that SMIC took trade secrets from former TSMC employees to get its plants up and running in short order.

Chanin said that SMIC had agreed to clean out all the stolen trade secrets as part of the 2005 settlement, but kept using them -- and on top of it destroyed documents. Indeed, Brick told jurors they could infer that SMIC had deliberately destroyed TSMC documents in its possession. The Keker lawyers tried to capitalize on the instruction by writing it out in large letters on an oversized, glossy plasterboard right beside the jury box.

Keker lawyers also made extensive use of PowerPoint, which included snippets of testimony next to head shots of the witnesses. All of the TSMC witnesses were smiling in the photos, while the SMIC witnesses were caught frowning.

Dressed in a darker suit, Wilson's Steuer didn't miss the chance for a few sarcastic digs. When arguing that TSMC didn't meet and confer in good faith with SMIC before filing the second lawsuit, he likened one of TSMC's presentations at those meetings to nonsense: "Nothing calls out good faith like a slide full of gibberish."

Steuer said the case was about trying to crush a competitor and boiled down to "fragments of alleged trade secrets that were not cleaned out." He claimed that TSMC hadn't proven that any trade secrets were misappropriated, because, as Steuer had argued, "information circulates in this industry in a number of ways."

The Wilson lawyer pushed the point that TSMC didn't really try to fix the problems that occurred after the 2005 settlement as required by the agreement. Instead, he said, TSMC just geared up for litigation. However, Brick had already ruled that TSMC gave adequate notice before suing.

The case has been split into several portions by Brick. Earlier this year, Wilson lost its bid to convince the judge that TSMC General Counsel Richard Thurston had doctored the settlement agreement. Damages will also be decided in a separate trial to come.

In closing, Chanin told the jury to punish SMIC.

"It's time for you to tell this company to act responsibly with your verdict in this case," Chanin said.

Steuer said that SMIC had already paid the price. "They did take responsibility," he said. "They settled the case and it was a huge and painful settlement."