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After four years of pretrial maneuvering, one week of jury selection was all Fremont, Calif.-based Avant Corp. needed to decide it wanted out of a criminal trial in its high-profile trade secrets theft case. The software maker on Tuesday accepted a plea agreement from the Santa Clara County, Calif., district attorney’s office that forces the company and seven individuals to pay $35 million in fines and means jail time for five of the defendants for stealing computer code from a competitor, San Jose, Calif.-based Cadence Design Systems Inc. Thus ends one of the most closely watched trade secrets theft cases in recent memory and a criminal prosecution that’s noteworthy both for its length and rarity. Legal scholars and intellectual property attorneys have touted the Avant case as one of the first true tests of California’s trade secrets theft statutes. “The resolution is a tremendous victory for the people of California and Silicon Valley,” said Deputy District Attorney Julius Finkelstein, who led the prosecution team. “It sends a clear message that stealing source code is a serious criminal offense. I think particularly software companies will feel gratified with the results.” Jail time ranges from one to six years for the individual defendants, and they are liable for $8 million of the fines. Avant will pay the remaining $27 million plus restitution. “This is a landmark day for protecting innovation and intellectual property,” said Ray Bingham, president and CEO of Cadence, in a statement. “Based on the weight of the evidence, we are not surprised by the results.” Avant referred questions to Daniel Bookin, a partner with O’Melveny & Myers who represented the company. He said Tuesday’s settlement lets Avant get back to business as usual. “The no-contest pleas put an end to the criminal process and allow Avant executives to focus on running the company as opposed to sitting in court for months,” Bookin said. Defense attorneys and prosecutors holed up in Judge Conrad Rushing’s chambers Tuesday morning, as prospective jurors cooled their heels. When the attorneys emerged, the defense and its clients immediately entered their no-contest pleas. Prosecutors dismissed charges against an eighth individual defendant, Mon Yen Tsai, who refused to settle. Tsai, one of the founders, was considered a peripheral figure in the case. “We didn’t think it was in the best interest of the people to proceed with a four-month trial for one defendant,” Finkelstein said. Until this week — with the prosecution pushing for jail time for all eight defendants facing trial — neither side was budging in settlement talks. However, rumors that the California Supreme Court is expected to decide today whether to hear a defense writ seeking to disqualify the prosecutor for accepting assistance from Cadence may have persuaded the prosecution to cut a deal. Nevertheless, Finkelstein had said earlier that he was unfazed by the defense’s repeated motions to kick him off the case. “I guess I should take that as a compliment,” Finkelstein had earlier said about the writ. The long-delayed case also got a kick-start from Judge Rushing, who took over in March after a retired appellate judge literally stormed off the bench due to defense delays. Rushing had pushed hard for a May 14 trial date, and the pressure tactics apparently were enough to bring both sides to the table to seriously discuss a settlement. “Judge Rushing gets a lot of credit for the settlement. By actually getting the case to trial, it settled,” Finkelstein said. “His vast experience in handling complex litigation matters helped as well.” In 1991, several Cadence employees left to start rival company Avant. Cadence — and later prosecutors — alleged Avant products were designed with stolen source code. According to experts hired by Cadence, error messages in Avant’s code matched error messages in Cadence’s product. Cadence filed a civil trade secrets and copyright infringement suit in 1995. Several securities fraud class actions were also filed. The DA followed with a criminal complaint in 1997. The civil case in U.S. district court in San Jose is stayed awaiting a 9th U.S. Circuit Court of Appeals decision. The outcome in the criminal case should not affect the civil action because no-contest pleas are inadmissible in the civil matter. Avant settled the class actions in May for $47 million. As part of Tuesday’s settlement, Avant CEO Gerald Hsu pleaded no contest to conspiracy, concealing stolen property and securities fraud and agreed to pay $2.7 million in fines but will face no jail time. Others pleaded no contest to similar charges and agreed to pay fines ranging from $27,000 to $2.7 million and serve jail or prison time. Prosecutors downplayed Hsu’s ability to avoid prison. “He is paying a $2.7 million fine. It’s a very common story when you go after a criminal enterprise, the people at the top are the hardest to convict. This case is no different,” Finkelstein said. “From our point of view, five individuals will receive prison or jail time and the defendants will pay $35 million.” Yun-Chung Cho, a former Cadence employee later employed by Avant, faces a $108,000 penalty and up to one year in jail. Yuh-Zen Liao, Avant’s vice president of technology, faces a $2.7 million fine and up to one year in jail. Tzyh-Lih Wuu, one of Avant’s founders, will pay a $2.7 million penalty and up to two years in jail. Shiaoli Huang, Avant director of business operations, will pay $108,000 in fines with no jail time. Mitsuru Igusa, a former Cadence employee, will pay $27,000 and faces up to a six-year prison sentence. Chih-Liang Cheng, a former Cadence employee, faces a $27,000 fine and 364 days in prison. Individual sentencing is scheduled for June and July.

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