Here is an article from the Merc about a suit between Intel and Broadcom. This suit could have implications for the suit between Nortel and ONI. Intel is arguing the doctrine of "inevitable disclosure" of intellectual property. This doctrine appears to be gaining acceptance in some courts. I will follow this case with a great deal of interest.
Intel sues Broadcom over
ex-employees
Outcome of case could impact California regulations on changing jobs
BY TOM QUINLAN
Mercury News
Two of the semiconductor industry's most successful companies are squaring off in court this week, as Intel Corp. is charging newcomer Broadcom Corp. with misappropriation of trade secrets and interference with employee contracts.
The case, which could help clarify California's employment laws, was first filed March 8 in Santa Clara County Superior Court. It started out as a little-noticed attempt by Intel to keep three former employees from taking similar jobs at Broadcom Corp., a smaller but fast-growing rival in the communications chip market.
But in an amended complaint filed on April 28, Intel is now accusing Broadcom of actively
misappropriating trade secrets and placing Intel's former employees in positions where there will be an ``inevitable disclosure'' of Intel's intellectual property.
The suit reflects the changing nature of the semiconductor industry as Intel, a leader in microprocessors and networking chips -- and an early investor in Broadcom -- is increasingly viewing communications chip pioneer Broadcom a significant competitor.
The case may also help shape the California laws that impact an employee's freedom in changing jobs -- especially in cases where an employee has access to trade secrets, a vital concern to most Silicon
Valley companies.
California has traditionally given employees wide latitude to move from job to job, but if Intel successfully argues that former employees should be barred from taking certain jobs with competitors
because they would inevitably disclose trade secrets, that freedom could be significantly curtailed, experts said.
The two companies have been battling in hearings this week to determine whether Intel should be
awarded a preliminary injunction that would temporarily bar Broadcom from assigning three former Intel employees to the jobs for which they were hired.
That would address many of Intel's concerns that Broadcom has been aggressively trying to gather information about Intel's product and marketing plans for communications and networking semiconductors -- allegations that Broadcom executives dismiss as out of hand.
Separate lawsuit
Also, Intel is asking in a separate suit filed in Denmark -- where the employee worked for Intel -- that a fourth recent Broadcom hire be prevented from working at the Irvine-based company at all.
``In a sense Intel is trying to make an example of these employees,'' said Broadcom president and
CEO Henry T. Nicholas III. ``This whole suit, I believe, is the result of some midlevel managers at Intel who were disgruntled over the fact that they lost some of their brightest stars.''
And in California, at least, there's very little standing in the way of letting someone change jobs, suggested Broadcom's outside counsel, Rico Rosales of the Palo Alto law firm Wilson, Sonsini, Goodrich & Rosati.
``There's a very high burden of proof, in California at least, that Intel must meet to keep its employees from going to work for a competitor,'' Rosales noted. ``If Intel is able to establish the idea of
inevitable disclosure, it would have a very chilling effect on a person's right to change jobs.''
Intel acknowledges that initially, its concern was that three of its former employees were filling jobs at Broadcom where they couldn't help but use the confidential information they gained at Intel.
Since the lawsuit was filed, however, Intel said it has discovered that Broadcom has been actively
trying to solicit confidential information from current and former Intel employees in a number of ways.
``In the discovery process, we found out that they were engaged in a campaign to obtain our
intellectual property,'' said Peter Detkin, Intel's assistant general counsel.
``We're actually discovering a lot of things that took place that weren't in the complaint since the hearings have started.''
Among Intel's claims are the allegations that an Intel engineer -- who has subsequently left Intel, but has not been hired by Broadcom -- gave a senior Broadcom manager a highly detailed and very
confidential diagram of a networking chip design that Intel plans to introduce -- a diagram that Broadcom never informed Intel it had.
Intel also said that William Lund, the employee based in Denmark, continued to request and gather
confidential intellectual property even as he was negotiating the terms of employment at Broadcom.
Another case
An additional instance of Broadcom attempting to gain Intel's trade secrets -- one that wasn't detailed in the April 28 complaint, but came out in testimony -- was the charge that Broadcom president
Nicholas received an e-mail from an Intel employee that outlined Intel's confidential processor road map -- another instance where Broadcom failed to inform Intel that it was receiving confidential information, Intel executives said.
``The fact is, if a company has proven to be trustworthy and concerned with the property rights of
others, then we are less concerned when they hire one of our senior vice presidents,'' Detkin said.
Given the circumstances, ``we don't think it appropriate that they raid our employees,'' he added.
Broadcom denies the charges that it has misappropriated Intel's trade secrets, or even wants to.
``We're an intellectual property company,'' Nicholas said, noting that the company doesn't
manufacture its own semiconductor designs. ``It's all we have. We're very careful about making sure that our product design are in fact ours.''
Although Broadcom acknowledges that Nicholas received an e-mail from an Intel employee, it did
not contain any confidential information, Rosales said.
Intel's amending its complaint to suggest that Broadcom has actively tried to get access to Intel's trade secrets, was just a recognition that its original complaint was relatively weak, Rosales said.
``We think (the misappropriation of trade secrets) charges are just a red herring,'' Rosales noted.
``They just don't want these employees working for us in these jobs. That's all they are trying to
accomplish.''
Impact could be huge
The outcome of the case could end up having a significant impact on the ability of highly placed or key employees -- especially those at high-tech companies -- to change jobs.
Traditionally, California regards non-compete clauses in employment contracts as unenforceable as a matter of public policy. That means the state generally won't honor such contracts from other states or foreign countries, either.
``California law protects employee mobility to a greater extent than what other states do,'' said Raymond Hixson, a labor and employment law attorney for the Palo Alto law firm Fenwick & West.
But in the past, trial courts have been receptive to the argument that ``inevitable disclosure'' of trade secrets might occur and should be prevented, he added -- until earlier this year when the California Supreme Court ``depublished'' the findings of a lower court that specifically upheld that theory. When a decision is depublished, courts cannot use it as a legal basis for their decisions.
``It could mean that the Supreme Court doesn't like the concept of inevitable disclosure, or they
could just want a better case to base that decision on,'' Hixson said.
Contact Tom Quinlan at tquinlan@sjmercury.com or (408) 271-3667.
sjmercury.com
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