SMIC to Pay TSMC $175 Mln to Settle Patent and Trade Secret Disputes

Strategic Insights -

TSMC, the world's largest independent semiconductor foundry, has reached a settlement with SMIC, New York-listed Semiconductor Manufacturing International Corporation, to resolve charges of patent and trade secret infringement. As part of the agreement, SMIC will pay TSMC $175 million over six years, with $30 million payments in the first five years and $25 million in the sixth year. The settlement also includes a cross-licensing agreement for each company's patent portfolio through December 2010, contingent on no further patent infringement incidents.

Key Takeaways:

  • SMIC agreed to pay TSMC $175 million over six years to settle patent and trade secret infringement disputes.
  • The payment schedule includes $30 million payments in the first five years and $25 million in the sixth year.
  • The cross-licensing agreement for patent portfolios applies through December 2010, subject to the condition of no further patent infringement.
  • TSMC will not sue SMIC for specific acts of alleged trade secret misappropriation, although the settlement does not grant SMIC access to TSMC's trade secrets.
  • The settlement marks the end of disputes between TSMC and SMIC that have lasted for over a year.

Statistics:

  • SMIC will pay TSMC $175 million in total over six years.
  • The payment schedule breaks down into: $30 million in the first five years and $25 million in the sixth year.
  • TSMC filed a lawsuit against SMIC in December 2003, which was later dismissed.
  • TSMC filed another suit against SMIC in California State Court in May 2004 and brought charges against SMIC with the U.S. International Trade Commission (ITC) in August 2004.

Sources:

  • INTERFAX-China
  • Shanghai (Shanghai Municipal Government)
  • SMIC's 2004 Q4 earnings conference call