Chip Maker Loses|One by Default

SAN FRANCISCO (CN) - Tech workers who schemed to steal controller chip technology and defected to a competing company, garnering "virtually overnight" success, have lost a legal battle by default, a federal judge ruled Monday.

VIA Technologies and VIA Labs sued ASUS Computer International, ASUSTeK Computer and ASMedia Technology, in August in San Francisco.

Chewei Lin, VIA's onetime president, left the company in 2007 to serve as president and director of ASMedia Technology.

"Dozens of other VIA employees, including senior product managers and R&D engineers, also joined ASM at around the same time, including Chi Chang, who is now the head of research and development at ASM," VIA claimed.

"On information and belief, the majority of current ASM analog designers, production control staff, and product managers are from VIA. As a result of ASM's mass raiding of VIA's employees, the former employees of VIA who joined ASM collectively had knowledge of substantially all of VIA's confidential trade secret information relating to USB 3.0 Technology, including hub controller chips, host controller chips, and device controller chips."

VIA claimed that an internal investigation revealed that former VIA employees who joined ASM "downloaded and printed numerous circuit diagrams for high speed controller integrated circuits (ICs) from VIA's workstations" while employed by VIA. "Prior to the migration of VIA's former employees to ASM in 2007, ASM had no expertise in the high-speed I/O field at all, including with the legacy USB 1.0/1.1/2.0 technologies critical to implementing the USB 3.0 protocol. Rather, ASM's original business since its founding in 2004 was making digital photo frames," the complaint states.

"Nevertheless, in 2008, shortly after luring away VIA's former employees, ASM announced that it would start to develop high speed I/O products, including USB 3.0 products and was able to take USB 3.0 device controller chips into mass production in 2009, approximately one year later. In 2010, ASM also launched USB 3.0 host controller chips. In January 2011, ASM, who previously had only sought trademark protection for marks used in connection with a narrow subset of digital photo frame-related products and accessories, filed applications in both Taiwan and the United States to register a trademark for use in connection with a wide range of ICs and high speed I/O products," according to the complaint.

Taiwanese investigators uncovered the scheme in an official investigation, VIA said.

"VIA's internal investigation and criminal investigations by prosecutors in Taiwan uncovered a scheme hatched by defendants in at least as early as 2007 to copy VIA's notable success in the development of USB technology, and boost their own flagging sales at VIA's expense, by inducing various VIA employees - including a then-VIA vice president Chewei Lin - to steal VIA's highly confidential and proprietary trade secret information relating to USB 3.0 controller chip technology, and defect to high-level positions with the defendants," the company said in its lawsuit.

The "mass theft and defection" launched the defendants from a lowly digital photo frame manufacturer to maker of "complex" computer chips "virtually overnight," VIA said.

"As a result of this mass theft and defection, ASM went from being a digital photo frame manufacturer with no USB-related products to mass producer of complex USB 3.0 chips virtually overnight, a highly suspicious circumstance that prompted the Taiwanese prosecutors currently pursuing criminal charges against ASM and its employees to state that 'it is extremely difficult to develop and take such chips into mass production in such a short time frame [of one year between ASM's announcement of its intent to start developing high-speed I/O products in 2008, and its move to mass production in 2009].' This abrupt change in ASM's product focus also coincided with a marked improvement in its financial situation, whereby it went from having less than US $10M in sales and reporting net operating losses for at least three consecutive years starting in 2007, to more than doubling its sales and reporting positive net operating income starting in 2010." (Brackets in complaint.)

VIA sought an injunction, disgorgement and costs for patent infringement, trade secret misappropriation and unfair competition.

"By misappropriating and infringing VIA's intellectual property, defendants have willfully and maliciously violated VIA's rights in its trade secrets and patents and engaged in unfair competition," the company said.

Default judgment was entered against the defendants Monday.

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