3/2008 IP Law & Business 18
Zusha Elinson

Silicon Valley has always been a hot bed of trade secrets suits. But there's a new twist in an ongoing dispute between Applied Materials, Inc., the huge Santa Clara-based maker of semiconductor equipment, and a company started by its former employees: the former employees' business is in China. So the dispute raises the question of which country will have jurisdiction. "Do the California courts want to be an international court of trade secret?" asks David Steuer, a Wilson Sonsini Goodrich & Rosati partner who represents another Chinese semiconductor company in a similar case.

Applied Materials claims that Gerald Yin, its former chief technology officer, and others took confidential information about tools used to design microchips, formed Advanced Micro-Fabrication Equipment Inc. (AMEC) in Shanghai, and then disclosed the technology in patent applications in China, Japan and the U.S. Morrison & Foester lawyers for the Chinese company are arguing that the case should be dismissed for lack of jurisdiction. "[Applied] is not suing any alleged thieves, it is only suing their subsequent employer, which, in this case happens to be a Chinese company," says Harold McElhinny, the lead MoFo lawyer. "But why would a Chinese--or Canadian or British or Brazilian--company be subject to California law simply because it hired someone who used to work in California?" Applied Materials's lawyers at Goodwin Procter and Fish & Richardson argue in court filings that the proper jurisdiction is California because many of the events giving rise to the claim happened there. The motion was scheduled to be heard in February.

The obvious reason for Mofo's strategy: "The home court advantage is pretty serious in China," said Bing Ho, a Baker & McKenzie lawyer who splits his time between California and China. "A big bad multinational against a little fledgling Chinese company -- the optics don't look very good."

In fact, AMEC is no fly-by-night operation--its backers include Goldman Sachs and Redpoint Ventures. Knock-offs of handbags are far from the whole story in China these days. Says Steuer of Wilson Sonsini: "I think it's more like the trade secrets cases in the early days of Silicon Valley."
This story appeared in sibling publication The Recorder .