Cadence steps up legal battle

Although Avant introduced a successor product to replace Aquarius early this year, the Fremont, California, company still serves "a substantial number of customers" who license Aquarius, said Smith McKeithen, Cadence's senior vice president and general counsel. "We want to make it crystal clear that the use of Aquarius should cease."

Cadence, of San Jose, California, said it also asked that a stay in its case be lifted, and presented new evidence that Avant had misappropriated Cadence trade secrets by copying code directly from its database software. The move, made in a brief filed yesterday in U.S. District Court in San Jose, is the latest salvo in the bitter, four-year-old legal feud between the two companies, both of which make software for microchips.

The earlier preliminary injunction in the case, issued last December by U.S. District Judge Ronald Whyte, ordered Avant to stop making or marketing an earlier Avant product known as ArcCell, finding that it contained code derived from Cadence software.

Whyte stopped short of applying the order specifically to Aquarius--which at the time was Avant's flagship product--but said he would extend his injunction to other Avant products if he was presented with evidence that they also violated Cadence's intellectual property rights.

Avant spokesman Clayton Parker said yesterday's filing came as no surprise, noting that Cadence's earlier request that Aquarius be recalled was rejected in May. "Their previous attempt to enjoin Aquarius failed, and we expect the same result with this attempt as well," Parker said.

In any event, he said the motion would have little effect on Avant, estimating that more than 80 percent of Avant's customers have upgraded to Aquarius's successor product, which was launched in January and is dubbed Apollo. A countersuit by Avant still is pending.

In its brief filed yesterday, Cadence argued that in making Aquarius, Avant copied code directly from a Cadence product called Design Framework II. "Aquarius would not exist as a workable product without Avant's misappropriation of Cadence trade secrets, and Aquarius therefore should be enjoined," the brief argued.

The companies' feud had its genesis in the 1991 defections of four Cadence executives who left to found Arcsys, the company now known as Avant. Cadence says the officers took with them trade secrets that gave the fledgling company a jump-start in getting a product to market. Over the next few years, two more Cadence executives defected to Avant, and, according to Cadence and prosecutors, a third employee also left, taking with him more source code that eventually found its way to Avant.

Cadence sued Avant for copyright infringement and trade secret misappropriation in December of 1995, one day after Santa Clara County investigators raided Avant's offices.

In April of 1997, the Santa Clara County District Attorney's office charged seven former Cadence employees--six of whom now hold executive positions at Avant--with trade secret misappropriation, a felony punishable by up to seven years in prison. Whyte stayed the civil case so that the criminal case could proceed. The criminal proceeding now is stalled while a motion by the prosecution to disqualify the municipal judge hearing the case is pending.

Cadence's motion yesterday asked Whyte to lift his stay in light of the delay in the criminal case. "It is now clear that the criminal case will not proceed to trial this century," the brief argued. "If this case does not proceed to trial for another four years, Avant will have succeeded in stealing code from Cadence in 1991, avoiding detection of theft until 1995, and deferring the day of reckoning for over ten years. Such a result is unconscionable."

Cadence added that, with each passing day, the damages to its company accrue, and estimated that damages in lost sales and punitive fees would total $1.2 billion by the end of 1999. The company said it doubted Avant's ability to pay damages, claiming that it has assets of only $129 million.

Avant and Cadence compete head-to-head in the market for software used by microchip makers and other electronics firms. Cadence is the industry leader, posting revenues last year of $915.89 million and net income of $169.49 million. Avant, by contrast, generated revenues of $147.37 million and net income of $6.5 million.