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Avant execs reach trade-secret plea deal

Several current and former employees have pleaded no contest to charges that they stole trade secrets from rival Cadence Design Systems.

Facing a lengthy and complex criminal trial, several current and former employees of Avant pleaded no contest Tuesday to charges that they stole trade secrets from rival Cadence Design Systems.

The settlement was reached as jury selection was under way in the trial in Santa Clara County, Calif., according to a source close to the company.

Avant (pronounced "ah-VAHN-tee"), a chip-design software maker, and eight people who worked for or were associated with the company were accused of lifting code from rival Cadence and illegally using it in Avant products.

The defendants, including Chief Executive Gerald Hsu and four Avant founders, faced 11 years in jail and fines of $27 million if convicted of the charges.

The counts included trade-secret theft, conspiracy to commit trade-secret theft, receiving stolen property, and securities fraud.

Under the terms of Tuesday's agreement, the company also pleaded no contest to trade-secret theft and securities fraud and will pay the maximum $27 million fine.

In addition, the company also must pay Cadence an undetermined amount. A restitution hearing is scheduled for June 4, and Avant has been ordered to place $10 million into an escrow account.

As part of Tuesday's agreement, charges against one of the defendants were dropped. Five of the defendants still could face prison sentences under the agreement. Hsu is not one of them, although he will have to pay $2.7 million. Some other defendants will have to pay fines ranging from $27,000 to $2.7 million, meaning the company and its employees must pay a total of $37 million. The defendants facing jail time will be sentenced over the next few weeks.

Avant said the plea agreement was a business decision designed to clear up concerns about the company?s future.

"Today?s settlement removes the long-standing uncertainty surrounding the criminal case and also confirms that this dispute does not involve any tools currently sold by Avant," said Clayton Parker, the company?s head of U.S. marketing.

Avant has maintained that the case is outdated because it no longer includes the disputed code in any of the products it sells. In a separate civil suit brought by Cadence, a judge ordered the company to stop shipping products containing the code.

The case is unusual because trade-secret theft lawsuits rarely involve criminal charges. The deputy district attorney prosecuting the case has said a victory could encourage more companies to work with law enforcement when they feel their intellectual property has been compromised.

"I think it's a big victory for the Valley and the software industry because it sends a message that stealing computer code is a crime," Deputy District Attorney Julius Finkelstein said.

Avant has successfully delayed the case for years through various legal maneuvers. The investigation into the company's actions began in 1994.