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Cadence, Avant settle trade-secret suit

Chip-design software maker Cadence Design Systems settles its civil lawsuit against rival Avant for $265 million, closing the chapter on a case that centered on stolen trade secrets.

Chip-design software maker Cadence Design Systems agreed to settle its civil lawsuit against rival Avant for $265 million, closing the chapter on a long-running case that centered on stolen trade secrets.

Under the terms of the settlement, the two companies and individuals named in the suit have agreed to dismiss all pending claims and counterclaims, which date back to 1994. In addition, they agreed to enter into reciprocal licenses covering the intellectual property at the heart of the lawsuit.

Executives at both of the companies expressed relief.

"This settlement underscores the integrity of the laws that protect and thereby enable innovation," Cadence CEO Ray Bingham said in a statement.

"With the litigation behind us, our resources--and those of (Avant owner) Synopsys--can be more focused on providing solutions for the technology challenges faced by our customers. I believe that the electronic design industry now can move forward in a spirit of cooperation and healthy competition," he said.

The suit stemmed from a criminal investigation begun in 1994 into allegations that workers at Avant, which develops software that helps the design of chips, lifted source code from rival Cadence and illegally used it in some products. The case was filed in the United States District Court for the Northern District of California.

Prosecutors deemed the violations so severe that they filed criminal charges, a rarity in a trade-secret case. Avant and eight people who worked for or were associated with the company faced charges including trade-secret theft, conspiracy to commit trade-secret theft, receiving stolen property, and securities fraud.

Cadence also filed the civil suit, but it was put on hold pending the outcome of the criminal case. The most recent settlement resolves the civil case.

Last year, just days before the criminal case was set to go to trial, Avant reached a plea agreement with prosecutors that sent several of its current and former workers to jail.

Then in July 2001, a Santa Clara County, Calif., judge ruled that Avant would have to pay $182 million in restitution for stealing its trade secrets. The judge also ordered that it would have to pay Cadence retroactive interest for lost profits and attorney fees, an amount Cadence executives said would add up to at least $200 million--more than twice Avant's annual earnings in 2000.

Though the restitution was a hefty sum, Cadence had asked for $700 million.

The money Avant must pay in this latest civil settlement is in addition to the amount it was ordered to pay in the criminal case, bringing its total payments to more than $460 million.

Synopsys, a large chip-design software maker that purchased Avant in June, will pay the money out of an $335 million insurance policy from Illinois National Insurance Company, a policy it bought upon completion of the acquisition. Under the terms of the settlement, Cadence will accept $265 million in two installments; $20 million will be paid on or before Nov. 22, and $245 million will be paid on or before Dec. 16.

"We are pleased to have settled this matter in a fair and reasonable manner," Aart de Geus, CEO of Synopsys, said in a statement. "We do not condone the actions taken against Cadence in the past by Avant and acknowledge the damage that it has caused to Cadence. Today's agreement puts this matter to rest for good."

News.com's Lisa Bowman contributed to this report.