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Cadence Details Suit Against Avant! Corp.

December 7, 1995

SAN JOSE, Calif. (AP) _ Officials at Cadence Design Systems had suspected for months that several former employees had stolen trade secrets in the hours before they quit their jobs.

But it wasn’t until a computer engineer saw his own bugs written into another company’s software that Cadence knew for sure, its president and chief executive officer Joseph Costello said Thursday.

The San Jose-based electronic design automation company sued Avant! Corp. and four individuals Wednesday, a day after Santa Clara County District Attorney officials, the FBI and local police did a 12-hour search of Avant!‘s corporate offices, removed computers and questioned employees. Avant!’s stock has lost nearly half its value since then.

The suit in U.S. District Court in San Jose alleges misappropriation of trade secrets, copyright infringement, conspiracy and other illegalities. It names Avant! chairman and chief executive Gerald Hsu along with former Cadence employees Mitsuru Igusa, Chih-Liang Cheng and Opher Segev.

Also on Wednesday, U.S. District Judge William Ingram issued a temporary restraining order to prevent Avant! from modifying or destroying any computer code for its ArcCell products. It also ordered the defendants to notify Cadence within 24 hours of all off-site storage.

Avant! denies all charges and said it ``will defend the complaint vigorously.″ No criminal charges have been filed.

In a teleconference Thursday, the company detailed the events that led up to the search and seizure. It claims the former Cadence employees left in 1994 and early 1995 to form another company that later became part of Avant! It also claims that before they left, they downloaded Cadence computer code and took it with them.

In September of 1994, Costello said, Igusa abruptly quit his job and refused to sign papers saying he would not disclose company secrets.

At the same time, company officials noticed a large transfer of information to his electronic mail system.

Police later searched Igusa’s home and found source code, the computer coding that makes all product manufacturing possible, he said.

Igusa was later charged and pleaded innocent to six counts of felony misappropriation of trade secrets.

About the same time, Hsu set up a rival company called ArcSys that eventually spun into Avant!. He hired Igusa as a consultant along with the two other former Cadence employees.

Cheng and Segev also left Cadence abruptly and appeared to copy source code, Costello said.

In August of 1995, an engineer was visiting a customer and noticed some source code that he had written himself. Even the bugs in the system were the same as those he wrote into his own work, Costello said.

The company launched an investigation that lead up to Tuesday’s raid on Avant! and Wednesday’s suit.

Avant! stock fell sharply Thursday for the second day in a row. On the Nasdaq Stock Market, it dropped more than 32 percent, or $11.375 a share, to $23.875.

It lost 14 percent Wednesday.

Cadence supplies software and services used to design semiconductors and other electronic products.

The employees who left Cadence founded ArcSys Inc., which later merged with Integrated Silicon Systems Inc. to form Avant!

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