News

20 January 2009

 

International Rectifier sues former CEO for theft of trade secrets

A hearing is expected by early February regarding a federal lawsuit in the California Central District Court filed on 8 September by power-management chip maker International Rectifier Corp (IR) of El Segundo, CA, USA against former CEO Alexander Lidow (son of Eric Lidow, who founded IR in 1947 and was chairman until last May).

After starting work at IR in 1977, Dr Alex Lidow was CEO from 1995 until October 2007. He resigned following an investigation by an IR-appointed independent audit committee revealed that April that accounting irregularities (including premature revenue recognition of product sales at the firm’s Japanese subsidiary) had cost IR about $117m, forcing it to restate two years of earnings.

The lawsuit alleges that Lidow engaged in an ongoing criminal enterprise – a racketeer-influenced and corrupt organization (RICO) – by stealing information, intellectual property and technology related to IR’s $60m research program on gallium nitride power devices for power management, which he oversaw as head of the R&D team.

IR has developed its proprietary GaN-on-silicon technology platform over the past five years, but kept it a trade secret to ensure a lead in developing and marketing GaN products. In an article in the Los Angeles Business Journal, IR is quoted as saying that the GaN research was not widely known about even within the firm, and that the researchers were part of a group known only as CSC. The firm announced its GaN power device technology publicly only last September, and demonstrated prototype devices in November.

However, IR claims that Lidow stalled IR from making its GaN technology public in 2007. It claims that instead, in a breach of his duties to act in IR’s best interest, Lidow during that time began secretly recruiting six IR staff (from the R&D team plus senior sales representatives) for his plan to establish his new, El Segundo-based firm Efficient Power Conversion Corp (EPCC, of which he is CEO), with the aim of providing rival GaN-based products. IR also claims that Lidow’s actions have undermined its five years of R&D and caused the firm to lose its competitive advantage.

As well as Lidow and EPCC, fellow defendants include the six former IR staff (Robert Beach, JianJuan ‘Joe’ Cao, David Tam, Alana Nakata, Stephen Tsang, and Guangyuang Zhao), as well as gallium nitride-based processing service provider GNOEM Systems Inc of Bolder Creek, CA (founded by Beach in 2004), process equipment maker Hermes-Epitek Corp and silicon wafer supplier EPISIL Technologies Inc (both of Taiwan), and MOCVD reactor supplier Aixtron AG.

In response to the lawsuit’s allegations, in the Los Angeles Business Journal article, Lidow’s attorney Robert Sacks claims that his clients are not using IR’s GaN technology, and that EPCC is developing a different semiconductor product. “There is no substance to the claims,” Sacks said. “It’s an effort to retaliate further and to cause him harm.”

Lidow and the other former IR staff are asking a federal judge to dismiss the RICO allegations. On 22 December, EPCC and Aixtron also presented motions for the lawsuit to be dismissed. The presiding judge Manuel Real is expected to rule on the matter in a hearing to be held by 2 February.

See related item:

International Rectifier launches GaN-on-Si power device technology

Search: International Rectifier GaN power devices GaN-on-silicon

Visit: www.irf.com

Visit: http://news.justia.com/cases/featured/california

Visit: www.labusinessjournal.com/article