Intel, Broadcom Settle Suit Over Trade Secrets

Feuding chip makers Broadcom Corp. and Intel Corp. said Tuesday that they have settled a trade secrets lawsuit that had drawn industry attention to their bitter dispute and to a legal assault on the general rule that employees can change jobs at will.

With engineers in short supply, the industry was eager to see if Intel could prevent employees from joining Broadcom merely because of the threat that they might violate Intel’s trade secrets.

But the settlement leaves that issue unresolved. California law tends to favor an employee’s right to change jobs, unless a company can prove that its intellectual property has actually been misappropriated.

Terms of the settlement in the Santa Clara County Superior Court case were not disclosed. The companies said in a news release that they were satisfied with the resolution.

Technology companies often resolve fights over trade secrets and intellectual property through royalty or cross-licensing agreements, according to industry experts.

Intel has remained a Broadcom customer for products unrelated to communications networking, the technology at issue in the lawsuit. And it is unlikely that the settlement will hamstring either company.

“I expected they would settle this out of court,” said market analyst Mark Edelstone of Morgan Stanley Dean Witter. “I didn’t think it was a suit that was going to change the way either company did business.”

The settlement does not cover a second suit Intel filed in federal court in Delaware in August, alleging that “nearly every aspect” of Broadcom’s business violates one or more of Intel’s patents.

But that lawsuit hardly fazes Edelstone. “At some point, I would guess that they will settle the patent case out of court as well,” he said.

The state trade secrets suit, filed in March, was the first public airing of what had become an escalating battle between the giant Santa Clara computer chip maker and the young, fast-growing Irvine communications chip maker.

Intel, the No. 1 producer of processor chips for personal computers, was an early investor in Broadcom. But the two companies have become rivals as Intel attempted to capture some of the market for networking components, where Broadcom is a key player.

Broadcom Chief Executive Henry T. Nicholas III had accused Intel in September of using lawsuits as a “standard business tactic” meant to slow down rivals. Intel had resorted to “specious litigation in the courts rather than competition in the marketplace,” he said.

On Tuesday, Intel spokesman Chuck Malloy laid out Intel’s general legal strategy.

“We view litigation as a form of dispute resolution and we have historically looked for ways to settle litigation without going to trial,” Malloy said. “We look for ways to find a business resolution.”

Broadcom officials declined to comment on the settlement.

Intel’s initial suit was filed after three employees who had been working to develop chips and software for Ethernet networking left to take similar jobs at Broadcom.

A judge allowed them to keep their new jobs at Broadcom while the case continued, but appointed a special monitor to oversee Broadcom’s actions.

Broadcom filed a cross-complaint in June, alleging that Intel had been surreptitiously using a misappropriated Broadcom chip in product demonstrations, misleading potential customers into believing that the technology was Intel’s.

The settlement covered both complaints and appears to remove any uncertainty over the three former Intel employees, who remain at Broadcom.

Broadcom shares lost $3.88 in Nasdaq trading Tuesday to close at $126.25 a share. Intel gained $1.50 per share to close at $42.63, also on Nasdaq.