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Epic Communications, Inc. v. Richwave Technology

November 17, 2009

EPIC COMMUNICATIONS, INC., ET AL., PLAINTIFFS AND APPELLANTS,
v.
RICHWAVE TECHNOLOGY, INC., ET AL., DEFENDANTS AND RESPONDENTS.



(Santa Clara County Super. Ct. No. CV076689) Trial Judge: The Honorable Kevin E. McKenney.

The opinion of the court was delivered by: Rushing, P.J.

CERTIFIED FOR PUBLICATION

This is an action by a Taiwanese corporation and its California subsidiary seeking damages for an alleged misappropriation of intellectual property originally transferred by their predecessor-in- interest, a California corporation, to a corporation in Taiwan. The transfer took place pursuant to a joint development agreement negotiated in substantial part by a Taiwanese engineer then employed by the transferee corporation. Three defendants are named: the transferee corporation, the engineer who negotiated the development agreement, and a second Taiwanese corporation formed by her as a "spin-off" of the transferee. The trial court granted a motion by the engineer and the "spin-off" corporation to quash service of process, reasoning that even if those defendants had sufficient contact with California to otherwise be subject to the jurisdiction of its courts, the Taiwanese residence of the principal plaintiff corporation made it unreasonable to exercise jurisdiction in California. We reject this conclusion. A refusal by California courts to exercise jurisdiction cannot be justified by the mere fact that a claim arising from California contacts is prosecuted by a nonresident. While the foreign status of an assignee might in some cases reduce the state's interest in adjudicating a dispute, that is at most a subsidiary consideration which cannot by itself justify a denial of access to our courts. The principal inquiry remains whether subjecting the defendant to local jurisdiction comports with fair play and substantial justice. The residence of the current owner of the claim has little if any bearing on that inquiry. Here the two Taiwan defendants engaged in conduct in California, and caused effects in California, that made it readily foreseeable that they would be haled into court here in the event of a dispute of the present type. We will therefore reverse the order quashing service of summons.

Background

A. Design Services Agreement

The intellectual property at issue was transferred under a joint development agreement between OEpic, Inc. (OEpic), a Delaware corporation registered to do business in California, and defendant ALi Corporation (ALi), a Taiwanese corporation, also apparently sometimes known as Acer Laboratories, Inc., or some variant thereon. OEpic, which plaintiffs describe as "defunct," was in the business, among others, of "developing and marketing high speed and optical communication semiconductor devices and integrated circuits, including power amplifiers." Toward that end it employed a team of engineers at offices in Sunnyvale. ALi in turn employed a team of engineers in Taiwan, headed by defendant Shyh-Chyi Wong, a resident of Taiwan.

It is unclear which of the co-venturers initiated the discussions leading to the joint development project. Wong declared that "OEpic contacted ALi" in the summer of 2002 and "expressed interest in working together." Pao declared that on an unspecified date in 2002, Wong "visited me at OEpic's office in Sunnyvale to initiate a talk on potential design collaborations with OEpic."*fn1 Cindy Yuen, OEpic's vice president of high-speed electronics, declared that in early August of 2002, ALi "contacted me, inquiring [into] the possibility of arranging a meeting between myself and . . . Wong."*fn2

That ALi was in the relative position of supplicant, or at least initiator of contact, may be suggested by the fact that it was OEpic who required ALi to execute a nondisclosure agreement, and not vice versa, as a condition of participating in exploratory discussions. The agreement contemplated exchanges of confidential information in the course of discussions concerning a "business opportunity of mutual interest . . . ." Although the agreement does not specify the nature of the opportunity, it is undisputed that it concerned development of a silicon-germanium (SiGe) power amplifier (PA) or linear power amplifier (LPA) for use in wireless networking devices. Both parties agreed not to use or further disclose information exchanged under the agreement for purposes beyond the discussions and each party's evaluation of the opportunity. Wong signed the agreement on or about August 15, 2002, on behalf of ALi as its "AVP" (Associate Vice President) of "RF/Communications." OEpic's president and CEO, Yi-Ching Pao, signed the agreement for OEpic.*fn3

Yuen declared that, about a week after signing the nondisclosure agreement, Wong met with her at OEpic's Sunnyvale offices to discuss the proposed project. They mainly discussed "radio frequency . . . front- end integrated circuit . . . designs." Wong told Yuen that although her RF (radio frequency) design group in Taiwan was "highly qualified and motivated," it "lacked the [sic] experience in high frequency RC [sic]*fn4 designs." For that reason, she said, "ALi was looking for a partner in `RF front-end IC designs.' " Wong "proposed that OEpic help ALi with its SiGe power amplifier design in a co-design project." The meeting concluded with a decision that Wong would "contact [Oepic president] Pao to talk about further details of the business arrangement."

Yuen declared that over the next six months or so, "Wong visited OEpic a few times to further discuss the potential collaboration between OEpic and ALi." These included a "lengthy meeting" between Yuen and Wong at OEpic's Sunnyvale office on November 13, 2002. Wong was "very specific about ALi's goal," which was "to find a partner to develop 2.4G[Hz] and 5.3G[Hz] power amplifiers using SiGe HBT technology of TSMC foundry."*fn5 ALi had evaluated products from other vendors but found them unsatisfactory. Wong "made it clear that ALi would like OEpic to develop power amplifiers . . . or linear power amplifiers . . . based on [the] OEpic team's extensive experience in [power amplifier] and [linear power amplifier] product[s]." By the conclusion of this meeting, Yuen declared, she and Wong had "reached the agreement on most items in this partnership, which eventually became the framework" of the parties' agreement to collaborate.

Wong acknowledged that she made "personal visits to the California facilities of the dissolved OEpic" but declared that she did so "while [she] was an employee of co-defendant ALi, not Richwave. My last visit to the California facilities of OEpic occurred before Richwave even existed." She went on to declare, "I only visited OEpic's California facilities twice for a few hours each time while on trips to the United States visiting other companies as well (I visited as an ALi employee both times, with the last visit in January 2003, and I never visited again OEpic California during the execution of the Design Services Agreement). My two brief physical visits were limited to the possibility of collaboration between OEpic and my employer at the time ALi." (Underlining in original; punctuation corrected.)*fn6

Effective February 15, 2003, ALi and OEpic entered into a formal Design Services Agreement (DSA) which contemplated that OEpic would design, for ALi's use, a "high performance Power Amplifier" or "Linearized Power Amplifier" for wireless applications. This agreement was executed on behalf of ALi by Hsi-Yuan Hsu, apparently an executive vice-president, and by Pao on behalf of OEpic. It required ALi, which it identified as "Customer," to pay $100,000 for the design, plus royalties up to $1.75 million for covered products "that ALi sells into its market channels." The agreement restrained ALi from disclosing any confidential information it might acquire from OEpic. It also prohibited assignment of the agreement by either party without the other's consent, except in connection with a "corporate reorganization, consolidation, merger, or sale of substantially all of [the assigning party's] assets." The agreement recited that it would "bind and inure to the benefit of each party's successors and permitted assigns."*fn7

Plaintiffs allege that OEpic made its first delivery of design materials under the agreement in May 2003. According to Yuen, over the ensuing months "ALi's RF design group, which is [sic] managed by Wong, interacted directly with OEpic's design group," all of whose members were California residents. "Wong was the manager on the ALi side," she averred, "while I managed the development team on the Epic side. Wong oversaw all the communications between the two companies; nearly all emails were copied to her. She also commented from time to time on matters such as project scheduling and technical designs."

B. Formation of Richwave

OEpic president Pao declared that in December, 2003, "Wong and her group spun off to form [defendant] Richwave [Technology, Inc.]" (Richwave). Wong denied that Richwave is a "a `spin-off' of ALi," characterizing it instead as "a Taiwanese company which was founded in part by former employees of Ali." Neither party indicates what it means by "spin-off."*fn8 Whatever they mean, Wong's denial is flatly impeached by her own unguarded descriptions of Richwave, in e-mail, as a "spin-off" of ALi.*fn9 In other respects Wong's account of Richwave's formation is substantially in accord with Pao's. She declared that on January 7, 2004, Richwave "first registered as a Taiwanese company." At that time, she continued, Richwave "was only raising funds and had no operations." According to Wong, Richwave did not commence "active operations" until fundraising was completed at the end of February, 2004. She and her team ceased being ALi employees, and became Richwave employees, "on or around March 1, 2004."

Plaintiffs allege that defendants fraudulently concealed the formation of Richwave for some three months after it occurred, thereby "allow[ing] Richwave to receive Plaintiffs' confidential information under the Agreement." They alleged that OEpic "was not informed of these changes regarding the program arrangement and the spin-off[] until . . . April of 2004." It is doubtful that these allegations were adequately substantiated for purposes of the motion to quash service. Pao declared rather vaguely that ALi "did not inform OEpic of the spin- off" until well after it occurred. Wong countered by declaring that "OEpic was fully aware of Richwave's formation as evidenced by the fact that Yi-Ching Pao (OEpic's president) and Ken Tai (OEpic's chairman as well as chairman of a major investor in Richwave named Richtek) mentioned the formation of Richwave in contacts with me during the approximate time period between December 2003 and January 2004."*fn10 Neither Pao nor Tai contradicted that averment in later declarations. However, in the excerpt of Wong's deposition testimony provided by plaintiffs, she testified only that Pao told her he had heard, apparently from Tai, "that there may be some plan or something," and asked "about the possible new planning."*fn11 Plaintiffs did not include the next page of the transcript, on which she may have either recounted her response to Pao's inquiry, or evaded or refused to answer that question. However, defendants did not supply that page either.

C. Conclusion of Contracted Services

Plaintiffs allege that after Richwave was formed, and after OEpic learned of its formation, agents of both Richwave and ALi falsely assured OEpic that it could continue to deliver information to Wong's team because Richwave had assumed, or would assume, ALi's obligations under the design services agreement. In support of these allegations Pao first declared that upon learning of Richwave's formation "[s]ometime in mid-April 2004," OEpic "started to request confirmation of program ownership and final payment from ALi." More specifically he declared that "[i]n May 2004, Yvonne Liu, who was a manager in Wong's group, told Epicom [sic*fn12 ] that ALi had sold the IP rights specified in the Agreement to Richwave, and that Richwave would take over the Agreement without any changes in terms." Wong attempted to controvert these averments by declaring, "Richwave has never told Epicom that Ali had sold the disputed intellectual property to Richwave. . . . The Plaintiffs' claims that Richwave told Epicom that ALi had sold the disputed intellectual property specified in the relevant Design Services Agreement to Richwave and that Richwave would take over that relevant disputed OEpic-ALi Design Services Agreement are false." Pao later averred more vaguely that at some unspecified time, "while Richwave was still physically part of ALi, Richwave represented to OEpic that it would eventually take over the [design services agreement] for ALi, and that OEpic should continue [in] collaboration under the [agreement] with Wong's design group, which had by then become Richwave."

In July 2004, Liu e-mailed one Darryl Quan at OEpic, "It's with regrets to inform you that RichWave doesn't need the design service from OEpic at current stage." Pao declared that Wong "instructed Epicom [sic] to send the final deliverables . . . [,] test reports . . ., and . . . samples . . . to ALi," which OEpic did in early August, 2004. According to the complaint, this occurred on August 5, 2004, marking completion of the "program."

On September 13, according to Pao, a manager of ALi's legal department told OEpic "that there would not be any assignment of the Agreement to Richwave, and that ALi would be solely responsible for the terms and obligations of the Agreement." Pao averred that in addition to telling OEpic that Richwave would not take over the agreement, both Richwave and ALi said that Richwave "would not use OEpic's confidential design information." At some point, "ALi also informed OEpic that it would not market OEpic's power amplifiers, and thus would not pay any royalty ...


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