Cadence Vs. Avant!

By Peter Chen, John Glynn Jr., Pratap Mukherjee
1999 | Case No. E61A

The case chronicles the origins and evolution of a landmark intellectual property dispute between Cadence Design Systems and Avant! Corporation. Cadence was the leading developer of Electronic Data Automation software used in the computer-aided design of sophisticated integrated circuits. Background on the industry and company is given. In 1991, four Cadence employees left to form a competitive firm, called ArcSys (later changed to Avant!). In 1994, Gerald Hsu, a senior Cadence executive, resigned and joined Avant! as its new CEO. This move started a series of legal disputes between the companies revolving around trade secret protection. Shortly after Hsu’s departure, Avant! continued to hire many Cadence employees, including a number of critical programmers. In addition, there was evidence that some of these people stole some of Cadence’s most valuable source code. Cadence began legal actions, including criminal charges, against Avant! and some of its employees for violation of trade secret laws. The case chronicles the highlights of the legal battle, the marketplace battle between the firms, and the public relations struggle. The case concludes by asking what the two CEOs should do in their respective positions. The central issues are: what is intellectual property, how to protect intellectual property, and how to effectively respond to perceived theft of intellectual property. Teaching Note available.

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