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Avant Ordered to Pay Cadence for Profit

Courts: Judge tells firm to pay $13.4 million more in interest for computer code theft a decade ago.

July 26, 2001|PHAM-DUY NGUYEN | BLOOMBERG NEWS

SAN JOSE — A California judge ordered Avant Corp. to pay an additional $13.4 million in interest to rival Cadence Design Systems Inc. for profit it may have lost when Avant stole its computer code a decade ago.

Santa Clara County Superior Judge Conrad Rushing on July 19 ordered Avant to pay $182 million to Cadence, the No. 1 maker of software for the semiconductor industry. Avant had pleaded no contest to four felony counts of stealing trade secrets and agreed to pay $27 million in fines.

Avant had argued that it shouldn't have to pay additional interest to San Jose-based Cadence, given the size of the restitution amount.

"The massive award threatens Avant's survival," the company said in court papers. Avant, which reported $93.7 million in revenue in the first quarter, also asked Rushing to approve a payment schedule to help it avoid bankruptcy.

"Making the entire restitution award payable immediately will likely force Avant to seek bankruptcy protection," the Fremont, Calif., company said in a brief filed before Wednesday's hearing.

Avant had proposed that it pay Cadence $100 million by Wednesday, $40 million by Aug. 1, $20 million by Oct. 15 and $40 million by Jan. 15, 2002. The $27-million criminal fine is due Aug. 20.

As of March 31, Avant had $248 million in cash and short-term investments, according to a filing with the Securities and Exchange Commission.

Also Wednesday, Rushing sentenced Avant Chief Executive Gerald Hsu to three years' probation and ordered him to pay $2.7 million in fines. Hsu, a former Cadence executive, pleaded no contest in May to conspiring to misappropriate trade secrets. Avant has paid Hsu's fines.

The company may not pay the remaining $5.6 million in fines owed by five other former Avant employees because of a pending shareholder lawsuit, said Clayton Parker, the company's general counsel. The five formerly worked at Cadence with Hsu and were later accused of code theft.

Hsu is the only defendant who remains employed at Avant.

Stephen Wuu, Avant's former vice president of engineering, was sentenced to two years in state prison and fined $2.7 million.

Avant shares fell $1.41 to close at $8.72 on Nasdaq. The day after the July 19 ruling, Avant shares fell 31% to $10.45. Cadence shares rose 67 cents to $22.08 on Nasdaq.

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