Synopsys' Filing for Re-Exam of Its Own Patents Does Not Cure Antitrust, Magma Says; Ignored Key Prior Art, Attempted to Enforce Fraudulently Obtained Patents

Business Wire, Jan 25, 2006

SANTA CLARA, Calif. -- Synopsys Inc.'s filing in U.S. district court Monday and a related filing with the U.S. Patent and Trademark Office are "too little, too late" attempts to avoid the consequences of its antitrust violations, as Synopsys failed to cite key prior art in patent applications and attempted to enforce invalid patents against Magma(R) Design Automation Inc., Magma said in a statement today.

Magma (Nasdaq:LAVA), a provider of semiconductor design software, said the motion Synopsys (Nasdaq:SNPS) filed Jan. 23, 2006 in the U.S. District Court for the District of Delaware, seeking to bifurcate the case and stay Magma's antitrust claims, is a belated attempt to delay trial on the antitrust injury it caused in asserting the invalid U.S. patents 6,434,733 and 6,766,501 (the '733 and '501 patents). Further, Magma said, Synopsys' Jan. 9, 2006 filing with the U.S. PTO for a re-examination of Synopsys' own patents reveals Synopsys' ongoing efforts to defraud the U.S. PTO.

The prior art omitted in Synopsys' '733 and '501 patent applications includes a paper entitled "Layout-Driven Scan Chain Partitioning and Reordering," presented at the 1996 Institute of Electrical and Electronics Engineers (IEEE) European Test Workshop -- a panel chaired by the very Synopsys employee who is named as an inventor of the '733 and '501 patents. Synopsys also omitted a paper entitled "Scan Insertion Criteria for Low Design Impact," presented at the 1996 IEEE VLSI Test Symposium, and two of the patents' named inventors are listed as reviewers for that conference. Synopsys and its patent lawyer knew of this paper while processing a related patent application but failed to tell the U.S. PTO about it while processing the '733 and '501 patent applications. As Magma pointed out in an Oct. 19, 2005 filing with the U.S. district court, this was a violation of Synopsys' duty of good faith and candor, and it makes all claims of these patents unenforceable.

In its Jan. 23 filing with the U.S. district court, Synopsys again fraudulently claimed it "was previously unaware" of this specific prior art. "Synopsys has now failed, after two separate opportunities, to accurately explain the existence of prior art it clearly knew about," said David Stanley, Magma senior vice president, Corporate Affairs. "No reasonable person could make that mistake twice."

"It seems Synopsys refuses to acknowledge two key facts," Stanley continued. "First, that it submitted patent applications that failed to cite all relevant prior art, making the resulting patents unenforceable. Second, that in attempting to enforce fraudulently obtained patents against Magma it violated U.S. antitrust law. It cannot avoid the consequences of those actions simply by asking the U.S. PTO to re-examine its own patents. Frankly, Synopsys cannot escape the fact these new filings are too little, too late."

Synopsys' recent court filings continue its pattern of attempting to enforce invalid patents to gain an unfair business advantage, Magma said, a pattern that began in September 2004 when Synopsys filed a lawsuit in U.S. District Court for the Northern District of California to enforce U.S. patent 6,378,114 (the '114 patent), another patent that issued without Synopsys having cited relevant prior art. After the existence of this prior art became known, the U.S. PTO agreed in September 2005 to re-examine the validity of the '114 patent. The U.S. PTO, in its ruling on the '114 re-examination, stated, "Accordingly, a substantial new issue of patentability, which has not been previously addressed, has been raised by the submission of the aforementioned references," and "All claims are subject to re-examination."

Interestingly, Synopsys' Code of Ethics and Business Conduct, published on the Synopsys website, asserts in a quote by its chief executive officer that "Integrity has long been a hallmark of Synopsys. It characterizes everything we do. In fact, it is our first core value." Magma's Stanley observed that this policy "seems not to apply to Synopsys' lawsuits, U.S. PTO filings and court filings."

Magma and Synopsys have been embroiled in patent litigation since 2004. In July of that year Magma, based on publicly available information, learned that Synopsys products were apparently infringing a number of Magma's patents, and attempted to discuss its concerns with Synopsys. Instead of responding to that request for a dialogue Synopsys raced to file a lawsuit in the U.S. District Court for Northern California, claiming Magma's patents should be the property of Synopsys and that Magma infringes them. In a subsequent action, Synopsys filed the Delaware lawsuit, in violation of antitrust law.

Industry observers have interpreted Synopsys' use of litigation as nothing more than an effort to disrupt the business of its smaller rivals, and a recent survey of the market concurs. In a poll taken after a Synopsys users group meeting late last year, one such observer, John Cooley, moderator of the E-Mail Synopsys Users Group (ESNUG) and the DeepChip website, asked respondents what changes they would make if they were to become the new CEO of Synopsys. Unprompted responses published at www.deepchip.com included "Stop the lawsuit against Magma"; "Concentrate on their (Synopsys') customers and not taking rivals to court"; and "(Stop) the litigation circus -- it is embarrassing." These and similar statements are available at www.deepchip.com/items/snug05-19.html.