Powerdsine, Inc. v. Ami Semiconductor, Inc.

• Decision Date: 18 December 2008
• Docket Number: No. 07 Civ. 6014 (SAS).,07 Civ. 6014 (SAS).
• Citation: 591 F.Supp.2d 673
• Parties: POWERDSINE, INC. and PowerDsine Ltd., Plaintiffs, v. AMI SEMICONDUCTOR, INC. and AMI Semiconductor Belgium Bvba, Defendants. Microsemi Corporation, Third-Party Defendant.
• Court: U.S. District Court — Southern District of New York

591 F.Supp.2d 673

POWERDSINE, INC. and PowerDsine Ltd., Plaintiffs, v. AMI SEMICONDUCTOR, INC. and AMI Semiconductor Belgium Bvba, Defendants Microsemi Corporation, Third-Party Defendant.

No. 07 Civ. 6014 (SAS).

United States District Court, S.D. New York.

December 18, 2008.

COPYRIGHT MATERIAL OMITTED

Dennis Cecil Hopkins, Esq., Scott Sonny Balber, Esq., Walter G. Hanchuk, Esq., Chadbourne & Parke LLP, New York, NY, for Plaintiffs and Third-Party Defendant.

David Goren, Esq., PowerDsine Ltd., Melville, NY, for Plaintiffs.

Bryan S. Banks, Esq., Tyler R. Bowen, Esq., Perkins Coie LLP, Phoenix, AZ, Brian S. Fraser, Esq., Richards Kibbe & Orbe, LLP, Donald Jay Friedman, Esq., James Matthew Denaro, Esq., Joseph E. Mais, Esq., Mary Rose Hughes, Esq., Michael Andrew Oblon, Esq., Perkins Coie LLP, Washington, DC, for Defendants.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge:

I. INTRODUCTION

PowerDsine, Inc. and PowerDsine, Ltd. (collectively "PowerDsine"), a designer of integrated circuits used in Power-over-Ethernet ("PoE") products, bring the instant suit against AMI Semiconductor, Inc. and AMI Semiconductor Belgium Bvba (collectively "AMIS"), a manufacturer of integrated circuits, alleging breach of contract and tortious interference with contract. This lawsuit addresses competition within the burgeoning market for PoE hardware and the fallout from an abortive partnership between PowerDsine and AMIS.

In its answer to PowerDsine's complaint, AMIS brings counterclaims against PowerDsine and its parent company, Microsemi Corporation (collectively "counter-defendants"). PowerDsine and Microsemi have moved for summary judgment on all counterclaims. For the reasons stated below, counter-defendants' motion for summary judgement is granted in full.

II. BACKGROUND

A. The Nature of the Dispute

PowerDsine is a designer of hardware used in PoE products.¹ PowerDsine, Inc. is a New York corporation,² and its parent-company PowerDsine, Ltd. is based in Israel.³ PowerDsine is a wholly-owned subsidiary of Microsemi, a California corporation.⁴ PoE technology allows the transfer of electrical power along with data streams over standard data network cables, obviating the need for separate power and data wires.⁵ One component of PowerDsine's work is the development of integrated circuits used in PoE equipment.⁶ While PowerDsine determines the specifications and functionality of the chips it needs, it does not manufacture its own integrated circuits ("ICs").⁷

AMIS is a designer and manufacturer of integrated circuits, a key component of all computer hardware.⁸ AMI Semiconductor Inc. is based in Idaho,⁹ and its subsidiary AMI Semiconductor Belgium Bvba is (unsurprisingly) Belgian.¹⁰ Although AMIS does not focus exclusively on PoE technology, it designs a variety of application-specific integrated circuits ("ASICs"), including mixed signal analog/digital chips that can be used in PoE hardware.¹¹ AMIS currently participates in the PoE market through a partnership with Broadcom, a direct competitor of PowerDsine.¹²

PowerDsine's complaint alleges that it provided AMIS with "unique design specifications and features of PoE integrated circuits ... as well as valuable confidential information about PoE technology" under the protection of a non disclosure agreement ("NDA").¹³ After AMIS received that information directly, it allegedly hired Sharon Dagan, a former PowerDsine employee, despite knowing of the non-competition clause in his contract with PowerDsine.¹⁴ In addition, Broadcom allegedly hired Shimon Elkayam, the PowerDsine engineer who had been PowerDsine's liaison with AMIS, despite knowing of a similar agreement not to complete.¹⁵ AMIS then allegedly used information obtained directly from PowerDsine, as well as the expertise of Dagan and Elkayam, to develop PoE ASICs in partnership with Broadcom.¹⁶

Along with its answer to PowerDsine's complaint, AMIS asserted counterclaims for breach of contract, business defamation, and tortious interference with prospective business relations.¹⁷ Each of these claims stems from communications related to this lawsuit.¹⁸ In its response to the instant motion for summary judgment, however, AMIS "elected not to pursue its ... counterclaims for breach of contract and interference with prospective business relations."¹⁹

Moreover, in its submissions opposing summary judgment, AMIS substantially narrowed the breadth of its business defamation claim. AMIS's statement of counterclaims lists the public filing of PowerDsine's complaint, distribution of the complaint to business analysts and customers of AMIS, and issuance of a press release announcing the lawsuit as the basis for its defamation claims.²⁰ AMIS no longer includes these statements in its elaboration of allegedly defamatory statements in opposition to counter-defendants' motion for summary judgment.

B. The Allegedly Defamatory Statements

AMIS now bases its business defamation claim on three specific statements.²¹ The first is an October 15, 2007 e-mail from Daniel Feldman, Senior Product Line Manager for PowerDsine's PoE ICs, to Michael Zimmerman, an employee of Marvell Technology Group, Ltd., a producer of storage, communications and consumer semiconductor products.²² On October 12, 2007, Zimmerman sent Feldman an agenda for a forthcoming meeting between Marvell and Microsemi. Agenda item two stated, "Legal violation with [Broadcom], inform (written letter) legal teams of top [North American] suppliers—Microsemi."²³ In response, Feldman thanked Zimmerman for the agenda and added comments. Specifically, he added to agenda item two,

See attached the presentation we show to customers in regards to the PowerDsine v. AMIS lawsuit (note that PowerDsine Ltd., a wholly owned subsidiary of Microsemi started the litigation), as well as the summons and the complaint. I will work with my legal team to issue a formal letter as well.²⁴

Zimmerman followed up on Feldman's comment by asking, "This is against AMIS not [Broadcom], right? Today, [Broadcom] is buying what from AMIS? [Intellectual Property]? The design? [Broadcom] manufacture themselves the die, packaging, etc?"²⁵ Feldman answered, "This is against AMIS. AMIS `did the design' (stolen from PowerDsine) and manufactures the ICs in their I3T80 process .... I am not sure who does the packaging, but a good guess is a 3rd party managed by

AMIS."²⁶

The second statement is a June 27, 2007 conversation between Feldman and Anoop Vetteth, an employee of Cisco Systems, Inc., a supplier of networking equipment and network management for the Internet.²⁷ Feldman recounted the conversation in an e-mail to a number of Microsemi employees, the relevant portion of which states,

I had today a conversation with Anoop, who is in India. He wanted to get more details about the suit between us an[d] AMI. I told him that we shopped for fabs normally, and that we gave a spec to AMIS, who developed a chip based on it and gave it to Broadcom as-is. Anoop told me that this is exactly what AMIS told to him, and that he found [it] very strange that a company would steal something and go around bragging about it. Anoop asked for David Goren's contact info because he wants to get a copy of the complete summons of the case.²⁸

The third statement occurred in a February 7, 2008 discussion between Daniel Feldman and Dov Frishberg, plaintiffs' damages expert.²⁹ Frishberg's notes of the conversation state,

The guy (going to France) chief engineer, next generation IC, write specs & give to diff. FABS, the FABS we approached were Freeskill, AMIS, Atmel .... Turnkey model, need to give detailed specification to these. All done under NDA. Then middle '05 Broadcom got to this guy. They hired him. He's in contact with AMIS, continued his role as Chief architect of Broadcom's chip that they stole from PowerDsine.³⁰

Finally, AMIS states that it infers from Feldman's deposition testimony the existence of additional, currently unknown defamatory statements. At an August 8, 2008 deposition, Joseph Mais, attorney for AMIS, asked Feldman, "Isn't it true that you made oral statements to customers to the same effect, namely, that AMI stole PowerDsine's specification and used it to design the Broadcom chip?"³¹ Feldman answered,

I am not sure that I used the term "stole" to customers. But you—what would be more appropriate would be that AMI had an NDA with Microsemi, AMI received specifications of a Microsemi IC, and the—and apparently copied these specifications violating the terms of the NDA and producing a chip based on these specifications.³²

AMIS has not identified any specific, purportedly defamatory statements by Feldman along the lines of this testimony.

III. CHOICE OF LAW

Prior to establishing the subject-specific law applicable to this case, this Court must apply the applicable choice of law rules. As a federal court sitting in diversity, this Court utilizes the choice of law regime of the state in which it is located.³³ In New York, "`the relevant analytical approach to choice of law in tort actions' is the `interest analysis' ... `the law of the jurisdiction having the greatest interest in the litigation will be applied.'"³⁴ "[T]he first question to resolve ... is whether there is an actual conflict of laws."³⁵ In a defamation action, if an actual conflict exists, the court must look to the law of the location of the alleged tort.³⁶

The defamation laws of New York, California, and Idaho—the U.S. jurisdictions with possible interests in this litigation— conflict in several critical ways.³⁷ For example, the protections afforded to opinion are substantially greater under New York law than under the law of California.³⁸ On the other hand, the protections afforded to statements related to litigation are broader in California than they are in Idaho.³⁹ Therefore a true conflict exists, and the law of the location of the tort applies.

Courts have considered numerous factors when determining the "location" of...