Trade Secrets: Business Loses

From Los Angeles Business Journal Online

"International Rectifier Corp. lost its battle with ousted chief executive Alexander Lidow when a Los Angeles federal judge dismissed its lawsuit over alleged theft of trade secrets.

The El Segundo maker of power management chips filed the suit in September, alleging that Lidow engaged in an ongoing criminal enterprise — also known as a racketeer influenced and corrupt organization, or Rico — by stealing information and intellectual property related to the company’s $60 million secret research. The judge dismissed the suit on Monday.

International Rectifier claimed that Lidow devised a plan to steal IR’s trade secrets, and then recruited former researchers and sales executives to help him launch a competing company.

Federal judge Manuel Real threw out International Rectifier’s suit, ruling that the company failed to properly plead its claim that Lidow, and the other former IR employees, where involved in a criminal enterprise."

Not much there about what was going on, but Semiconductor Today had a bit more about the specific allegations:

"However, IR claims that Lidow stalled IR from making its GaN technology public in 2007. It claims that instead, in a breach of his duties to act in IR’s best interest, Lidow during that time began secretly recruiting six IR staff (from the R&D team plus senior sales representatives) for his plan to establish his new, El Segundo-based firm Efficient Power Conversion Corp (EPCC, of which he is CEO), with the aim of providing rival GaN-based products. IR also claims that Lidow’s actions have undermined its five years of R&D and caused the firm to lose its competitive advantage."

And this quote from Lidow's lawyer:

In response to the lawsuit’s allegations, in the Los Angeles Business Journal article, Lidow’s attorney Robert Sacks claims that his clients are not using IR’s GaN technology, and that EPCC is developing a different semiconductor product. “There is no substance to the claims,” Sacks said. “It’s an effort to retaliate further and to cause him harm.”

For what it is worth, Yahoo Finance has Form 8-K for INTERNATIONAL RECTIFIER CORP /DE/ which includes this:

5.02(b) Resignation of Director/Resignation of Officer

A. On April 17, 2008, the Company and Eric Lidow entered into an agreement ("Lidow Agreement") pursuant to which Mr. Lidow resigned as Chairman of the Board and as a Director of International Rectifier Corporation (the "Company") and retired from the Company, to be effective May 1, 2008. A copy of the Lidow Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Pursuant to the Lidow Agreement, the Company will provide Mr. Lidow with certain office, secretarial and transportation assistance, and will provide Mr. Lidow and his spouse with medical and life insurance benefits for the remainder of their lives equal to those presently provided to them by the Company. In addition, Mr. Lidow will be entitled to exercise his options to purchase shares of the Company's common stock until the later of eighteen months from the effective date of his resignation or sixty days following the date on which the Company becomes current in its periodic reports with the Securities and Exchange Commission ("SEC"). Additionally, under the Lidow Agreement, the Executive Employment Agreement between the Company and Mr. Lidow, dated May 15, 1991, as amended, is terminated effective May 1, 2008. The foregoing description is not complete and is qualified in its entirety by reference to the actual Lidow Agreement, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by this reference.

About all I can do from this distance is quote Arte Johnson: "Verrrry interesting." Considering the outcome, I think paying attention to what Lidow's attorney said ought to give rise to some speculation.

On the other hand, Trade Secrets Blog has this:

Graham Robertson, a spokesman for International Rectifier, said the company is evaluating its next move in its battle with Lidow.

“We are reviewing the options,” Robertson said.

We wonder if one of the options International Rectifier is considering is bringing claims under California's Trade Secrets Act or maybe even going federal with an Economic Espionage Act claim. We'll keep you posted.