Under the settlement's terms, SMIC will pay TSMC $175 million, payable in installments over six years ($30 million in each of the first five years and $25 million in the sixth year). In addition, the two parties will cross license to each other's patent portfolio through December 2010. The agreement also provides for the dismissal of all pending legal actions without prejudice between the two companies in U.S. District Court, California State Superior Court, the U.S. International Trade Commission, and Taiwan District Court as well.
In the settlement agreement, TSMC covenants not to sue SMIC for itemized acts of trade secret misappropriation as alleged in the complaints, although the settlement does not grant a license to use any of TSMC's trade secrets. The patent cross license and settlement agreement are terminable upon a breach by SMIC, which may result in the reinstitution of the legal proceedings and acceleration of the outstanding payments under the settlement agreement.
"We are pleased that the litigation has been settled peacefully and believe that the settlement is in the best interests of the company's long term development," said Richard R. Chang, President and CEO of SMIC.
SMIC also released quarterly figures showing that during the three months ended December 31, 2004, sales increased 6.2% to $291.8 million from $274.9 million in the prior quarter.