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GlobalFoundries sues IBM, says trade secrets were unlawfully given to Japan’s Rapidus

GlobalFoundries sues IBM, says trade secrets were unlawfully given to Japan's Rapidus © Reuters. A screen displays the company logo for semiconductor and chipmaker GlobalFoundries Inc. during the company’s IPO at the Nasdaq MarketSite in Times Square in New York City, U.S., October 28, 2021. REUTERS/Brendan McDermid

By Jane Lanhee Lee

OAKLAND, California, (Reuters) -Chip manufacturer GlobalFoundries Inc said on Wednesday it had filed a lawsuit against International Business Machines (NYSE:) Corp, accusing it of unlawfully sharing confidential intellectual property and trade secrets.

New York-based GlobalFoundries said in its complaint that IBM had shared IP and trade secrets with Rapidus, a new state-backed Japanese consortium that IBM is working with to develop and produce cutting-edge two-nanometre chips.

It also asserted that IBM had unlawfully disclosed and misused its IP with Intel Corp (NASDAQ:), noting that IBM had announced in 2021 it would collaborate with Intel on next-generation chip technology.

“IBM is unjustly receiving potentially hundreds of millions of dollars in licensing income and other benefits,” GlobalFoundries said in a statement.

IBM pushed back in an emailed statement to Reuters saying: “GlobalFoundries filed this meritless lawsuit after a court rejected the company’s attempt to dismiss IBM’s legitimate fraud and breach of contract claims. Their allegations are entirely baseless, and we are confident that the court will agree.”

Intel declined to comment. Rapidus said it is not in a position to comment.

The complaint said GlobalFoundries and IBM had collaboratively developed technology over decades in Albany, New York, and the exclusive right to license and disclose the technology was sold to GlobalFoundries in 2015.

GlobalFoundries is seeking compensatory and punitive damages as well as an injunction against IBM to stop using the trade secrets. It also said IBM has been recruiting GlobalFoundries’ engineers – efforts which have accelerated since the Rapidus partnership was announced in December 2022, and asked the court to order an end to those recruitment efforts.

Rapidus, which counts Sony (NYSE:) Group Corp, NEC Corp and other major tech firms as consortium members, is of national strategic importance and has been hailed in Japan as a symbol of U.S.-Japan cooperation.

Japan long ago lost its lead in chip manufacturing, particularly in advanced semiconductors, and is now rushing to catch up and ensure its car makers and information technology companies do not run short of the key component.

This is the second time GlobalFoundries has sued IBM since buying IBM’s semiconductor plants in 2015.

In 2021, GlobalFoundries asked a judge to rule that it did not violate a contract with IBM which claims it is owed $2.5 billion in damages. That litigation is still ongoing, according to a GlobalFoundries spokesperson.

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