Veldhoven, the Netherlands, April 17, 2019
Although ASML has been responsive to media questions around the XTAL court case, we believe that the way this matter is characterized in the press is not always in line with the facts and in some instances even highly speculative. Therefore, ASML would like to summarize the key facts in this regard.
- In this court case, a jury in the Santa Clara Superior Court in November 2018 found a US based company called XTAL guilty of misappropriation of trade secrets and inducing, aiding and abetting former employees of ASML to breach their contracts with and their fiduciary duties and loyalty to ASML. These former employees, with Chinese and US nationalities, in 2015, misappropriated certain source code and Intellectual Property (IP) from Brion, a US subsidiary of ASML.
- The source code and IP relate to Process Window Enhancement (PWE). This business, which is separate and distinct from ASML’s main systems business, represents less than 1% of ASML’s annual revenue. Suggestions in the media that ASML’s core technology was affected by this misappropriation are therefore factually incorrect.
- XTAL is a Silicon Valley based company, with funding from entities from South-Korea and China.
- XTAL’s aim was to create a competing product and sell it to an existing ASML customer in South Korea, who had also invested in XTAL
- Based on the facts as disclosed in the court case, and based on third party investigative work, ASML reached the conclusion that the objective of XTAL and the former employees was to enrich themselves by using the misappropriated trade secrets and IP. No evidence was found of any direct Chinese government involvement in this matter. The wide speculation about a government-directed ‘conspiracy’ to steal our IP and trade secrets is therefore just that: wide speculation.
- There has been some discussion in the press about the need to disclose elements of this matter more broadly. In this regard, a number of facts are important to understand:
- There is no sustained actual damage to speak of. As mentioned, the business concerned is small and not our core business, XTAL’s business deal with the South-Korean customer was thwarted hence ASML did not lose any business, and the stolen information was not lost and is still at our disposal. The basis for the monetary award to ASML is not actual damages suffered by ASML. Rather, the primary driver for the award was the R&D costs that XTAL had avoided by stealing our IP and trade secrets. ASML is actively working with the relevant customers to enable continued access to the technology.
- The preliminarily awarded amount of USD 223 million (i) was and still is not a receivable in view of XTAL’s financial situation and ultimate bankruptcy and, moreover, (ii) is still to be finally determined by the judge.
- In light of the above, the matter was insufficiently material to otherwise merit or require mentioning in ASML’s financial accounts or management reports, let alone to require prompt disclosure as inside information/price sensitive information.
- ASML’s Board of Management is deeply committed to protecting ASML’s IP. Therefore, the company has taken and continues to take significant measures in this regard. These measures are not just of a technical nature, but also include continued efforts to maintain a culture of awareness and compliance amongst its employees and other stakeholders. Part of this is the relentless pursuit of individuals or entities that violate or threaten to violate our IP in any way. ASML’s immediate legal action against XTAL and several former employees is in line with our policy in this regard.
- ASML understands from the public discussion in this matter that our stakeholders are aware of the significant value of our know-how and IP and that public speculation about risks in this regard -irrespective of the quality of the facts underlying such speculation- might be of interest to them. ASML will take this understanding into consideration in future events.
Veldhoven, April 17, 2019
Board of Management