- 11 November 2004-

Cree sues NCSU over Nitronex license

Durham-based Cree, co-founded by North Carolina State University’s Neal Hunter, is claiming in a lawsuit filed in October that the university breached two contractual agreements it had when the university's Office of Technology Transfer signed another deal with Raleigh's Nitronex (SiC on silicon), with the consequence that Cree has suffered "substantial damages" from the university's alleged actions.

The lawsuit seeks compensatory damages in excess of $10,000 and asks that NCSU be made to forfeit its royalties from and its equity in Nitronex. The suit further asks that the university's tech transfer programme be directed to live up to its agreements, including giving Cree exclusive rights to a semiconductor technology that has become one of two key processes used by Nitronex.

Nitronex co-founder and VP GAN material Kevin Linthicum believes the University is confident of its position. The suit focuses around a technology developed in the lab of professor Larry Davis during the summer of 1998. Called "pendeo-epitaxy," it involves a method of making crystalline materials, including semiconductors, with a very low number of defects.

Cree, under a 1996 contract with NCSU, agreed to supply Davis and members of his lab crew with silicon carbide wafers, eventually valued at $1.3m, on which to conduct their investigations. In return, Cree received a guarantee that the company would get "an exclusive option" to license any new technology developed with its own wafers.

Six months after Davis' pendeoepitaxy breakthrough, in December 1998, Cree informed NCSU of its intention to obtain an exclusive license on the invention, and that the agreement - granting Cree rights to the process and to all alterations and modifications to it - was signed in June 1999. Cree paid NCSU $500,000 in royalties under the deal.

But when Cree signed the June agreement, it was not aware that NCSU's Office of Technology Transfer had signed a letter of intent in March1999, to license modifications of the core technology to Nitronex, a company started by graduate student researchers from Davis' lab.

Semiconductors are made by depositing a crystal layer of materials - gallium, silicon, silicon carbide and others - on a base. Under their agreement with NCSU, the graduate students, including Linthicum, were granted the right to use the pendeo-epitaxy crystallisation process on wafer bases made out of sapphire or silicon.

Cree, which relies on silicon carbide in most of its fabrication efforts, contends that such a modification was covered in its licensing agreement with NCSU. The initial letter-of-intent arrangement between NCSU and the Nitronex founders was formalised in a subsequent licensing deal signed in February 2000, the the same month Nitronex received its $500,000 seed cash infusion from Centennial Venture Partners, NCSU's venture capital arm.

While Cree was honouring its commitments to NCSU, it claims that the NC State, along with certain graduate students of the university who were attempting to establish a new startup company to compete against Cree.

Since 2000, Nitronex has won venture investments totalling more than $45m and is now shipping products to a growing list of customers. Linthicum says the suit is between Cree and the University. He notes that pendeo-epitaxy has become one of two key fabrication processes in the company's portfolio. But he also adds that Nitronex and Cree are essentially in two different market spaces with no customer conflict.

Source: http://triangle.bizjournals.com