8-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

October 16, 2001

(Date of earliest event reported)

ALTERA CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	0-16617	77-0016691
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)

101 Innovation Drive, San Jose, California 95134

(Address of principal executive offices, including zip code)

(408) 544-7000

(Registrant’s telephone number, including area code)

TABLE OF CONTENTS

	Item 9. Regulation FD Disclosure.
	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
SIGNATURES
EXHIBIT INDEX
Exhibit 99.1
Exhibit 99.2

Item 9. Regulation FD Disclosure.

     On October 22, 2001, Altera Corporation announced that the United States District Court for the Northern District of California ruled on October 16, 2001 that “using the bitstream [from Altera’s MAX+PLUS® II software] to program a Clear Logic device violates Altera’s software license.” The ruling is part of ongoing litigation brought by Altera against Clear Logic alleging that Clear Logic has unlawfully interfered with Altera’s customer relations and unlawfully appropriated Altera’s registered mask work technology. For more information, please see the press release attached as Exhibit 99.1 and the order of the United Stated District Court attached as Exhibit 99.2.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

     (c)  Exhibits.

99.1	Press Release dated October 22, 2001.
99.2	Order of United States District Court for the Northern District of California, San Jose Division.

2

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ALTERA CORPORATION
By:	/s/ Nathan Sarkisian
	Nathan Sarkisian, Senior Vice President and Chief Financial Officer

Date: October 22, 2001

3

EXHIBIT INDEX

99.1	Press Release dated October 22, 2001.
99.2	Order of United States District Court for the Northern District of California, San Jose Division.

4 EX-99.1 3 f76434ex99-1.txt EXHIBIT 99.1 EXHIBIT 99.1 INVESTOR CONTACT: MEDIA CONTACT: Scott Wylie Anna del Rosario Altera Corporation Altera Corporation (408) 544-6996 (408) 544-7496 swylie@altera.com adelrosa@altera.com ALTERA WINS KEY RULINGS IN LITIGATION WITH CLEAR LOGIC SAN JOSE, CALIF., October 22, 2001--Altera Corporation (Nasdaq: ALTR) today announced that the United States District Court for the Northern District of California ruled in its favor on October 16, 2001, stating that "using the bitstream [from Altera's MAX+PLUS(R) II software] to program a Clear Logic device violates Altera's software license." The ruling is part of ongoing litigation brought by Altera against Clear Logic alleging that Clear Logic has unlawfully interfered with Altera's customer relations and unlawfully appropriated Altera's registered mask work technology. Erik Cleage, Altera's senior vice president, marketing, said today, "Altera is gratified that the court has resolved a key element of our dispute with Clear Logic. We believe the judge correctly found that it is a violation of our software license to use Altera's MAX+PLUS II software to program non-Altera devices and, specifically, that using the bitstream to program a Clear Logic device violates Altera's software license. We look forward to a prompt and speedy resolution of the remaining issues in the case." COURT DENIES CLEAR LOGIC'S MOTION FOR SUMMARY JUDGMENT The court denied Clear Logic's motion for summary judgment of Altera's claims for tortious interference with Altera's software license. In denying Clear Logic's motion for summary judgment, the court ruled: "The Court rejects Clear Logic's arguments because the unambiguous language of the software license provides that the Altera software may only be used to program an Altera device. If the software is used to create a bitstream, which in turn is used to program a Clear Logic device, the software has necessarily been used to program the Clear Logic device. Therefore, using the bitstream to program a Clear Logic device violates Altera's software license." COURT GRANTS ALTERA'S MOTION FOR SUMMARY JUDGMENT The court's order also granted Altera's motion for summary judgment against Clear Logic's claims of unfair competition. As noted by the Court, Clear Logic had claimed that "Altera has unfairly competed with Clear Logic by falsely telling customers that it would be a breach of the use restriction for those customers to send the bitstream to Clear Logic for the purpose of programming a Clear Logic device." The court disposed of Clear Logic's claim, stating: "As discussed above, the Court finds that the software use restriction prohibits use of the software for programming non-Altera devices. Therefore, Altera's statements to the public were accurate." (more) Copies of the court's order can be requested from the United States District Court for the Northern District of California at 280 South First Street, San Jose, California (408-535-5364). LITIGATION BACKGROUND On November 16, 1999, Altera filed suit against Clear Logic, Inc. in Federal District Court in San Jose. Altera alleged that Clear Logic unlawfully appropriated Altera's registered mask work technology in violation of the federal mask work statute and that Clear Logic unlawfully interfered with Altera's customer relations. The suit asked for compensatory damages, punitive damages, and an injunction to stop Clear Logic from unlawfully using Altera's technology. ABOUT ALTERA CORPORATION Altera Corporation, The Programmable Solutions Company(R), was founded in 1983 and is a leading supplier of programmable logic devices (PLDs). Altera's CMOS-based PLDs are user-programmable semiconductor chips that enhance flexibility and reduce time-to-market for companies in the communications, computer peripheral, and industrial markets. By using high-performance devices, software development tools, and sophisticated intellectual property cores, system-on-a-programmable-chip (SOPC) solutions can be created with embedded processors, memory, and other complex logic together on a single PLD. Altera common stock is traded on the Nasdaq Stock Market under the symbol ALTR. More information on Altera is available on the Internet at http://www.altera.com. ### Altera, The Programmable Solutions Company, the stylized Altera logo, specific device designations, and all other words and logos that are identified as trademarks and/or service marks are, unless noted otherwise, the trademarks and service marks of Altera Corporation in the U.S. and other countries. All other product or service names are the property of their respective holders. All rights reserved. EX-99.2 4 f76434ex99-2.txt EXHIBIT 99.2 EXHIBIT 99.2 NOT FOR CITATION IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION ALTERA CORPORATION, No. C 99-21134 JW Plaintiff, ORDER DENYING CLEAR LOGIC'S MOTION FOR v. SUMMARY JUDGMENT ON TORTIOUS INTERFERENCE CLAIMS; GRANTING ALTERA'S CLEAR LOGIC, INC., MOTION FOR SUMMARY JUDGMENT ON UNFAIR COMPETITION COUNTERCLAIM Defendant. --------------------------------- (Docket Nos. 173, 180, 188) I. INTRODUCTION The following motions were heard on October 1, 2001: Defendant Clear Logic, Inc.'s ("Clear Logic") motion for summary judgment on Plaintiff Altera Corporation's ("Altera") tortious interference claims, and Altera's motion for summary judgment on Clear Logic's unfair competition counterclaim. Based upon all papers filed to date and the comments of counsel at the hearing, the Court denies Clear Logic's motion for summary judgment and grants Altera's motion for summary judgment. II. BACKGROUND(1) Altera manufactures programmable logic devices ("PLDs"), which are semiconductor chips that permit customers to program the chip's logical functions. Altera has also developed proprietary software tools that allow ---------------- (1) To the extent evidence is cited or relied upon in this order, the objections to such evidence are overruled. 1 customers to create and implement designs that make a PLD serve the functions the customer needs. To use the software for programming, an Altera customer inputs its design specifications into the software, which then produces a ".pof" file, also called a "bitstream file", containing the customer's chip design. The bitstream is then used to program chips. Altera has invested heavily in its PLDs, software, and customer support services. Altera does not charge its customers for these resources. It is only after a customer designs its chip and places a large-volume order for Altera PLDs that Altera recoups the costs it incurred in providing these resources to its customers. Altera licenses its software to its customers through a "clickwrap" mechanism. The provision of the license agreement at issue reads as follows: Pursuant to this Agreement, you may:...(b) use the Licensed Programs for the sole purpose of programming logic devices manufactured by ALTERA and sold by ALTERA or its authorized distributors (the "Permitted Use"). In January of 1998, Clear Logic publicly announced a technology, called ClearShot EDA, that made it possible for a customer to use bitstreams generated by Altera's software to configure Clear Logic application specific integrated circuits ("ASICs"). Clear Logic advertised its technology on its website and invited purchasers of Altera's PLDs to send their bitstreams to Clear Logic. Clear Logic's technology is capable of converting, within just hours, an Altera bitstream into information that can be used by Clear Logic to manufacture its own ASICs. Clear Logic then provides the customer samples that are pin-to-pin compatible with the customer's Altera PLD. Altera initiated the present lawsuit in November of 1999 against Clear Logic, alleging, inter alia, intentional interference with contractual relations, namely Altera's software licenses, and intentional interference with prospective contractual relations. Clear Logic counterclaimed for unfair competition. The parties' respective motions for summary judgment challenge the factual and legal bases for these claims. The primary issue in dispute is whether Altera's software license prohibits using a bitstream file generated from Altera's software to program a Clear Logic device. III. STANDARDS Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex v.Catrett, 477 U.S. 317, 323-324 (1986). The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323. If he meets this burden, the moving party is then entitled to judgment as a matter of law when the non-moving party 2 fails to make a sufficient showing on an essential element of his case with respect to which he bears the burden of proof at trial. Id. at 322-23. The non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). The non-moving party cannot defeat the moving party's properly supported motion for summary judgment simply by alleging some factual dispute between the parties. To preclude the entry of summary judgment, the non-moving party must bring forth material facts, i.e., "facts that might affect the outcome of the suit under the governing law...Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986). The court must draw all reasonable inferences in favor of the non-moving party, including questions of credibility and of the weight to be accorded particular evidence. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520 (1991) (citing Anderson, 477 U.S. at 255); Matsushita, 475 U.S. at 588; T.W. Elec. Serv. v. Pac. Elec. Contractors, 809 F.2d 626, 630 (9th Cir. 1987). It is the court's responsibility "to determine whether the 'specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence." T.W. Elec. Serv., 808 F.2d at 631. "[S]ummary judgment will not lie if the dispute about a material fact is 'genuine,' that is if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. However, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 587. IV. DISCUSSION A. Altera's Claim for Intentional Interference With Contractual Relations To establish a claim for intentional interference with contractual relations, a plaintiff must show: (1) the existence of a valid contract; (2) knowledge by the defendant of the existence of the contractual relationship; (3) intentional acts on the part of the defendant intended or designed to disrupt the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) damages to plaintiff caused by the acts of defendant. Quelimane Company, Inc. v. Stewart Title Guaranty Co., 19 Cal.4th 26, 55 (1998); Ramona Manor Convalescent Hospital v. Care Enterprises et al., 177 Cal.App.3d 1120, 1130 (1986). Clear Logic contends that it is entitled to summary judgment because Altera cannot satisfy the first, third, and fourth elements cited above. Each of the three elements are discussed below in the same order as they are presented in Clear Logic's briefs. 3 1. Actual Breach Or Disruption Clear Logic contends it has not induced actual breach of the software license because, on its face, the use restriction in the software license only limits the licensee's use of the software program, not the output of the program, including the bitstream file. Clear Logic attempts to support its interpretation of the use restriction with evidence that another section of Altera's software license specifically addresses the "direct product" of the software program whereas the use restriction does not. With regard to exporting, Altera's software license provides, "[y]ou shall not export the Licensed Program(s), or the direct product thereof without first obtaining any necessary U.S. or other governmental licenses and approvals." Clear Logic assumes that the phrase "direct product" in the exporting provision means bitstream, and argues that in the absence of this "direct product" language in the use restriction, the use restriction should not be construed to preclude use of the bitstream. Clear Logic also argues that its interpretation of the software program is consistent with Altera's conduct. More specifically, Clear Logic contends that Altera had notice as early as January of 1998 that Clear Logic was asking Altera's customers to send their bitstream files for conversion, and yet, Altera did nothing to stop its customers or Clear Logic until filing suit in November of 1999. The Court rejects Clear Logic's arguments because the unambiguous language of the software license provides that the Altera software may only be used to program an Altera device. If the software is used to create a bitstream, which in turn is used to program a Clear Logic device, the software has necessarily been used to program the Clear Logic device. Therefore, using the bitstream to program a Clear Logic device violates Altera's software license. Because the language of the software license is unambiguous, the Court finds it unnecessary to review any of the extrinsic presented by Clear Logic regarding the meaning of the software license, including evidence of Altera's alleged inaction between November of 1998 and January of 1999. The Court also finds Clear Logic's analysis of the exporting provision unpersuasive because it assumes that the phrase "direct product" means bitstream without evidentiary support for such an assumption. Moreover, even if Clear Logic's assumption is correct, it does not necessarily support Clear Logic's interpretation of the use restriction. Altera has never contended that the bitstream could be considered separate and distinct from Altera's software. The use restriction limits the use of the program, including use of the program to create the output, for the purpose of programming Altera devices. Therefore, if the output is used to create a non-Altera device, the program must also have been used in the process. 2. Intent Clear Logic next contends that Altera cannot prevail on the tortious interference with contract claim because there is no evidence that Clear Logic intended to cause a breach of the software license. Clear Logic's argument is based 4 upon language from the California Supreme Court's decision in Seaman's Direct Buying Service, Inc. v. Standard Oil Company of California, 36 Cal.3d 752 (1984); however, that language is taken out of context. The Seaman's decision cannot reasonably be construed to require a specific intent to cause a breach. In other words, there is no requirement that the defendant appreciate the legal significance of a contract and what actions would constitute a breach of that contract. Rather, the Seaman's Court makes clear that to prevail on a tortious interference claim, it is sufficient to show a more generalized intent to cause "interference." The Seaman's Court refers with approval to a jury instruction that "[a] defendant is deemed to have acted intentionally if it knew that disruption or interference with an advantageous relationship was substantially certain to result from its conduct." Seaman's, 36 Cal.3d at 766; see also Quelimane Company v. Stewart Title Guaranty Company, 19 Cal.4th; Ramona Manor Convalescent Hospital v. Care Enterprises, 177 Cal.App.3d 1120 (1985). Altera has presented more than sufficient evidence to support its allegation that Clear Logic intended to cause interference with the software license, including statements from Clear Logic's personnel, Clear Logic's refusal to indemnify those companies who forwarded their bitstreams, Altera's notification to Clear Logic of its interpretation of the use restriction, and Clear Logic's success in soliciting Cisco as a customer. See Altera's Opposition Brief at 19-20. This evidence raises a triable issue of fact which must be decided by a jury. 3. Existence of a Valid Contract Clear Logic next contends that the software license is unenforceable as against public policy, and therefore cannot serve as the basis of a claim of tortious interference. More specifically, Clear Logic contends that the software license is anticompetitive and unjustifiably raises consumer prices and reduces consumer choice, and perpetuates a kind of "niche monopoly" whereby Altera can raise the prices for its products to anticompetitive levels and unfairly raise barriers to entry to a new competitor such as Clear Logic. These strong accusations lack any factual basis, and therefore must be summarily dismissed. For all the reasons set forth above, the Court denies Clear Logic's motion for summary judgment on the claim for tortious interference with contractual relations. B. Altera's Claim for Intentional Interference With Prospective Contractual Relations The basic elements of a claim for intentional interference with prospective contractual relations include: (1) an economic relationship between the plaintiff and some third person containing the probability of future economic benefit to the plaintiff; (2) knowledge by the defendant of the existence of the relationship; (3) that defendant knowingly interfered with plaintiff's expectancy; (4) actual disruption of the relationship; and (5) damages. Further, a plaintiff must show that the alleged interference was wrongful "by some measure beyond the fact of the interference itself." Della Pena 5 v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 393 (1995). Clear Logic contends that it is entitled to summary judgment on the interference with prospective contractual relations claim because there is no evidence of any wrongful conduct other than the fact of interference itself. The Court disagrees. Altera has presented evidence that Clear Logic made fraudulent misrepresentations to customers. For example, Altera has evidence that Clear Logic told a customer that "Clear Logic will not knowingly manufacture any devices that illegally infringe on the intellectual property rights of a third party." Altera has also submitted "comfort letters" Clear Logic sent to its customers regarding the use of the bitstream generated by Altera's software. See e.g. Lessani Conf. Decl., Ex. 30. Altera has coupled this evidence with evidence suggesting that Clear Logic knew the misrepresentations were, at a minimum, misleading. Lessani Conf. Decl., Ex. 6. Whether the alleged misstatements were made with the requisite intent must be evaluated by a jury. Therefore, the Court denies summary judgment on the tortious interference with prospective business claim. C. Clear Logic's Claim for Unfair Competition Clear Logic alleges in its counterclaim that Altera has unfairly competed with Clear Logic by falsely telling customers that it would be a breach of the use restriction for those customers to send the bitstream to Clear Logic for the purpose of programming a Clear Logic device. Altera seeks summary judgment on Clear Logic's claim for unfair competition on numerous grounds, including, inter alia, that its statements about the software use restriction are not actionable because they were true. As discussed above, the Court finds that the software use restriction prohibits use of the software for programming non-Altera devices. Therefore, Altera's statements to the public were accurate. Nevertheless, Clear Logic argues that a statement, even if true, is actionable if it is likely to mislead or deceive the customer. However, Clear Logic has presented no evidence to suggest that Altera's statements were misleading or deceptive. Therefore, Altera is entitled to summary judgment on the unfair competition claim. V. CONCLUSION For the reasons set forth above, Clear Logic's motion for summary judgment on the tortious interference claims is DENIED, and Altera's motion for summary judgment on the unfair competition counterclaim is GRANTED. Dated: October 15, 2001 /s/ JAMES WARE ------------------------------------ JAMES WARE United States District Judge 6 THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN MAILED TO: Paul H. Heller Philip J. McCabe Kenyon & Kenyon River Park Towers 333 West San Carlos, Suite 600 San Jose, Ca. 95110 G. Hopkins Guy III Orrick, Herrington & Sutcliffe LLP 1020 Marsh Road Menlo Park, Ca 94025 Terrence P. McMahon Richard F. Cauley McDermott,Will & Emery 2700 Sand Hill Road Menlo Park, Ca 94025 Kenneth W. Brakebill James J. Brosnahan Morrison & Foerster LLP 425 Market Street San Francisco, Ca. 94105-2482 Karl J. Kramer Morrison & Foerster LLP 755 Page Mill Road Palo Alto, Ca. 94304-1018 DATED: RICHARD W. WIEKING, CLERK BY: /s/ RONALD L. DAVIS --------------------------------- RONALD L. DAVIS COURTROOM DEPUTY 7

EX-99.1

                                                                    EXHIBIT 99.1

INVESTOR CONTACT:            MEDIA CONTACT:
Scott Wylie                  Anna del Rosario
Altera Corporation           Altera Corporation
(408) 544-6996               (408) 544-7496
swylie@altera.com            adelrosa@altera.com


                             ALTERA WINS KEY RULINGS
                         IN LITIGATION WITH CLEAR LOGIC

SAN JOSE, CALIF., October 22, 2001--Altera Corporation (Nasdaq: ALTR) today
announced that the United States District Court for the Northern District of
California ruled in its favor on October 16, 2001, stating that "using the
bitstream [from Altera's MAX+PLUS(R) II software] to program a Clear Logic
device violates Altera's software license." The ruling is part of ongoing
litigation brought by Altera against Clear Logic alleging that Clear Logic has
unlawfully interfered with Altera's customer relations and unlawfully
appropriated Altera's registered mask work technology.

Erik Cleage, Altera's senior vice president, marketing, said today, "Altera is
gratified that the court has resolved a key element of our dispute with Clear
Logic. We believe the judge correctly found that it is a violation of our
software license to use Altera's MAX+PLUS II software to program non-Altera
devices and, specifically, that using the bitstream to program a Clear Logic
device violates Altera's software license. We look forward to a prompt and
speedy resolution of the remaining issues in the case."

COURT DENIES CLEAR LOGIC'S MOTION FOR SUMMARY JUDGMENT

The court denied Clear Logic's motion for summary judgment of Altera's claims
for tortious interference with Altera's software license. In denying Clear
Logic's motion for summary judgment, the court ruled:

"The Court rejects Clear Logic's arguments because the unambiguous language of
the software license provides that the Altera software may only be used to
program an Altera device. If the software is used to create a bitstream, which
in turn is used to program a Clear Logic device, the software has necessarily
been used to program the Clear Logic device. Therefore, using the bitstream to
program a Clear Logic device violates Altera's software license."

COURT GRANTS ALTERA'S MOTION FOR SUMMARY JUDGMENT

The court's order also granted Altera's motion for summary judgment against
Clear Logic's claims of unfair competition. As noted by the Court, Clear Logic
had claimed that "Altera has unfairly competed with Clear Logic by falsely
telling customers that it would be a breach of the use restriction for those
customers to send the bitstream to Clear Logic for the purpose of programming a
Clear Logic device." The court disposed of Clear Logic's claim, stating:

"As discussed above, the Court finds that the software use restriction prohibits
use of the software for programming non-Altera devices. Therefore, Altera's
statements to the public were accurate."

                                     (more)




Copies of the court's order can be requested from the United States District
Court for the Northern District of California at 280 South First Street, San
Jose, California (408-535-5364).

LITIGATION BACKGROUND

On November 16, 1999, Altera filed suit against Clear Logic, Inc. in Federal
District Court in San Jose. Altera alleged that Clear Logic unlawfully
appropriated Altera's registered mask work technology in violation of the
federal mask work statute and that Clear Logic unlawfully interfered with
Altera's customer relations. The suit asked for compensatory damages, punitive
damages, and an injunction to stop Clear Logic from unlawfully using Altera's
technology.

ABOUT ALTERA CORPORATION

Altera Corporation, The Programmable Solutions Company(R), was founded in 1983
and is a leading supplier of programmable logic devices (PLDs). Altera's
CMOS-based PLDs are user-programmable semiconductor chips that enhance
flexibility and reduce time-to-market for companies in the communications,
computer peripheral, and industrial markets. By using high-performance devices,
software development tools, and sophisticated intellectual property cores,
system-on-a-programmable-chip (SOPC) solutions can be created with embedded
processors, memory, and other complex logic together on a single PLD. Altera
common stock is traded on the Nasdaq Stock Market under the symbol ALTR. More
information on Altera is available on the Internet at http://www.altera.com.


                                       ###


Altera, The Programmable Solutions Company, the stylized Altera logo, specific
device designations, and all other words and logos that are identified as
trademarks and/or service marks are, unless noted otherwise, the trademarks and
service marks of Altera Corporation in the U.S. and other countries. All other
product or service names are the property of their respective holders. All
rights reserved.

EX-99.2

                                                                    EXHIBIT 99.2

                                NOT FOR CITATION

                       IN THE UNITED STATES DISTRICT COURT

                     FOR THE NORTHERN DISTRICT OF CALIFORNIA

                                SAN JOSE DIVISION



ALTERA CORPORATION,                   No.       C 99-21134 JW

               Plaintiff,
                                      ORDER DENYING CLEAR LOGIC'S MOTION FOR
     v.                               SUMMARY JUDGMENT ON TORTIOUS
                                      INTERFERENCE CLAIMS; GRANTING ALTERA'S
CLEAR LOGIC, INC.,                    MOTION FOR SUMMARY JUDGMENT ON UNFAIR
                                      COMPETITION COUNTERCLAIM
               Defendant.

---------------------------------

                                                   (Docket Nos. 173, 180, 188)

                                 I. INTRODUCTION

        The following motions were heard on October 1, 2001: Defendant Clear
Logic, Inc.'s ("Clear Logic") motion for summary judgment on Plaintiff Altera
Corporation's ("Altera") tortious interference claims, and Altera's motion for
summary judgment on Clear Logic's unfair competition counterclaim. Based upon
all papers filed to date and the comments of counsel at the hearing, the Court
denies Clear Logic's motion for summary judgment and grants Altera's motion for
summary judgment.

                                II. BACKGROUND(1)

Altera manufactures programmable logic devices ("PLDs"), which are semiconductor
chips that permit customers to program the chip's logical functions. Altera has
also developed proprietary software tools that allow


----------------

(1) To the extent evidence is cited or relied upon in this order, the objections
    to such evidence are overruled.


                                       1


customers to create and implement designs that make a PLD serve the functions
the customer needs. To use the software for programming, an Altera customer
inputs its design specifications into the software, which then produces a ".pof"
file, also called a "bitstream file", containing the customer's chip design.
The bitstream is then used to program chips. Altera has invested heavily in its
PLDs, software, and customer support services. Altera does not charge its
customers for these resources. It is only after a customer designs its chip and
places a large-volume order for Altera PLDs that Altera recoups the costs it
incurred in providing these resources to its customers.

        Altera licenses its software to its customers through a "clickwrap"
mechanism. The provision of the license agreement at issue reads as follows:

        Pursuant to this Agreement, you may:...(b) use the Licensed Programs for
        the sole purpose of programming logic devices manufactured by ALTERA and
        sold by ALTERA or its authorized distributors (the "Permitted Use").

        In January of 1998, Clear Logic publicly announced a technology, called
ClearShot EDA, that made it possible for a customer to use bitstreams generated
by Altera's software to configure Clear Logic application specific integrated
circuits ("ASICs"). Clear Logic advertised its technology on its website and
invited purchasers of Altera's PLDs to send their bitstreams to Clear Logic.
Clear Logic's technology is capable of converting, within just hours, an Altera
bitstream into information that can be used by Clear Logic to manufacture its
own ASICs. Clear Logic then provides the customer samples that are pin-to-pin
compatible with the customer's Altera PLD.

        Altera initiated the present lawsuit in November of 1999 against Clear
Logic, alleging, inter alia, intentional interference with contractual
relations, namely Altera's software licenses, and intentional interference with
prospective contractual relations. Clear Logic counterclaimed for unfair
competition. The parties' respective motions for summary judgment challenge the
factual and legal bases for these claims. The primary issue in dispute is
whether Altera's software license prohibits using a bitstream file generated
from Altera's software to program a Clear Logic device.

                                 III. STANDARDS

        Summary judgment is proper "if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The
purpose of summary judgment "is to isolate and dispose of factually unsupported
claims or defenses." Celotex v.Catrett, 477 U.S. 317, 323-324 (1986).

        The moving party "always bears the initial responsibility of informing
the district court of the basis for its motion, and identifying those portions
of 'the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any' which it believes demonstrate the
absence of a genuine issue of material fact." Id. at 323. If he meets this
burden, the moving party is then entitled to judgment as a matter of law when
the non-moving party


                                       2


fails to make a sufficient showing on an essential element of his case with
respect to which he bears the burden of proof at trial. Id. at 322-23.

        The non-moving party "must set forth specific facts showing that there
is a genuine issue for trial." Fed. R. Civ. P. 56(e). The non-moving party
cannot defeat the moving party's properly supported motion for summary judgment
simply by alleging some factual dispute between the parties. To preclude the
entry of summary judgment, the non-moving party must bring forth material facts,
i.e., "facts that might affect the outcome of the suit under the governing
law...Factual disputes that are irrelevant or unnecessary will not be counted."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The opposing party
"must do more than simply show that there is some metaphysical doubt as to the
material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586
(1986).

        The court must draw all reasonable inferences in favor of the non-moving
party, including questions of credibility and of the weight to be accorded
particular evidence. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520
(1991) (citing Anderson, 477 U.S. at 255); Matsushita, 475 U.S. at 588; T.W.
Elec. Serv. v. Pac. Elec. Contractors, 809 F.2d 626, 630 (9th Cir. 1987). It is
the court's responsibility "to determine whether the 'specific facts' set forth
by the nonmoving party, coupled with undisputed background or contextual facts,
are such that a rational or reasonable jury might return a verdict in its favor
based on that evidence." T.W. Elec. Serv., 808 F.2d at 631. "[S]ummary judgment
will not lie if the dispute about a material fact is 'genuine,' that is if the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party." Anderson, 477 U.S. at 248. However, "[w]here the record taken as a whole
could not lead a rational trier of fact to find for the non-moving party, there
is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 587.

                                 IV. DISCUSSION

A. Altera's Claim for Intentional Interference With Contractual Relations

        To establish a claim for intentional interference with contractual
relations, a plaintiff must show: (1) the existence of a valid contract; (2)
knowledge by the defendant of the existence of the contractual relationship; (3)
intentional acts on the part of the defendant intended or designed to disrupt
the contractual relationship; (4) actual breach or disruption of the contractual
relationship; and (5) damages to plaintiff caused by the acts of defendant.
Quelimane Company, Inc. v. Stewart Title Guaranty Co., 19 Cal.4th 26, 55 (1998);
Ramona Manor Convalescent Hospital v. Care Enterprises et al., 177 Cal.App.3d
1120, 1130 (1986). Clear Logic contends that it is entitled to summary judgment
because Altera cannot satisfy the first, third, and fourth elements cited above.
Each of the three elements are discussed below in the same order as they are
presented in Clear Logic's briefs.


                                       3


        1. Actual Breach Or Disruption

        Clear Logic contends it has not induced actual breach of the software
license because, on its face, the use restriction in the software license only
limits the licensee's use of the software program, not the output of the
program, including the bitstream file. Clear Logic attempts to support its
interpretation of the use restriction with evidence that another section of
Altera's software license specifically addresses the "direct product" of the
software program whereas the use restriction does not. With regard to exporting,
Altera's software license provides, "[y]ou shall not export the Licensed
Program(s), or the direct product thereof without first obtaining any necessary
U.S. or other governmental licenses and approvals." Clear Logic assumes that the
phrase "direct product" in the exporting provision means bitstream, and argues
that in the absence of this "direct product" language in the use restriction,
the use restriction should not be construed to preclude use of the bitstream.
Clear Logic also argues that its interpretation of the software program is
consistent with Altera's conduct. More specifically, Clear Logic contends that
Altera had notice as early as January of 1998 that Clear Logic was asking
Altera's customers to send their bitstream files for conversion, and yet, Altera
did nothing to stop its customers or Clear Logic until filing suit in November
of 1999.

        The Court rejects Clear Logic's arguments because the unambiguous
language of the software license provides that the Altera software may only be
used to program an Altera device. If the software is used to create a bitstream,
which in turn is used to program a Clear Logic device, the software has
necessarily been used to program the Clear Logic device. Therefore, using the
bitstream to program a Clear Logic device violates Altera's software license.
Because the language of the software license is unambiguous, the Court finds it
unnecessary to review any of the extrinsic presented by Clear Logic regarding
the meaning of the software license, including evidence of Altera's alleged
inaction between November of 1998 and January of 1999.

        The Court also finds Clear Logic's analysis of the exporting provision
unpersuasive because it assumes that the phrase "direct product" means bitstream
without evidentiary support for such an assumption. Moreover, even if Clear
Logic's assumption is correct, it does not necessarily support Clear Logic's
interpretation of the use restriction. Altera has never contended that the
bitstream could be considered separate and distinct from Altera's software. The
use restriction limits the use of the program, including use of the program to
create the output, for the purpose of programming Altera devices. Therefore, if
the output is used to create a non-Altera device, the program must also have
been used in the process.

        2. Intent

        Clear Logic next contends that Altera cannot prevail on the tortious
interference with contract claim because there is no evidence that Clear Logic
intended to cause a breach of the software license. Clear Logic's argument is
based


                                       4


upon language from the California Supreme Court's decision in Seaman's Direct
Buying Service, Inc. v. Standard Oil Company of California, 36 Cal.3d 752
(1984); however, that language is taken out of context. The Seaman's decision
cannot reasonably be construed to require a specific intent to cause a breach.
In other words, there is no requirement that the defendant appreciate the legal
significance of a contract and what actions would constitute a breach of that
contract. Rather, the Seaman's Court makes clear that to prevail on a tortious
interference claim, it is sufficient to show a more generalized intent to cause
"interference." The Seaman's Court refers with approval to a jury instruction
that "[a] defendant is deemed to have acted intentionally if it knew that
disruption or interference with an advantageous relationship was substantially
certain to result from its conduct." Seaman's, 36 Cal.3d at 766; see also
Quelimane Company v. Stewart Title Guaranty Company, 19 Cal.4th; Ramona Manor
Convalescent Hospital v. Care Enterprises, 177 Cal.App.3d 1120 (1985).

        Altera has presented more than sufficient evidence to support its
allegation that Clear Logic intended to cause interference with the software
license, including statements from Clear Logic's personnel, Clear Logic's
refusal to indemnify those companies who forwarded their bitstreams, Altera's
notification to Clear Logic of its interpretation of the use restriction, and
Clear Logic's success in soliciting Cisco as a customer. See Altera's Opposition
Brief at 19-20. This evidence raises a triable issue of fact which must be
decided by a jury.

        3. Existence of a Valid Contract

        Clear Logic next contends that the software license is unenforceable as
against public policy, and therefore cannot serve as the basis of a claim of
tortious interference. More specifically, Clear Logic contends that the software
license is anticompetitive and unjustifiably raises consumer prices and reduces
consumer choice, and perpetuates a kind of "niche monopoly" whereby Altera can
raise the prices for its products to anticompetitive levels and unfairly raise
barriers to entry to a new competitor such as Clear Logic. These strong
accusations lack any factual basis, and therefore must be summarily dismissed.

        For all the reasons set forth above, the Court denies Clear Logic's
motion for summary judgment on the claim for tortious interference with
contractual relations.

B. Altera's Claim for Intentional Interference With Prospective Contractual
Relations

        The basic elements of a claim for intentional interference with
prospective contractual relations include: (1) an economic relationship between
the plaintiff and some third person containing the probability of future
economic benefit to the plaintiff; (2) knowledge by the defendant of the
existence of the relationship; (3) that defendant knowingly interfered with
plaintiff's expectancy; (4) actual disruption of the relationship; and (5)
damages. Further, a plaintiff must show that the alleged interference was
wrongful "by some measure beyond the fact of the interference itself." Della
Pena


                                       5


v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 393 (1995).

        Clear Logic contends that it is entitled to summary judgment on the
interference with prospective contractual relations claim because there is no
evidence of any wrongful conduct other than the fact of interference itself. The
Court disagrees. Altera has presented evidence that Clear Logic made fraudulent
misrepresentations to customers. For example, Altera has evidence that Clear
Logic told a customer that "Clear Logic will not knowingly manufacture any
devices that illegally infringe on the intellectual property rights of a third
party." Altera has also submitted "comfort letters" Clear Logic sent to its
customers regarding the use of the bitstream generated by Altera's software. See
e.g. Lessani Conf. Decl., Ex. 30. Altera has coupled this evidence with evidence
suggesting that Clear Logic knew the misrepresentations were, at a minimum,
misleading. Lessani Conf. Decl., Ex. 6. Whether the alleged misstatements were
made with the requisite intent must be evaluated by a jury. Therefore, the Court
denies summary judgment on the tortious interference with prospective business
claim.

C. Clear Logic's Claim for Unfair Competition

        Clear Logic alleges in its counterclaim that Altera has unfairly
competed with Clear Logic by falsely telling customers that it would be a breach
of the use restriction for those customers to send the bitstream to Clear Logic
for the purpose of programming a Clear Logic device. Altera seeks summary
judgment on Clear Logic's claim for unfair competition on numerous grounds,
including, inter alia, that its statements about the software use restriction
are not actionable because they were true. As discussed above, the Court finds
that the software use restriction prohibits use of the software for programming
non-Altera devices. Therefore, Altera's statements to the public were accurate.
Nevertheless, Clear Logic argues that a statement, even if true, is actionable
if it is likely to mislead or deceive the customer. However, Clear Logic has
presented no evidence to suggest that Altera's statements were misleading or
deceptive. Therefore, Altera is entitled to summary judgment on the unfair
competition claim.

                                  V. CONCLUSION

        For the reasons set forth above, Clear Logic's motion for summary
judgment on the tortious interference claims is DENIED, and Altera's motion for
summary judgment on the unfair competition counterclaim is GRANTED.

        Dated: October 15, 2001

                                            /s/ JAMES WARE
                                            ------------------------------------
                                                JAMES WARE
                                                United States District Judge


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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN MAILED TO:

Paul H. Heller
Philip J. McCabe
Kenyon & Kenyon
River Park Towers
333 West San Carlos, Suite 600
San Jose, Ca. 95110

G. Hopkins Guy III
Orrick, Herrington & Sutcliffe LLP
1020 Marsh Road
Menlo Park, Ca 94025

Terrence P. McMahon
Richard F. Cauley
McDermott,Will & Emery
2700 Sand Hill Road
Menlo Park, Ca 94025

Kenneth W. Brakebill
James J. Brosnahan
Morrison & Foerster LLP
425 Market Street
San Francisco, Ca. 94105-2482

Karl J. Kramer
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, Ca. 94304-1018

DATED:                                      RICHARD W. WIEKING, CLERK

                                            BY:    /s/ RONALD L. DAVIS
                                               ---------------------------------
                                                   RONALD L. DAVIS
                                                   COURTROOM DEPUTY



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