SMIC: Patent litigation with IFT will not have significant adverse impact on the company

SMIC responded to the first round of inquiries from the Shanghai Stock Exchange, including the litigation between it and Innovative Foundry Technologies LLC (hereinafter referred to as "IFT").

SMIC pointed out that in this case, IFT is a Non-Practicing Entity (hereinafter referred to as "NPE"), and this type of litigation is relatively common among US technology companies. NPE takes advantage of the complex and expensive characteristics of US civil litigation procedures to force the counterparty to pay patent licensing fees by filing lawsuits or threatening to file lawsuits. Considering the nature of NPE litigation, the patents involved in this case, and the results and experience of the company's handling of related NPE litigation and disputes, this case will not have a significant adverse impact on the company's business development and ability to continue operations.

It is understood that in December last year, IFT filed a patent infringement lawsuit against SMIC, Broadcom, Cypress and Dish Network in the United States District Court for the Western District of Texas, claiming that these companies infringed on more than four of its patents (patent numbers are US6580122B1, US6806126B1, US6933620B2 and US7009226B14) and demanded financial compensation.

It is reported that this lawsuit is mainly aimed at SMIC's 65nm products and processes.

In April this year, SMIC filed a counterclaim for non-infringement against IFT in the U.S. District Court for the Northern District of California, and in the same month submitted a motion to dismiss with the U.S. District Court for the Western District of Texas, arguing that the plaintiff's lawsuit lacked factual and legal basis and requesting the court to dismiss the lawsuit against the company.

Previously in its prospectus, SMIC disclosed that during the reporting period, the company and its subsidiaries' sales of 65nm process-related products to downstream customers such as Broadcom Incorporated, Broadcom Corporation and Cypress Semiconductor Corporation (among the co-defendants, DISH Network Corporation is not a direct customer of the company) who are co-defendants in this case, accounted for approximately 1% of the company's total operating revenue during the reporting period.