Cypress Semiconductor Corporation v. Fujitsu Semiconductor Limited

Background

Cypress Semiconductor Corporation filed an ex parte application seeking a temporary restraining order and preliminary injunction against Fujitsu Semiconductor Limited. The court found that proceeding without first giving Fujitsu notice was unwarranted and ordered Cypress to serve Fujitsu. Fujitsu then appeared specially to oppose the application.

Cypress’s only cause of action was for breach, anticipatory breach, or repudiation of contract. The dispute concerned photomasks located in Japan that Cypress used to manufacture certain analog semiconductor and microcontroller products. The agreements were governed by Japanese law and required arbitration in Tokyo under the rules of the Japan Commercial Arbitration Association.

Personal Jurisdiction Concern

The court expressed serious concerns about whether it had personal jurisdiction—the authority to exercise power over Fujitsu. Cypress acknowledged that Fujitsu was a Japanese corporation, that the photomasks were in Japan, and that the agreements were governed by Japanese law and required arbitration in Tokyo. Cypress also acknowledged that it had not yet served the summons and complaint under the Hague Service Convention, and Fujitsu had moved to dismiss based on improper service. The court nevertheless evaluated whether Cypress had satisfied the requirements for emergency injunctive relief.

Reasons for Denial

To obtain a temporary restraining order or preliminary injunction, Cypress had to show that it was likely to succeed on the merits, likely to suffer irreparable harm without relief, that the balance of hardships favored it, and that an injunction would serve the public interest. The court held that Cypress had not shown a likelihood of success on its contract claim. Cypress relied on an opinion from Japanese attorneys stating that it had “reasonable grounds” to demand that Fujitsu not destroy, remove, or impair the photomasks. The court found that this was not enough to show likely success.

The court also held that Cypress had not shown likely irreparable harm. Cypress alleged that Fujitsu had demanded $3.5 million for the photomasks and had threatened to destroy them if Cypress did not pay. Cypress argued that recreating the photomasks would cost millions of dollars and take many months, and that losing access could interrupt manufacturing and damage customer confidence. But Cypress acknowledged that it could avoid the interruption and preserve the photomasks by paying the $3.5 million demand. The court therefore characterized the potential injury as temporary economic loss for which money or other corrective relief could be available later, rather than irreparable harm.

The court also found that Cypress’s failure to begin the agreed Tokyo arbitration undermined its claim that irreparable harm was imminent. Cypress had known about the payment demand and alleged destruction threat but had repeatedly said it intended to begin arbitration in the near future.

Disposition

Because Cypress failed to establish a likelihood of success on the merits or a likelihood of irreparable harm, the court did not consider the remaining injunction factors. Judge Lucy Koh denied Cypress’s application for a temporary restraining order and preliminary injunction. The order did not decide the ultimate merits of Cypress’s contract claim.