A legal battle is shaping up in California involving a Chinese startup that makes equipment used to produce semiconductors.

Advanced Micro-Fabrication Equipment (AMEC), of Shanghai, was sued in California by Applied Materials, which claims the company misappropriated its trade secrets. But lawyers for the Chinese company asked the judge to dismiss the suit, arguing the U.S. court has no jurisdiction over AMEC's activities.

AMEC's motion for dismissal will be heard by Judge James Ware of the U.S. District Court for the Northern District of California, on Feb. 11.

Applied's lawsuit, filed in October and amended last month, claims AMEC used its trade secrets to develop etch and CVD (Chemical Vapor Deposit) tools that are used to make chips. AMEC's tools will compete against similar products from Applied, which cost millions of dollars each. Applied is seeking an injunction from the court to prevent the misappropriation of its trade secrets and wants punitive damages as well as a declaration that it owns patent applications recently filed by AMEC.

Applied identified four former employees in the suit, including AMEC founders Gerald Yin and Aihua Chen.

Applied's amended complaint describes Yin, who left Applied in 2004 to start AMEC, as a former corporate vice president and chief technology officer who "managed the etch product group and had broad access to Applied confidential information and trade secrets concerning its etch tools." In addition, the complaint says Chen at one point served as general manager of Applied's CVD product group and had access to proprietary technology related to those tools.

To bolster its case against AMEC, Applied noted that the former employees identified in the lawsuit signed agreements that give Applied all rights to inventions made during their employment, and prevent them from using Applied's confidential information for anyone else's benefit. Under the agreement, any patents filed by the former employees within one year of leaving Applied are "presumed to have been conceived or made during their employment with Applied and would belong to Applied."

As a result, Applied's complaint lays claim to two AMEC patent applications filed in China on August 5, 2005, that name Yin and other former Applied employees as inventors. These patents should belong to Applied as the patent applications were made "one year and three days after Yin left applied" and therefore must be based on information that Yin disclosed to AMEC during the one year period, the complaint said.

AMEC subsequently filed patent claims in Japan and the U.S. based on the Chinese patent applications. Applied's complaint also claims these patent applications as its own, noting Applied filed its own patent applications covering the same technologies.

In response, AMEC's motion to dismiss argues that the U.S. court has no jurisdiction over the Chinese company.

"In this case, there is no jurisdiction over AMEC Inc., because the allegations of the (amended complaint) relate exclusively to actions that took place in China. None of Applied's claims arises out of allegations concerning contact with California," the motion said, adding any legal action by Applied against AMEC should be heard in a Chinese court instead.