SAN JOSE, Calif. -- Evidence in the bitter software-code lawsuit between Avant! Corp. and Cadence Design Systems Inc. indicates that Avant! copied some of Cadence's source code for use in its own place-and-route products, a federal judge said last week.

U.S. District Judge Ronald Whyte made the statement in a ruling on a Cadence request to bar Avant! place-and-route products from the market. However, Whyte refused Cadence's request for a preliminary injunction, saying such a move at this point in the litigation would endanger Avant!'s survival.

"Cadence has established that its pre-release framework source code is protected as copyrighted and as trade secret," Whyte wrote. "Further, the evidence establishes that Avant! copied some of that code.

"Although Avant! had an independent expert examine portions of code identified by Cadence and rewrite or delete any that appeared similar to Cadence's, this does not appear to have been sufficient," said the ruling. "Avant! still was able to take advantage of its knowledge of the functions within Cadence's code and the basic structure of the Cadence program itself."

Nevertheless, said Whyte, "the court is not satisfied that the evidence of Avant!'s actual use of any such protected information is sufficient to justify enjoining Avant! from producing or selling any of its products, particularly given the balance of hardships in Avant!'s favor."

Cadence, based here, sued Avant! in late 1995, claiming that the Sunnyvale, Calif., company's ArcCell and ArcCell-XO place-and-route software were built with stolen Cadence code. Gerry Hsu, Avant!'s president and CEO, left a high-ranking management position at Cadence to join Avant!'s previous incarnation, ArcSys, in 1994.

Hsu has denied the company stole code from Cadence and described the Cadence suit as a tactic to prevent Avant! from competing effectively in the fast-growing place-and-route market.

Last week, both companies rushed to claim victory in the wake of the ruling.

Avant! said in an announcement that the decision ensures uninterrupted sales of its place-and-route products.

"We are pleased to see that justice has been served," Hsu said in a statement. "We hope that both Avant! and Cadence will put the legal issues behind them and compete professionally in the open marketplace." Hsu was traveling to Japan and unavailable for comment.

Cadence, for its part, argued that Whyte's ruling bolstered its contentions.

In his 24-page ruling, Whyte said that a preliminary injunction to bar the sales of Avant! software--which he said represents 60 percent of the company's revenues--would "jeopardize Avant!'s ability to survive as a relatively new company which invested significant time and resources in the development of its products prior to the time Cadence initiated its suit."

However, he said, "based upon the evidence presented to date, the court concludes that Cadence will likely prevail in showing that Avant!'s clean room procedures were inadequate."

While he refused to keep ArcCell, ArcCell-XO or its successor products from the market, Whyte did bar Avant! from using Cadence's Vsize source code in any product. He also barred the company from using any Cadence source code, or any code derived from code proffered by Mitsuru Igusa, a former Cadence employee whom Cadence claimed stole portions of its code. Indeed, said Whyte, "The code appears to have been copied by Igusa."

The judge also stripped Avant! of a key defense, ruling that the company could not hide behind a 1994 agreement between Hsu and Cadence as protection against legal claims. He found the pact covered only claims existing at the time of the agreement and not any that might arise after it.

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