Cadence, however, asserted that the code is an essential part of Avanti's place and route tool, and that use of the misappropriated code caused a direct loss of sales for Cadence as long as Avanti denied wrongdoing and continued to sell the tool. To back up that claim, Cadence counsel called to the witness stand its former chief executive officer, Joseph Costello, who said Avanti's attempt to downplay the role of the code was "ludicrous" and "patent baloney."

The opening arguments in Avanti's restitution hearing, which come almost a month after the company pleaded no contest to charges of code theft, set the stage for several more days of acrimonious debate before presiding Judge Conrad Rushing. Avanti attorney George Riley said he'll need at least until next week to question and cross-examine witnesses.

A key question of the hearing is how Rushing will determine what Avanti should pay in restitution. Avanti is arguing that a standard "head start" yardstick should apply, whereby the payment is determined by the time-to-market advantage Avanti was able to gain by using code stolen from Cadence.

Disputed advantage

Avanti's defense team contends that the company shouldn't have to pay any restitution if it can show that there was indeed no head start. Otherwise, Avanti should have to pay either $600,000 in royalties on sales of its ArcCell place and route tool, or a maximum of $2 million for royalties of ArcCell and the Aquarius tool, Riley said.

Riley said that Cadence's demand for $683 million in restitution "grossly overstates the importance of the Simbad database," and that all but 4 percent of the code for Avanti's placement and route tools was developed by Avanti.

"The effort it took to write that [database code] is insignificant compared to the complex algorithms required for placing and routing," Riley said. "The competitive value of Avanti's product is in the top-half place and route code."But Cadence asserted that the database is indeed an essential part of the tool, and that it touches all other elements of the place and route software. When questioned by Cadence counsel, Costello said Cadence had looked at using databases from companies like Oracle Corp., but that place and route is too complex and specialized for public domain software.

"Even companies like [Oracle] can't possibly touch the problems related to place and route," Costello said. "You have to build a special-purpose database for this kind of application."

Asked whether Cadence lost market share to Avanti, Costello said Avanti had nabbed about 20 of Cadence's 50 top-tier accounts while he was chief executive officer. When questioned about Avanti's pricing strategy, he said Avanti would routinely charge $30,000 to $40,000 per seat for its tool, about the same as what Cadence was charging in maintenance fees for its tools priced in the hundreds of thousands of dollars

The hearing was adjourned before Costello could be cross-examined by the defense. The next hearing is scheduled for Wednesday (June 20).

Meanwhile, lead prosecutor Julius Finkelstein said that Avanti executives have earned millions as a result of selling tools with tainted code while denying any wrongdoing. "For the past 10 years [Avanti] has condoned and rewarded source-code stealing and has deceived its investors," he said.

Judge Rushing, who often interjected to seek clarification on loosely-defined terms like source code and database, made clear some of his concerns about both companies arguments. He called Cadence's methodology to seek compensation beyond the usual head start and lost royalty-loss tests "striking and novel." And he questioned Avanti's claim that it used only a small portion of the misappropriated database code, saying that the denouement in Ernest Hemingway's short story "Fifty Grand" was made up of only a few short sentences but is still central to the story.