United States District Court, D. Massachusetts
ZYXEL COMMUNICATIONS, INC., Individually and as Assignee of MitraStar Technology Corp.
SKYWORKS SOLUTIONS, INC.
MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO
RICHARD G. STEARNS UNITED STATES DISTRICT JUDGE.
product liability dispute, ZyXEL Communications, Inc. (ZyXEL
Inc.), a seller of defective wireless routers, seeks to hold
Skyworks Solutions, Inc., the designer and manufacturer of a
microwave monolithic integrated circuit (MMIC) power
amplifier component, responsible for the “[e]ndemic
[f]ailure” of its routers. Compl. ¶ 35. ZyXEL Inc.
asserts claims under the Racketeer Influence and Corrupt
Organization Act (RICO), 18 U.S.C. § 1962(c) (Count I);
fraud and intentional misrepresentation (Count II); and
breach of the implied warranty of fitness for a particular
purpose (Count III). Skyworks moves to dismiss the Complaint
pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state claims
upon which relief can be granted.
the stage, first the players: Massachusetts-based defendant
Skyworks designs and manufactures semiconductor components
for use in the fabrication of wireless routers. Asian
Information Technology, Inc. (AIT), a Taiwanese company, is a
Skyworks distributor. MitraStar Technology Corporation, also
based in Taiwan, manufactures, among other products, wireless
networking routers. Plaintiff ZyXEL Inc., based in
California, is a wholly owned subsidiary of ZyXEL
Communication Corp. (ZyXEL Corp.), another Taiwanese company.
ZyXEL Inc. imports products from ZyXEL Corp. and sells them
in the United States.
plot: Through mid-2016, Skyworks manufactured an MMIC power
amplifier designated as model SE2605L-R. Sometime in 2016,
Skyworks learned from a customer of a latent defect in the
SE2605L-R. Compl. ¶ 18. As explained in an “8D
Problem Solving Report” authored by Skyworks in June of
2018, “the problem was that the Rfin reference
grounding level of the  ¶ 2605L-R was being impeded
where epoxy, known as the die attach layer, was used to
connect two key components of the device.” Id.
[W]hen functioning normally, the die attach layer effectively
connects the die to the lead frame (ground) by way of the
conducting properties of the die attach layer, such as the
flakes of silver suspended in the epoxy used in the
SE2605L-R. However, in the  ¶ 2605L-R, the flakes of
silver in the epoxy used for the die attach layer shifted
over time away from the copper lead frame toward the backside
of the die.
Id. ¶ 14. The shifting of the silver flakes in
the epoxy “developed as a result of the difference in
electrode potential of silver and copper, ”
id. ¶ 16, and produced “less conductivity
between the silver flakes in the epoxy and the copper lead
frame, and thereby impeding the RFin reference grounding
level and causing high ‘RFin to Ground resistance,
'” id. ¶ 14. High RFin to ground
resistances causes instability, and “produce[s] a radio
signal outside of the parameters of its specification.”
Id. ¶ 15. In other words, the SE2605L-N was
doomed to fail over time.
response, in July of 2016, Skyworks made two principal
changes to the design of the SE2605L-R - “(i)
conversion of the lead frame finish from copper to NiPdAu;
and (ii) conversion of the epoxy used for the die attach
layer from 2815A to 1290WB.” Compl. ¶ 18. The
redesigned MMIC power amplifier was designated as model
SE2605L-RN. Skyworks issued a Product Change Notification
(PCN) on August 16, 2016, which was distributed to its
customers worldwide. According to the PCN,
a. The reason for the product changes [was] “[t]o be
consistent with the material set of other Skyworks
b. “[T]here is no change to fit, function, reliability,
quality or safety”; and
c. “No customer impact is anticipated with this
Id. ¶ 21. Skyworks began shipping the new
SE2605L-RN on September 15, 2016, but also continued to sell
off its remaining inventory of SE2605L-R.
August 28 and November 9 of 2016, MitraStar placed 11
purchase orders for SE2605L-R, totaling approximately 1
million units, see id. ¶ 31,  the fulfillment
of which MitraStar received through May of 2017. During that
period, MitraStar received a copy of the PCN in September of
2016. In October of 2016, MitraStar received samples of the
new SE2605L-RN from AIT. MitraStar inquired of AIT the
differences between the SE2605L-R and the new SE2605L-RN
(other than those described in the PCN). AIT identified only
the marking information, such as the model number, shown on
the surface of the Skyworks SE2605L-RN. In February of 2017,
MitraStar repeated the request. AIT responded by pointing to
the material composition identified in the PCN. AIT also
provided test reports purporting to demonstrate immaterial
performance differences between the two models.
the denouement: MitraStar built the SE2605L-R into its model
C1100Z wireless routers. ZyXEL Corp. purchased the routers
from MitraStar. ZyXEL Inc. imported and sold them in the
United States. In May of 2018, Century Link, Inc., ZyXEL
Inc.'s most important U.S. customer, reported widespread
reliability and performance failures involving the C1100Z
routers. MitraStar engineers determined that the problems
originated with the SE2605L-R component. When the results
were reported to Skyworks, it generated the 8D Report
described supra, disclosing the defect in the
SE2605L-R. Ultimately, ZyXEL Inc. established a 13% failure
rate in the C1100Z routers, compared to an industry standard
of less than 1%. CenturyLink invoked an “Endemic
Failure” section of its ...