Recent startup iTech Group has filed suit against National Semiconductor Corp. (NYSE: NSM) for “damaging iTech’s business” by blocking access to software, asserting the Silicon Valley company reneged on its agreement to sell its Mediamatics software business to iTech.

“We see National Semiconductor breeching our agreements,” says Doug Leech, chief operating officer for iTech. “This is a question of business law rather than company stature.”

iTech alleges that it contracted with National to purchase the rights to its Mediamatics digital media decoding and encoding software, including source code with updates, under a perpetual license. Given prior assurances from National, iTech later contracted separately to purchase all of the assets of the division of National that distributes the Mediamatics software, namely the Mediamatics PC software business.

Furthermore, iTech alleges that Santa Clara, CA-based National Semiconductor is not honoring the license granted to iTech, is not providing iTech with the agreed software, and is not honoring the acquisition of the Mediamatics division with the agreed assets.

“This was contemplated as a multi-million dollar transaction,” Leech says of the proposed Mediamatics acquisition. “National Semiconductor and iTech had intended to complete the transaction by May, and later contracted a revised date of August.”

iTech says it will seek a court order compelling National to provide iTech with access to the software and to enforce iTech’s rights to purchase the Mediamatics business. In addition, iTech will seek monetary compensation from National for not completing the transaction and for bad faith conduct with respect to the sale of the Mediamatics division and the software license agreement.

“It’s early”

Represented by the Los Angeles-based law firm of Rutter Hobbs & Davidoff, iTech says it seeks recovery of damages of up to $50.5 million in the Superior Court of California in Santa Clara, where it filed the suit Friday.

“We have yet to see a public response from National Semiconductor on our complaint,” Leech adds; “it’s early.”

Jeff Weir, director of worldwide public relations for National Semiconductor, has referred all inquiries to the legal filings and says, “We adamantly do not discuss details of litigation once the action is in court.”

National Semiconductor, which combines analog and digital technology, is focused on the fast growing markets for wireless handsets, displays, information infrastructure and information appliances. National reported sales of $1.5 billion for its most recent fiscal year and has about 10,000 employees worldwide.

Raleigh-based iTech Group is a privately-held company and does not disclose information about its size, Leech says. It licenses “Digital Media Engine” middleware that includes personal video recording software, MPEG-across-IP streaming software and other capabilities to major consumer electronics and personal computer companies for integration with their products. iTech’s server software enables customers and partners to deliver digital media services, such as intelligent program guides, entertainment portals and secure enterprise multicasting.

iTech Group:

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