Toshiba ordered to pay Lexar US$380M in flash case

A jury in California has found Toshiba liable in a case concerning flash memory brought by Lexar Media and ordered Toshiba to pay US$380 million, Lexar said.

A jury in California has found Toshiba and one of its U.S. units liable in a case brought by Lexar Media concerning flash memory and ordered Toshiba to pay US$380 million in damages, Lexar said last week.

Toshiba and Toshiba America Electronic Components were found liable of breach of fiduciary duty and theft of trade secrets in the case in the Superior Court for the State of California, County of Santa Clara.

Additionally, the jury found Toshiba guilty of actions which may support punitive damages, said Eric Whitaker, executive vice president and general counsel of Lexar. Evidence will be presented to the jury on Thursday to support a claim for further damages. Whitaker said the amount of damages claimed will be made public in court on Thursday and will be based on the net worth of Toshiba.

Toshiba declined to comment on the jury's recommendation.

Both the jury's recommendation on Wednesday and subsequent awards that might be made are subject to confirmation by the judge in the case.

At the root of the complaint is a business relationship gone sour. The two companies became partners in 1997 when Toshiba invested US$3 million in Lexar and received a seat on the company's board. Toshiba sat on the Lexar board for two and a half years and through that position gained access to the company's technology and its business plans while at the same time working with SanDisk Corp., a rival of Lexar, on plans to jointly develop flash memory chips, said Lexar.

"We think the way they did that was wrong," said Whitaker. "This (ruling) reaffirms the rules of the road."

The U.S. patents that were disputed in the case, 5,907,856; 6,034,897; 6,040,997; 6,081,878; 6,141,249 and 6,374,337, relate to various flash memory technologies.

"It's critically important for Lexar," Whitaker said of the patent ruling. "The value of Lexar's IP (intellectual property) has always been and will always be at the center of our business model. This sends a very important message to our current and future business partners."

Licensees of Lexar technology include Samsung Electronics, Sony, Olympus and Eastmak Kodak Co., Whitaker said.

Even with Wednesday's decision and Thursday's hearing for punitive damages, the case is not over.

A claim made by Lexar for unfair competition was not presented to the jury and is expected to be heard by the court on April 13 along with post trial motions. Among these motions, Lexar is likely to seek an injunction that bars Toshiba products found to include the Lexar technology under question from sale in the U.S., it said. These include NAND flash memory chips and memory cards that incorporate the chips.

A further case of patent infringement covering more than 10 patents has yet to be heard in the U.S. District Court for the Northern District of California. In that case Lexar is also seeking damages and an injunction against sale of certain Toshiba products.

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Martyn Williams

IDG News Service
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