Memory rivals brace for legal battle after alleged trade secrets theft

The Toshiba-SanDisk joint venture has filed lawsuits against SK Hynix for misappropriating trade secrets

A former SK Hynix employee is at the center of a brewing legal battle between top flash memory rivals after allegedly stealing trade secrets.

Toshiba and NAND flash joint-venture partner SanDisk on Thursday filed lawsuits against competitor SK Hynix and its subsidiaries, alleging theft and misuse of confidential trade secrets.

The lawsuits, filed in Japan and the U.S., came after Tokyo's Metropolitan Police Department on Thursday arrested former SK Hynix employee Yoshitaka Sugita on charges of stealing trade secrets. The trade secrets were allegedly stolen by Sugita when he was employed by the SanDisk-Toshiba joint venture, and the information was passed to SK Hynix, his next employer. The lawsuits allege misuse of proprietary information by SK Hynix to gain competitive advantage.

Toshiba and SanDisk, which jointly manufacture NAND flash at a fabrication plan in Yokkaichi, Japan, provided information on the alleged trade secrets theft that led to Sugita's arrest on or around Thursday by the police in Tokyo. Sugita is cooperating with the authorities, SanDisk said.

Toshiba filed a lawsuit against SK Hynix in the Tokyo District Court under Japan's Unfair Competition Prevention Act, according to a statement. Toshiba is seeking damages for the "wrongful acquisition and use of Toshiba's proprietary technical information related to NAND flash memory," according to a statement.

A separate lawsuit filed by SanDisk in the Santa Clara Superior Court in California on Thursday against SK Hynix and its U.S. subsidiary alleges that the defendants cashed in on the stolen trade secrets. SanDisk is seeking damages, and remedies for trade secret misappropriation under California's Uniform Trade Secret Act.

SanDisk in its civil suit also alleged that SK Hynix "solicited" Sugita to steal the trade secrets from SanDisk-Toshiba. The confidential information was later used by SK Hynix for technical and operational purposes, including to lay out its future NAND flash roadmap, according to the complaint filed with the court.

A spokesman for SK Hynix in South Korea said the company is still in the process of verifying the lawsuits and has no immediate comment.

Sugita worked at SanDisk-Toshiba from February 2003 and resigned in June 2008, where he analyzed defective products and had access to trade secrets related to NAND flash memory designs, devices and manufacturing processes, according to the document. Sugita allegedly stole trade secrets in May 2008, including "SanDisk's most sensitive and valuable flash memory trade secrets." The 10GB of sensitive information that was downloaded is said to have included data on research and development, design and circuit layouts, process technology, tools, testing, device and business information.

After leaving SanDisk-Toshiba, Sugita commenced work for SK Hynix in July 2008 and was employed there until June 2011. But it was only in January 2014 that SanDisk-Toshiba learned about the trade secret misappropriation through an informant aware of Sugita and SK Hynix's activities. Despite signing a non-disclosure agreement after leaving SanDisk-Toshiba, Sugita allegedly delivered "substantial technical, operational and business trade secret information" which SK Hynix used despite "knowing that it was acquired by improper means," according to court documents.

Toshiba said SK Hynix is a partner, but had to file a lawsuit as a means of redressal. The company said it would will establish "a more robust system for protecting its intellectual property and preventing its loss."

Research firm IC Insights placed SK Hynix as the fifth largest vendor of semiconductors, estimating US$13 billion in sales for 2013. Toshiba was in sixth spot with projected sales of $12.2 billion. In NAND flash, Toshiba ranked second in sales during the fourth quarter of 2013 with sales of $1.5 billion, while SK Hynix was in fourth place with sales of $730.5 million.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

Join the newsletter!

Or
Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags legalmemoryintellectual propertypatenttoshibaComponentsCivil lawsuitsSK Hynix

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Agam Shah

IDG News Service
Show Comments

Essentials

Mobile

Sansai 6-Outlet Power Board + 4-Port USB Charging Station

Learn more >

Exec

Budget

Back To Business Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?