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Toshiba ordered to pay Lexar $380M in trade secrets suit

The court battle centers around a business relationship gone sour

By Martyn Williams
March 24, 2005 12:00 PM ET

IDG News Service - A jury in California has found Toshiba Corp. and one of its U.S. units liable in a lawsuit brought by Lexar Media Inc. concerning flash memory and ordered Toshiba to pay $380 million in damages, Lexar said yesterday.
Toshiba and Toshiba America Electronic Components Inc. 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.
The jury also found Toshiba guilty of actions that may support punitive damages, said Eric Whitaker, executive vice president and general counsel at Lexar. Evidence was expected to be presented to the jury today to support a claim for further damages. Whitaker said the amount of damages claimed will be made public today and will be based on the net worth of Toshiba.
Toshiba declined to comment on the jury's recommendation.
Both the jury's recommendation and any subsequent damages awarded 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 $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 [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 Co., Sony Corp., Olympus Corp. and Eastman Kodak Co., Whitaker said.
Even with yesterday's decision, the case is not over. A claim by Lexar of unfair competition wasn't presented to the jury and is expected to be heard by the court on April 13, along with post-trial motions. Among those motions is likely to be an injunction from Lexar seeking to bar the sale in the U.S. of Toshiba products found to include the Lexar technology in question. Those include NAND flash memory chips and memory cards that incorporatethe chips.
A separate 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 the sale of certain Toshiba products.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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