Seagate suit against STEC could raise SSD prices

Seagate's suit against STEC could change the storage game

Seagate Technology LLC filed a potentially far-reaching patent infringement lawsuit against STEC Inc. yesterday, over flash memory-based solid-state drives (SSDs).

Seagate, one of the world's largest hard disk drive (HDD) makers, claims that several STEC products, including SSDs and some DRAM (dynamic RAM) devices, infringe as many as four of its patents. Seagate filed the lawsuit in the U.S. District Court for the Northern District of California.

The lawsuit could go a long way in changing the game between HDD and SSD makers. At a time when demand for storage is exploding as people give up CDs and DVDs and start storing music, movies and more on their computers, SSDs have gained ground against HDDs because they use less power and are more reliable, although HDDs remain far less expensive.

A Seagate victory in the suit, or a settlement, could result in the company winning cross-licensing agreements and collecting royalties not only from STEC but also from other SSD makers such as Samsung Electronics and Intel Corp., or see them facing similar lawsuits, according to Jim Handy, analyst at Objective Analysis. The royalties would become like a tax on SSDs and potentially other flash memory products, increasing prices to end users.

Seagate and Western Digital Corp. partnered with SanDisk Corp. in the 1980s to establish the flash card market, gaining access to key flash SSD intellectual property, some of which is being used in the complaint against STEC, Handy said.

"Although we are not in a position to comment on the validity of Seagate's claim, we have been watching the technology business long enough to understand the way the patent game is often played," he said.

Such cases rarely go to trial. The parties usually settle after squaring off over which one has more patents. The owner of the larger patent portfolio, Seagate in this case, normally ends up naming the settlement terms, Handy said.

The STEC case will likely be a proving ground for Seagate's patents, but larger companies may put up more of a fight even if Seagate wins. STEC's revenue was only $188.7 million last year, making it a far smaller company than, for example, Intel at $38.3 billion.

Handy said that Seagate is already in talks with all major SSD makers on the patent issue.

Representatives from Seagate, Samsung and Intel declined to comment on the case.

But in an open letter, Seagate CEO Bill Watkins wrote: "This is not about stifling innovation or threats to our business from solid-state technology. We welcome advances in this, and other technologies, and in fact we continue to invest considerable R&D funds and now have teams of people focused on the development of Seagate solid-state and related technologies. What this lawsuit is about is preserving for our shareholders the value we have created by building an industry-leading patent portfolio."

Copyright © 2008 IDG Communications, Inc.

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