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Jury Awards Lexar $465M Total from Toshiba

UPDATED: A California jury awarded Lexar Media an additional $84 million in punitive damages, upping the total that Toshiba has to pay for stealing trade secrets to $465.4 million.

The decision, one of the largest intellectual property verdicts in California and U.S. history, comes a day after the jury said Toshiba had to pay Lexar $381.4 million in damages for breach of fiduciary duty and theft of trade secrets.

Lexar and Toshiba both make flash memory (define) storage cards, used in digital cameras and MP3 players.

"This verdict sends a clear message that protects all the other companies that don't have the will or means to take on a giant like Toshiba for their fraudulent or abusive business practices. This is a huge victory not just for Lexar, but for innovative companies everywhere," said Eric Whitaker, executive vice president and general counsel, Lexar.

Toshiba said in a brief statement that it would fight the judgment.

"Toshiba believes that the verdict rendered by the jury was in error, and we plan to pursue all available legal avenues to correct it," the company said. Toshiba invented NAND flash memory technologies and has been a pioneer throughout its development."

The Japan-based company also said it will continue to produce NAND flash memory products and does not plan to revise fiscal projections for 2004 because of the decision.

Punitive damages are awarded when a jury finds a defendant's actions in a case are oppressive, fraudulent or malicious. In this case, Toshiba invested in and secured a seat on Lexar's board in 1996 only to take the technology, turn around and use it for its own gain.

After accessing Lexar's technical information, it began talks with Lexar foe SanDisk. Toshiba later resigned its seat on the board, and announced its relationship with SanDisk. Lexar sued Toshiba in 2002.

Toshiba tried to argue that it developed the technology in question but Lexar's counsel discovered a paper trail of Toshiba's own internal documents.

Lexar, which has been struggling financially, could get more money from Toshiba because it has other claims pending. Lexar's claim for unfair competition was not given to the jury and will be decided by the California Superior Court in San Jose, possibly after a hearing on April 13. Lexar's case for patent infringement against Toshiba is also pending.

Lexar will further attempt to defend its technology by asking the court for an injunction that bars the sale of Toshiba's products in the United States. Analysts said this could be damaging to Toshiba because it sells a lot of flash memory cards in the country.

Lexar expects that the court will hold a hearing on Lexar's request for an injunction on April 13, 2005.



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