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Toshiba, Micron Settle Flash Gripe For $288M

UPDATED: Toshiba today said it will pay $288 million for Micron's NAND Flash semiconductor technology and license patents to settle all of the litigation between Toshiba and Lexar Media, which Micron bought in June.

NAND Flash  has become the preferred format for storing large quantities of data on USB Flash drives, digital cameras and MP3 players, devices that are quickly proliferating at a time when customers demand more mobile technologies.

For that reason, NAND is one of the hottest technologies in the semiconductor sector, and is a multi-billion-dollar industry with huge stakes between No. 1 Toshiba and No. 2 Samsung.

Gartner said NAND Flash sales topped $10.7 billion in 2005; the research firm expects $14.7 billion in sales through 2006.

The deal between Toshiba and Micron settles the rancorous, long-running patent dispute between Toshiba and Lexar, a case that involved breach of fiduciary duty and theft of trade secrets going back several years.

The case simmered since 2002 and boiled over last year when a jury ordered Toshiba to pay Lexar $465.4 million for stealing trade secrets and infringing on patents.

The shock of that verdict reverberated throughout the industry and served as a cautionary tale about what can happen when executives from one company move on to a competitor.

Lexar was later dealt a blow in the legal war after a California Superior Court judge declined the Flash memory maker's request for Toshiba to stop selling its own Flash products.

When Micron agreed to acquire Lexar last year, analysts openly questioned whether or not Micron would be able to assume the litigation burden and settle with Toshiba.

To be sure, Gartner analyst Joseph Unsworth said he was surprised at the settlement price for Toshiba, but warned that the competitive nature of the NAND Flash space could lead to additional litigation down the road.

"While it seems that Toshiba got off the hook pretty easily financially, it certainly does not spell the end of patent disputes for the NAND industry and its participants," he said.

Today, Toshiba and Micron resolved their gripe in a friendly fashion.

"We appreciate that Micron approached this issue in a positive spirit that allowed the parties to work together to bring all outstanding litigation and claims to a full and final resolution," said Masashi Muromachi, corporate executive vice president of Toshiba Corporation and president & CEO of Toshiba's semiconductor company.

"We have enjoyed a strong relationship with Toshiba for a number of years, have the highest respect for Toshiba as an innovator in flash technology and see no merit in continuing to pursue this litigation," said Micron Chairman, CEO and President Steve Appleton.