RealTime IT News

Lexar Awarded Millions For Toshiba Indiscretions

A jury awarded Lexar Media $381.4 million in damages after it decided rival Toshiba stole trade secrets of its Flash memory technology and shared them with Lexar rival SanDisk.

The Superior Court for the State of California, County of Santa Clara, is expected to hold a hearing to award Lexar punitive damages after deciding the actions of Toshiba were willfully harmful. Lexar also will ask the court for an injunction barring the sale of certain Toshiba Flash chips and cards that include Lexar technology in the United States.

The victory should resonate loudly in the market for Flash memory , said Gartner analyst Joe Unsworth. Flash memory is a chip storage technology used in cell phones and digital cameras that can be erased and reprogrammed in units of memory called blocks.

Unsworth said he expects Toshiba to appeal the ruling, noting that an injunction prohibiting Toshiba from selling its products in the United States has the potential to be very damaging.

"They ship a lot of their Flash to the U.S. in the form of cards, and SanDisk also gets some Flash from them," Unsworth said.

Appeal aside, the money from the ruling could also help a struggling Lexar, which competes in a multi-billion-dollar market with Samsung, Toshiba, SanDisk and others.

"Lexar has been having some major financial problems over the last few quarters, and that's really hurt them in terms of having available cash," Unsworth said. "A verdict that goes their way to the tune of $381 million is significant."

Lexar is expected to announce earnings, which Unsworth expects will be weak, after the market closes today. Meanwhile, shares for Lexar jumped more than 100 percent Thursday in morning trading, from $3.17 from the previous close to $6.41.

The Fremont, Calif., Flash vendor has other cases pending against Toshiba.

Lexar expects that the court will hold a hearing on Lexar's request for an injunction on April 13. Discovery has now begun in Lexar's case for patent infringement against Toshiba on more than 10 of its patents pending in federal court. Lexar's other claim for unfair competition is also pending.

The issues of contention between Lexar and Toshiba go back to 1996, said Lexar spokesman Eric Thomas. Toshiba invested in and secured a seat on Lexar's board.

After becoming privy to 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.