Toshiba has been ordered to pay $465 million in damages to Lexar Media for stealing trade secrets.
Lexar took Toshiba to court over Toshiba's use of Lexar NAND flash memory technology for digital cameras. Toshiba was in partnership with Lexar but is now partnering SanDisk.
Judge Jack Komar added $84 million to damages of $381.4 million already agreed by a jury in March. The additional punitive damages were because Toshiba's actions were "oppressive, fraudulent or malicious". Toshiba appealed the award and lost.
The story goes back to 1997 when Toshiba invested $3 million in Lexar, then just a start-up, and gained a seat on Lexar's board. Hideo Ito, a senior Toshiba executive, was on the board from 1997 to 1999. This resulted, according to Lexar, in Toshiba obtaining confidential Lexar information concerning flash memory patent applications.
Toshiba began working with SanDisk, a rival flash memory product manufacturer to Lexar. In October 1999, Toshiba and SanDisk announced a 70 billion yen (£350m) joint venture for the production of large-capacity flash memory chips. This became FlashVision. SanDisk is the world's largest flash memory manufacturer.
Lexar says Toshiba shared its trade secrets with SanDisk. Toshiba says Lexar's claim is false because it used different technology when working with SanDisk. The San Jose jury disagreed hence the two damages awards.
Toshiba is generally credited with having invented flash memory. It is fighting to have the damages award over-turned. At the time of the original award, Toshiba's lawyer said it would try to "correct what we believe to be an erroneous jury verdict in this case."
According to News Journal of India report Eric S. Whitaker, Lexar's lawyer, said: "You've got to be able to trust your partners. Toshiba was on our board, talking about more partnerships, and meanwhile they were planning to work with SanDisk. We thought Toshiba was going to be our partner for the long term."
The award is the third-largest IP-related award in US legal history. It is thought it could stave off bankruptcy for Lexar, if it is finally upheld. In comparison, Lexar's full revenue for 2004 was $682 million.
It received a settlement from Memorex in August this year relating to infringement of its flash memory patents. The size of the payout isn't known. Memorex also agreed to stop selling the Flash memory in question.
Lexar has tried to win an injunction stopping Toshiba selling the Flash memory products concerned in that case. It has not succeeded.
Lexar also has an outstanding case against Fuji Photo relating to flash memory patent infringements. It dates from July 2002, and Fujitsu has just counter-filed claiming Lexar has broken its patents.