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Lexar awarded $465 million in Toshiba suit

Posted by iTech - 2005-10-15

A court on Friday (Oct. 14) affirmed a previous jury verdict that awarded Lexar Media Inc. over $465 million in damages in its suit against Japan’s Toshiba Corp.

Toshiba responded to the judgment. The company said the case is in the entry of judgment phase, which is a procedural step in a trial that comes after a jury verdict and before the filing of certain post-trial motions.

“The procedures at the trial court are ongoing, and as this litigation moves to its conclusion, we will continue to pursue all legal avenues available to us to correct what we believe to be an erroneous jury verdict in this case, including filing post-trial motions or applicable appeals,” according to Toshiba.

The case, heard in the Superior Court for the State of California, alleged that Toshiba invested $3 million in flash-card maker Lexar (Fremont, Calif.) and asked for and received a seat on Lexar's board in 1997. At the time, Toshiba received extensive confidential information, including Lexar's highly confidential patent applications, according to Lexar.

Lexar indicated that by 1997, Toshiba had allegedly "tried but failed to develop a reliable flash memory controller," according to the company. And unbeknownst to Lexar, Toshiba also had "top secret" internal plans to partner with rival flash-memory product maker SanDisk Corp.

Lexar, a manufacturer of digital media products, in March claimed a legal victory over Toshiba. It also said that a jury awarded the company over $380 million in damages as part of the legal victory against Japan's Toshiba. A day after finding Toshiba liable for $380 million in a flash-memory patent suit, a jury awarded Lexar an additional $84 million in punitive damages in the case.

Toshiba has filed numerous motions challenging the verdict. As late as this week, Toshiba filed an emergency appeal asking the court of appeals to review the case and to delay the entry of judgment, according to Lexar. That request was immediately denied, the company said.

In entering the judgment, the Superior Court for the State of California affirmed the jury verdict delivered in March in the case against Toshiba.

“We are very pleased that, after six months of Toshiba's efforts to challenge the jury verdict, the court has rejected those challenges and entered judgment confirming that verdict in every respect,” said Eric Whitaker, executive vice president and general counsel, Lexar, in a statement.

“The jury's verdict was based on a mountain of evidence, mostly from Toshiba's own files, establishing that Toshiba deliberately violated its duties to Lexar and that a large number of the products currently manufactured and sold by Toshiba contain Lexar’s trade secrets,” he said. “We are confident that Toshiba's remaining efforts to challenge the verdict, including its inevitable appeal, will fare no better than Toshiba's earlier attempts.”

Now that the judgment is final, California law requires that interest accrue on the amount of the judgment at the statutory rate of 10 percent simple interest, which is approximately $46 million per year or $127,298 per day.

Lexar is also pursuing an ongoing case against Toshiba in the Federal Court for the Northern District of California, accusing the Japanese electronics giant of patent infringement.

The company’s case for patent infringement against Toshiba on more than ten of its patents remains pending in Federal Court. Discovery is scheduled to continue through early 2006 and Lexar expects that a trial will take place on one of the patent actions in late 2006.

The patents at issue in the federal case include U.S. Patent Nos. 5,479,638; 5,818,781; 5,907,856; 5,930,815; 6,034,897; 6,040,997; 6,134,151; 6,141,249; 6,145,051; 6,202,138; 6,262,918; 6,374,337; and 6,397,314. Lexar is seeking damages as well as an injunction against Toshiba for those products that infringe Lexar's patents, including its flash memory chips, flash cards and digital cameras and USB flash drives.

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