Seagate sues flash drive maker

Seagate, the world’s largest hard drive maker, claims that STEC has violated four of its patents covering the way a storage device communicates with a computer. The suit was filed in the Northern District of California.

STEC said it believes Seagate’s lawsuit is “completely without merit

and primarily motivated by competitive concerns rather than a desire to protect its intellectual property

.” The company said it began building flash drives before Seagate won its patents. (STEC’s full statement is below.)

“This is not just Seagate; the drive industry pretty much owns the applications space for storage in notebook, desktop, enterprise,” Seagate CEO Bill Watkins told Fortune. “It’s been stunning to me how visibly people have been violating our intellectual property, across the board.”

Hard drives and flash drives are increasingly vying for share of the storage market as devices like Apple’s iPod and iPhone exert influence over electronics and computer design. The legal battle is no big surprise — a month ago, Watkins told Fortune he was considering suing flash drive suppliers. At the time, Watkins also downplayed the potential of flash drives to make inroads in the mainstream laptop market, which is an important source of revenue for Seagate.

While flash drives had begun showing up in laptops from Apple, Dell and Lenovo, Watkins said Seagate executives “just don’t see the flash notebook sell.”

Major laptop manufacturers seem to see it, though. Just last week, global leader Hewlett-Packard announced the HP Mini, a tiny, stylish laptop whose $500 entry-level configuration offers 4 gigabytes of flash storage instead of a hard drive. If HP finds success with the entry-level Mini, it’s a sure bet that other PC makers will place more flash bets as well.

Still, Watkins said he isn’t trying to stop the flash drive industry with the legal action but rather Seagate hopes to use its leverage to have a bigger say in the market.

“Our goal is really to get commercial partnerships and licensing agreements, which has been historically how the drive industry has done it,” he said. “This is not about stopping technology. We actually believe this technology’s going to get there and we’re going to be part of it. But I’ve spent $7 billion over the last 10 years on R&D in this area, in spaces like this, and we’re just not going to let it go away for free.”

STEC’s full statement:

SANTA ANA





, Calif., April 15, 2008 – STEC, Inc. (Nasdaq:STEC), a designer, manufacturer and marketer of high performance solid state drives (SSDs), announced today that it has received notice of a patent infringement lawsuit brought by Seagate Technology LLC (Nasdaq: STX), Seagate Technology International, Seagate Singapore International Headquarters Pte. Ltd. and Maxtor Corporation in United States District Court, Northern District of California, alleging infringement of US Patent Nos. 6,404,647 (issued in 2002), 6,849,480 (issued in 2005), 6,336,174 (issued in 2002) and 7,042,664 (issued in 2006).

STEC is one of the first companies to build SSDs, having designed, manufactured and shipped SSDs as early as 1994, long before any of the suggested patents were issued to Seagate. Given the effect SSDs are having on the HDD market, STEC believes that Seagate’s lawsuit is completely without merit and primarily motivated by competitive concerns rather than a desire to protect its intellectual property. STEC believes that Seagate’s action is a desperate move to disrupt how aggressively customers are embracing STEC’s Zeus-IOPS technology and changing the balance of power in enterprise storage. Seagate is sending a clear signal that it recognizes STEC as the leader in the SSD business and is attempting to slow down part of the growth that STEC is gaining through its SSD offering, particularly in the enterprise segment. STEC will aggressively pursue its defense to this infringement action.

In addition, STEC will also closely examine the patents asserted by Seagate as STEC believes it held such technology including prior patents, dating more than a decade prior to any of Seagate’s patents. Although STEC is in the process of analyzing the claims in this lawsuit, STEC believes that Seagate’s asserted patents pertain to technologies where STEC has years of prior experience and/or patents. STEC has significant patents related to SSD which have been developed through the decades of experience STEC has with developing, manufacturing and shipping SSDs. Beyond that long history, STEC also believes that many of Seagate’s claims are not relevant to SSD. For example, STEC was one of the originators of stacking technology with patents dating back to the mid-1990s, while Seagate’s patent on this matter was issued in 2005.

Through this process, STEC will determine if Seagate is misappropriating any of STEC’s core technologies; STEC will take appropriate action to protect its interests, including seeking the invalidation of Seagate’s patents.

“Throughout our 18 year history, STEC has been diligent in its pursuit of industry-changing technology while entirely respectful of the intellectual property that has been developed by others. The allegation put forth by Seagate in recently published articles that STEC “…ha[s] stolen [its] patents,” is simply not accurate nor in line with STEC’s long history of success and fair play in these markets,” said Manouch Moshayedi, chairman and CEO of STEC. “In fact, STEC believes these allegations are in response to the competitive threat that we as a leading developer of innovative SSD technologies pose to the HDD industry. We view this action as Seagate’s attempt to slow down the growth that STEC’s SSD business is experiencing, particularly in the enterprise segment. We have a high degree of confidence in STEC’s intellectual property portfolio.”