STEC Girds For Patent Battle With Seagate

Seagate, Scotts Valley, Calif., said on Monday that it has initiated a patent infringement lawsuit against Santa Ana, Calif.-based STEC for infringing on a number of Seagate's U.S. storage patents.

Seagate CEO Bill Watkins said in an open letter posted on his company's Website that Seagate has invested $7 billion over the last 10 years in R&D, and has over 3,900 U.S. patents in its portfolio. He also said that Seagate welcomes competition because "it drives innovation, benefits customers and results in a host of other benefits to our increasingly digital world."

However, Watkins said in the letter, while Seagate has not been a particularly litigious company, it must defend itself against "others in our industry [who] have taken shortcuts in the race to innovate, and in the process. . . are relying on intellectual property developed or acquired by Seagate."

On Tuesday, STEC responded to the lawsuit with the possibility of seeking to invalidate some of Seagate's patents.

Pat Wilkison, vice president of marketing and business development at STEC, said that of the four claims that Seagate made in terms of infringement, STEC either had prior patents or had started shipping products related to the technology prior to when the patents were filed.

Because of that, Seagate is taking a risk in filing an infringement lawsuit against STEC, Wilkison said. "If we are successful, it would impact Seagate's claims," he said.

STEC, which recently signed an OEM deal with storage vendor EMC, of Hopkinton, Mass., to put its solid-state drives in EMC's DMX arrays, and which works with other OEM customers, was surprised when it heard about the lawsuit, Wilkison said.

"Usually when there's substance to the claims, there's some communications and collaboration in advance," he said. "I first found out about it when Fortune magazine called me about it yesterday, 17 hours after the lawsuit was filed. We got served the papers last night."

Wilkison said that one reason for the patent infringement is that Seagate is looking to enter the SSD market at the same time that other potential competitors, including Samsung, Toshiba, Intel, and Micron, are entering.

"The category is starting to get significant in scale," he said. "Not only in the enterprise, but in the notebook market as well. Seagate doesn't have any products in this category."

Avi Cohen, head of research at Avian Securities, a Boston-based analyst firm, said in a report released on Tuesday that the Seagate infringement suit could impact STEC's ability to work with OEM customers who not have to take into account the litigation.

Cohen also wrote that Seagate probably chose to sue STEC instead of some of the new entrants to the SSD market who manufacture traditional hard drives like Samsung or Toshiba because such suits could spill out into the hard drive market.

Furthermore, wrote Cohen, Seagate may also be trying to disrupt STEC's relationship with Hynix Semiconductor, the Korea-based semiconductor memory developer, in order to help Seagate forge an exclusive relationship with Hynix.

Seagate executives declined to comment on the lawsuit due to preparations for the company's release of its quarterly financial report later on Tuesday.