Behind one of the largest jury awards ever in a Silicon Valley intellectual-property case is a story that has played out like a messy divorce.
Late last month, Fremont’s Lexar Media Inc. won $465 million in civil damages from Japanese electronics giant Toshiba Corp. A Superior Court jury in Santa Clara County sided with Lexar’s claim that Toshiba — Lexar’s former lead investor and strategic partner — had stolen its flash-memory trade secrets and leaked them to rival SanDisk Corp. of Sunnyvale.
The case’s mounds of court filings and testimony don’t fully convey the sense of shock and betrayal Lexar executives said they felt when Toshiba dumped them and struck up a partnership with their No. 1 competitor.
Lexar insiders tell of rising anger as they became convinced that SanDisk’s flash-memory devices shared key features that Lexar considered proprietary.
A central question quickly emerged: Had Hideo Ito, 61, a career Toshiba executive who sat on Lexar’s board from 1997 to 1999, directly or indirectly passed the technology startup’s secrets to SanDisk?
Or did Toshiba and SanDisk, as those firms claimed, develop the innovations on their own?
Those sharply different perceptions show how murky and subject to interpretation such matters can be. And they illustrate how emotional such disputes can become when the life of a business venture is at stake.
Petro Estakhri, 47, an electrical engineer and co-founder of Lexar, remembers vividly when Toshiba and SanDisk issued press releases touting their collaboration in flash memory in 1999.
I punched the table so hard. I started using really wrong words. I said, ‘This is ridiculous,’ ” he said in an interview. “But at the same time, remember, I’m powerless. I’m up against a $10 billion company. What can I do? I can go complain to my general counsel.”
Now executive vice president and chief technology officer, Estakhri as much as anyone had banked personally on Lexar’s ability to advance the speed and utility of flash-memory controllers — essentially the brain of a flash card that directs how data are stored and read by memory chips.
Lexar alleged that Toshiba’s deception cost it hundreds of millions of dollars in sales in the cutting-edge flash-memory sector.
