Seagate 2002 Annual Report Download - page 18

ITEM 3. LEGAL PROCEEDINGS
The following discussion contains forward-looking statements relating to our legal proceedings described below. Litigation is inherently
uncertain and may result in adverse rulings or decisions. Additionally, we may enter into settlements or be subject to judgments that may,
individually or in the aggregate, have a material adverse effect on our results of operations. Accordingly, actual results could differ materially
from those projected in the forward-looking statements.
Intellectual Property Litigation
Convolve, Inc. and Massachusetts Institute of Technology (“MIT”) v. Seagate Technology LLC, et al.
Between 1998 and 1999, Convolve,
Inc., a small privately held technology consulting firm founded by an MIT Ph.D., engaged in discussions with Seagate Delaware with respect
to the potential license of technology that Convolve claimed to own. During that period, the parties entered into non-
disclosure agreements. We
declined Convolve’s offer of a license in late 1999. On July 13, 2000, Convolve and MIT filed suit against Compaq Computer Corporation and
us in the U.S. District Court for the Southern District of New York, alleging patent infringement, misappropriation of trade secrets, breach of
contract, tortious interference with contract and fraud relating to Convolve and MIT’s Input Shaping
®
and Convolve’s Quick and Quiet
™
technology. The plaintiffs claim their technology is incorporated in our sound barrier technology, which was publicly announced on June 6,
2000. The complaint seeks injunctive relief, $800 million in compensatory damages and unspecified punitive damages. We answered the
complaint on August 2, 2000 and filed counterclaims for declaratory judgment that two Convolve/MIT patents are invalid and not infringed
and that we own any intellectual property based on the information that we disclosed to Convolve. The court denied plaintiffs’ motion for
expedited discovery and ordered plaintiffs to identify their trade secrets to defendants before discovery could begin. Convolve served a trade
secrets disclosure on August 4, 2000, and we filed a motion challenging the disclosure statement. On May 3, 2001, the court appointed a
special master to review the trade secret issues. The special master resigned on June 5, 2001, and the court appointed another special master on
July 26, 2001. After a hearing on our motion challenging the trade secrets disclosure on September 21, 2001, the special master issued a report
and recommendation to the court that the trade secret list was insufficient. Convolve revised the trade secret list, and the court entered an order
on January 1, 2002, accepting the special master’s recommendation that this trade secret list was adequate. On November 6, 2001, the USPTO
issued US Patent No. 6,314,473 to Convolve. Convolve filed an amended complaint on January 16, 2002, alleging defendants’ infringement of
this patent, and we answered and filed counterclaims on February 8, 2002. Discovery is in process. On July 26, 2002, we filed a Rule 11
motion challenging the adequacy of plaintiffs’ pre-filing investigation on the first two patents alleged in the complaint and seeking dismissal of
plaintiffs’ claims related to these patents and reimbursement of attorney’s fees. The court denied our motion on May 23, 2003. Briefing on
claims construction issues has been completed and a claims construction (Markman) hearing has been requested. No trial date has been set. We
believe that the claims are without merit, and we intend to defend against them vigorously. On May 6, 2003, the USPTO issued to Convolve
U.S. Patent No. 6,560,658 B2, entitled “Data Storage Device with Quick and Quiet Modes.” Convolve has indicated that it will seek leave of
the court to add this patent to the lawsuit. This latest patent is a continuation of a patent currently in the lawsuit (U.S. Patent No. 6,314,473).
We similarly believe any claims that may relate to this continuation patent would be without merit, regardless of whether such claims were
added to the ongoing litigation or asserted against us in a separate lawsuit. Judge John Martin, who was assigned to this case, has announced
his retirement from the federal bench. We have been informed that the case has been assigned to Judge George B. Daniels.
Shao Tong, et al. v. Seagate International (Wuxi) Co., Ltd . In July 2002, we were sued in the People’s Court of Nanjing City, China, by
an individual, Shao Tong, and a private Chinese company, Nanjing Yisike Network Safety Technique Co., Ltd. The complaint alleged that two
of our personal storage disc drive products infringe Chinese patent number ZL94111461.9, which prevents the corruption of systems data
stored on rigid disc drives. The suit, which sought to stop us from manufacturing the two products and claimed immaterial monetary damages,
was dismissed by the court on procedural grounds on November 29, 2002. On December 3, 2002, the plaintiffs served us with notice that they
had refiled the lawsuit. The new complaint contains identical infringement claims against the same disc drive products, claims immaterial
monetary damages and attorney’s fees and requests injunctive relief and a recall of the products from the Chinese market. Manufacture of the
accused products ceased in May 2003. At a hearing on March 10, 2003, the court referred the matter to an independent technical advisory board
for a report on the application of the patent claims to the two products. On June 10, 2003, we presented our non-infringement case to the
technical panel. The panel issued a technical advisory report to the court finding no infringement. The court has set a hearing on the technical
advisory report for August 21, 2003. We believe the claims are without merit, and we intend to defend against them vigorously.
Seagate Technology v. Read-Rite Corporation. In order to clarify our rights under a patent cross-
license agreement that Seagate Delaware
entered into with Read-Rite Corporation as of December 31, 1994, we filed a declaratory judgment action on May 7, 2003 in the Superior
Court of California, County of Santa Clara, seeking a declaration that we are entitled to a cross-license, effective as of November 22, 2000,
under terms substantially identical to those contained in the original Patent Cross License Agreement. On June 11, 2003, Read-Rite
Corporation answered the complaint putting forward a general denial and asserting various affirmative defenses. On June 17, 2003, Read-Rite
Corporation filed a voluntary petition for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. Upon notice, our declaratory judgment
action has been stayed. On July 23, 2003, the U.S. Bankruptcy Court approved the bid of Western Digital Corporation to acquire the assets of
Read-Rite Corporation, including the intellectual property that was the subject of Read-Rite’s dispute with us, in a transaction that closed on
July 31, 2003.
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