Update: Toshiba sues Hynix on memory patents

Japan's Toshiba Corp. filed patent infringement lawsuits in Japanese and U.S. courts on Monday against South Korea's Hynix Semiconductor Inc., it said Tuesday.

The Japanese suit was filed in the Tokyo District Court against Hynix Semiconductor Japan Inc. and alleges that Hynix violated three of Toshiba's patents covering NAND-type flash memory chips, Toshiba said in a statement. The suit seeks monetary damages and a halt to sales of the Hynix products that Toshiba alleges infringe upon its patents, it said.

Toshiba also filed a broader suit against Hynix and some of its U.S. subsidiaries in the U.S. District Court for the Northern District of Texas later the same day. That suit alleges Hynix has infringed upon four patents on NAND-type flash memory and three relating to DRAM (dynamic random access memory). Like the Japanese suit, it asks for an injunction against sale of the products and monetary damages.

Both lawsuits relate to a patent cross-licensing agreement signed between Toshiba and Hynix in August 1996. The agreement expired on Dec. 31, 2002, and despite negotiations the two companies have been unable to agree on a revision of the arrangement, Toshiba said.

Hynix could not be immediately reached for comment.

"Toshiba want money ... and they want to protect their technology," said Kim Soo-Kyoum, program director for semiconductor research at market research company IDC.

Kim said that the suits filed by Toshiba are in support of legal moves made in mid-October by its flash memory development and production partner SanDisk Corp. against STMicroelectronics NV, which partners Hynix in making flash chips.

On Oct. 18, SanDisk filed a complaint with the U.S. International Trade Commission alleging that NAND-type flash memory chips made by STMicroelectronics NV infringed a SanDisk patent. SanDisk requested that STMicroelectronics' NAND flash memory chips be barred from sale in the U.S. SanDisk also filed suit in the U.S. District Court for the Northern District of California involving the same patent, and sought an order declaring that its products did not infringe 14 U.S. patents assigned to STMicroelectronics.

Flash memory has the ability to maintain its contents even after power to the chip has been turned off. This has made it one of the most commonly used types of memory chip in devices such as consumer electronics products, cellular telephones and digital music players. DRAM is the most commonly used type of memory in personal computers.

Toshiba Corp. is the world's second biggest NAND flash memory maker with about 34 percent market share, according to IDC. Meanwhile, Hynix, which has started volume production of NAND flash recently has only a very small share, according to Kim.

However, if Toshiba forces Hynix to pay royalties through successfully prosecuting the patent dispute, Toshiba will benefit from any success Hynix and STMicroelectronics have in the market.

"It's a win-win situation for Toshiba," Kim said.

The total NAND flash memory market is expected to be $6.8 billion in 2004 and will grow to a value of $8.2 billion in 2008, according to IDC estimates.

Another reason for Toshiba to file its actions is concern that increasing flash memory production by Hynix and STMicroelectronics may further erode prices that are already falling, cutting into Toshiba's and SanDisk's profits, according to an industry insider.

Toshiba was the fourth largest manufacturer of flash memory in 2003, according to data from market research company IDC. Toshiba had a 13.3 percent share of the global $10.7 billion market on a revenue basis, behind Samsung Electronics Co. Ltd., Fujitsu AMD Semiconductor Ltd. and Intel Corp., according to IDC's estimates. Hynix was not ranked in the top ten.

In the DRAM market, Hynix was the No. 2 producer of chips in the second quarter of this year, according to IDC figures. The company had a 16.1 percent share of the $7 billion global market behind market leader Samsung Electronics.