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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Jason Rooks who wrote (20184)	4/24/2001 8:12:29 PM
From: orkrious	Respond to of 60323

I look forward to the annual meeting because I will ask management what it is doing about protecting the company's IP. Jason, unlike last year, I won't make it this year. However, I still look forward to hearing the answer to your question through the modern wonder of the internet. Jay

To: Jason Rooks who wrote (20184)	4/25/2001 11:55:17 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

Jason, the reasons why a company might NOT want to sue for patent infringement, even when there is a strong case, are many and varied. The recent Lexar settlement is a good example. There is no question that Lexar infringed the '987 patent, and did so intentionally. If the case had gone to a jury, and assuming the jury would have found in favor of SanDisk (not necessarily a good assumption), SanDisk could have been entitled to treble damages. But such an award would have taken years to materialize, owing to the time consuming appeals process. It would also have been expensive, with SanDisk having to keep paying legal bills and receiving no compensation until the issue was finally resolved. The settlement was a way of recovering legal costs immediately, and at the same time it allowed Lexar to continue in business, forcing Lexar to pay royalties beginning April 1. A more severe judgment against Lexar might have driven the company into bankruptcy, in which case all judgments would be set aside. Sometimes it's more prudent to negotiate a settlement. A related issue that may apply to smaller players is whether there is a potential for recovery that greatly exceeds the cost of pursuing an action. I suspect that with many of the smaller companies, it's too soon to file expensive lawsuits. Instead, merely advising those companies of their potential liability would preserve SanDisk's right to file an action later on, when the damages might be sufficiently large to make the case worthwhile. As to Sony, if there is an infringement, or if Sony is required to pay some kind of royalty to SanDisk, it is probably better to put them on notice and meanwhile try to negotiate some mutually beneficial solution to the problem. A company like SanDisk may have some success against Lexar but may have second thoughts about engaging in a bout with an 800 lb. gorilla. A classic David and Goliath example is seen in the case of Stac Electronics v Microsoft several years ago. Microsoft had an agreement to incorporate Stac's compression software into early versions of Windows, at a time when hard disk space was considerably more expensive than it is now. Microsoft thought it found a way to make something similar without infringing the Stac IP, and subsequently canceled its contract with Stac. Clear damage and quite clear infringement too. Stac sued and eventually won, whereupon Microsoft agreed to a settlement. But the cost and energy spent by Stac was so high that the company never recovered. You never see Stacker software now, and virtually all its investments made with the $44+ million settlement have come to virtually nothing. Experience is a good teacher. Art