Toshiba sues Western Digital for meddling in memory chips unit sale

Japan's Toshiba Corporation has files a case against US-based Western Digital for interfering in the sale of its memory chip unit to cover losses from its nuclear division

Toshiba is suing Western Digital for 120bn yen ($1bn), accusing it of interfering in the attempted sale of its flash memory business.

The Japanese giant, which is offloading the unit, which makes chips for smartphones and laptops, to cover losses at its nuclear unit, has so far failed to finalise sale to its preferred buyer, a group of Japanese, US and South Korean investors.

Western Digital, a partner of Toshiba, objects to that proposed deal. (See: Western Digital moves court to block Toshiba from selling its chip business )

The US firm, which jointly runs Toshiba's main semiconductor plant, has been feuding bitterly with its Japanese partner, and has sought a US court injunction to prevent any deal that does not have its consent.

Toshiba Corporation and Toshiba Memory Corporation today filed a petition with the Tokyo District Court against Western Digital Corporation, and its subsidiary Western Digital Technologies, Inc, seeking a provisional disposition order for an injunction against acts of unfair competition, and also brought suit for a permanent injunction, damages and payment of 120 billion yen, alleging violation of the Unfair Competition Prevention Act, among other things.

The lawsuit, as detailed in Toshiba's 2 June press release, `Update on Status of Third-party Investment in the Memory Business,' states that WD has continually interfered with the bid process related to the sale of TMC.

Citing joint venture agreements between Toshiba and SanDisk LLC (including its affiliates, `SanDisk'), the lawsuit also says that WD has exaggerated its consent right – in both public statements and private communications to bidders and others involved in the sale process – in order to interfere with the sale of TMC which does not hold the ownership interests in joint venture companies co-owned with SanDisk. The complaint goes on to state that proceeding with the sales process for TMC does not violate any consent rights held by WD; WD's claims are false, designed only to interfere with the sale process, and have damaged Toshiba and TMC.

Toshiba and TMC said they filed litigation in Japan because WD has improperly obtained Toshiba and TMC's trade secrets by transferring employees of SanDisk to WD who have access to confidential information of Toshiba and TMC through their participation in the collaboration between SanDisk and Toshiba/TMC.

''Toshiba considers that WD's actions are damaging to both Toshiba and TMC, violate the Unfair Competition Prevention Act (Article 2(1) (iv), (vii), (viii), (xv)), and are tortious acts under the Civil Code (Article 709). Toshiba and TMC have filed the petition for a provisional disposition order seeking an injunction to put an end to WD's damaging actions, and a suit seeking permanent injunction and damages,'' says a Toshiba release.

In addition, the suit says that Toshiba did not object to WD access to information related to the joint venture and development under the assumption that WD will be entering into a contract in respect of information access. However WD had rejected to such contract and, accordingly, to prevent further damage, TMC said it has no choice but to block WD's ability to access such information, starting today.

Western Digital, which is an owner, with Toshiba, of a NAND production operation in Japan that is part of Toshiba's larger microchip subsidiary, argues that Toshiba cannot sell the subsidiary to an outside party without its approval.

Western Digital today said it had made a renewed offer with its partner in the bid, the American investment firm Kohlberg Kravis Roberts. It did not disclose terms, except to say that it was willing to provide Toshiba with debt financing.

''Western Digital continues to believe it is the best partner to advance Toshiba's legacy of technology innovation in Japan,'' Western Digital said in a statement.