Toshiba and Micron agreed to settle a long-running patent dispute over NAND flash memory technology Friday, with Toshiba agreeing to pay Micron $288 million to buy some of Micron’s semiconductor technology patents and license patents originally owned by Micron’s Lexar Media unit.

Micron announced its intention to acquire Lexar for $690 million in March (see Micron Buys Lexar for $690M). When the acquisition closed in June, Boise, Idaho-based Micron inherited Lexar’s patent portfolio, as well as Lexar’s ongoing lawsuit against Tokyo-based Toshiba, dating back to 2002.

The agreements between the two companies settle all of their outstanding NAND flash memory-related litigation that has been pending in the United States District Court in the Northern District of California, the U.S. International Trade Commission, and the California Court of Appeals.

Shares of Micron rose $0.39 to $18.16 in recent trading.

The memory industry has been awash with litigation of late, and Micron spokesperson Daniel Francisco said his company was continuing its ongoing DRAM (dynamic random access memory) litigation against Rambus (see Rambus Lawsuits Continue).

However, the dispute over the NAND flash patents was only against Toshiba, so that patent litigation has now been settled, he said. Toshiba is the second-largest manufacturer of NAND flash memory, with Samsung ranked No. 1.

Paying Up

Toshiba was glad to get past the dispute, even though it will be paying a hefty sum.

“We appreciate that Micron approached this issue in a positive spirit that allowed the parties to work together to bring all outstanding litigation and claims to a full and final resolution,” Masashi Muromachi, a corporate executive vice president with Toshiba, said in a statement.

“We have enjoyed a strong relationship with Toshiba for a number of years, have the highest respect for Toshiba as an innovator in flash technology, and see no merit in continuing to pursue this litigation,” Micron Chairman and CEO Steve Appleton said in a statement.

Before his company acquired Lexar, Toshiba and Lexar had been embroiled in a nasty dispute, with Lexar filing a complaint with the International Trade Commission demanding that it stop Toshiba from importing flash memory chips into the U.S.

A California jury sided with Lexar in March 2005 and found that Toshiba had misappropriated Lexar’s patents, awarding Lexar $380 million in damages, plus another $84 million in punitive damages (see Jury Awards Lexar $464 Million).

However, after an appeal, another court determined in December 2005 that there was insufficient evidence for the amount of damages granted, and ordered a new trial.

JP Morgan analysts Shawn Webster, Christopher Danely, and Sameer D Parab said the settlement award came sooner than they had expected.

“We are surprised a settlement was reached already as we had expected the case to remain open until at least the end of [calendar year 2006],” they wrote in a research note.

They noted that the settlement amount is nearly a third of the $900-million acquisition price of Lexar, which will reduce some of the dilution impact.

Contact the writer:MCohn@RedHerring.com

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