Toshiba wins chip patent suit against Hynix

The Tokyo District Court on Friday ruled that Hynix infringed Toshiba’s patents related to flash memory chips and ordered the South Korean company to halt imports and sales of its chips in Japan.

Under the ruling, which comes over a year since Toshiba filed a patent infringement lawsuit against Hynix in Japan and the US, the Korean chipmaker will also have to pay compensation to its Japanese rival.

The decision is a victory for the Japanese group, which claims Hynix infringed three of its patents related to Nand flash memory chips. The market for these chips is growing rapidly on demand from portable devices, including Apple’s iPod portable music player.

The court also ordered Hynix to pay about Y7m in damages and the bulk of the legal fees related to the case. A Hynix representative in Tokyo declined to comment on the ruling.

Toshiba is also suing Hynix in the US, where the Korean company has a much larger presence than in Japan. The Japanese group has also filed a complaint with the US International Trade Commission, which is expected to conclude an investigation into the matter by year-end.

Toshiba’s legal victory comes as the competition in the Nand flash memory market has intensified, with Hynix gaining share worldwide.

Nand flash memory was pioneered by Toshiba. But the Japanese group has been overtaken by Samsung, the Korean group, which has the largest share of the market with 53 per cent, according to iSuppli, the US research group.

Toshiba is second, with 22 per cent, followed by Hynix, which has gained a 12 per cent share despite entering the market only recently. However, if SanDisk, with which Toshiba has a joint venture, is included, their combined market share goes up to nearly 40 per cent, according to Toshiba.

The market for Nand flash memory chips is forecast to grow strongly, after soaring 64 per cent to $10.8bn last year, according to iSuppli. The market was $2.2bn in 2002, nearly doubled to $4.1bn the following year and rose again to $6.6bn in 2004.

However, while demand for flash memory chips has been growing strongly, manufacturers have suffered from severe price falls.

Hynix’s entry into the flash memory market has not been welcomed by competitors due to its low-price strategy. Prices fell 40 per cent in 2004 and a similar amount last year due to a sharp increase in supply.

Toshiba filed its lawsuit against Hynix after negotiations to renew a cross-licensing agreement broke down.