Toshiba Sues Western Digital

June 29, 2017

Toshiba and Toshiba Memory Corporation filed a petition with the Tokyo District Court against Western Digital 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 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; WDs claims are false, designed only to interfere with the sale process, and have damaged Toshiba and TMC.

Toshiba and TMC have filed litigation in Japan because WD has improperly obtained Toshiba and TMCs 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 WDs 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 WDs damaging actions, and a suit seeking permanent injunction and damages.

In addition to intentionally interfering with the TMC sale process via its false claims, 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. Accordingly, to prevent further damage to TMC, TMC believes it has no choice but to block WDs ability to access such information, starting today.

Western Digital issued the following statement regarding Toshiba's recent actions, including its decision to prohibit certain employees from accessing shared databases related to the three NAND flash-memory joint ventures operated with Western Digital's SanDisk subsidiaries ("JVs") as well as, in some instances, access to the JVs' facilities, and its decision to seek a provisional disposition order against Western Digital in the Tokyo District Court:

Western Digital is strongly focused on the success of the JVs, and over the past 17 years has made substantial investments to support and grow this world-class venture. We remain committed to upholding all of our commitments and obligations as a partner in the JVs, including the vigorous protection of trade secrets. Any claims by Toshiba to the contrary are frivolous and without merit. We also note that operations at the JVs are ongoing and SanDisk continues to be entitled to its 50 percent share of the JVs' output.

Toshiba took an unprecedented and retaliatory action to prohibit certain employees from accessing shared databases and, in some instances, the JVs' facilities themselves. This action will have the consequence of harming not only Toshiba's stakeholders, but also our respective customers.

Western Digital has not received any legal filings and therefore is unable to comment on the specific claims made by Toshiba in Tokyo District Court. However, the process to resolve disputes is clear: under the JV contracts, disputes are required to be resolved through arbitration with the ICC International Court of Arbitration. The arbitration proceedings are ongoing, and SanDisk's filing for preliminary injunctive relief in the Superior Court of California for the County of San Francisco seeks to ensure that the ICC International Court of Arbitration will be given an appropriate opportunity to resolve the disputes.

We believe the actions taken by Toshiba are continued attempts to both pressure Western Digital to relinquish its previously agreed upon and legitimate consent rights, and to distract Toshiba's stakeholders following its annual general meeting. It is surprising that Toshiba would take such actions given the implications for its employees, customers, shareholders and creditors.

Western Digital also reiterated its commitment to jointly invest in the JVs, including Fab 6 in Yokkaichi, Japan:
As Western Digital has previously stated, we fully intend to invest in the JVs, including Fab 6, to continue our ongoing conversion from 2D NAND to 3D NAND. Commercial volumes from Fab 6 are not expected until mid-calendar year 2018. Our commitment to make continued significant investments in Yokkaichi and the surrounding communities to support the JVs and preserve it as the world's centerpiece of innovation in memory technology development and manufacturing is unchanged.

Previously SanDisk filed a request for injunctive relief seeking to prevent Toshiba from transferring its JV interests until SanDisk's claims can be heard in arbitration. SanDisk looks forward to presenting its case to the Superior Court of California for the County of San Francisco on July 14, 2017. In addition, SanDisk is confident that it will succeed on the legal merits of its arbitration request filed on May 14, 2017, and the case continues to move forward in the ICC International Court of Arbitration.

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