Seagate Technology has agreed to settle a lawsuit by offering customers who purchased a hard drive from the company during the last six years a cash refund or free backup and recovery software.

Michael Lazar and Sarah Cho, who had purchased Seagate hard drives in the US, had filed an initial lawsuit in March 2005, alleging that the storage capacity of the hard drives was 7 percent less than the vendor promised.

A hearing has been scheduled for February 7, 2008, in San Francisco Superior Court to approve the settlement of Cho vs. Seagate Technology (US) Holdings.

Cho alleges that Seagate said its hard drives would produce approximately 7 percent more usable storage capacity than buyers actually received after purchasing the devices.

Cho alleged that Seagate's use of the decimal definition of the storage capacity term "gigabyte" (GB) whereby 1GB equals 1 billion bytes, was misleading to consumers because computer operating systems instead report hard drive capacity using a binary definition of GB, whereby 1GB equals 1, 073, 741, 824 bytes -- a difference of approximately 7 percent from Seagate's figures.

In court papers, Seagate said between March 22, 2001, and March 31, 2007, the disk drive maker sold approximately 6.2 million retail hard drives in the US.

Once the settlement is approved, anyone who bought a Seagate brand hard disk drive between March 22, 2001, and Dec. 31, 2006, has the right to submit an online claim form for cash or software from Seagate by March 10, 2008, according to court documents.

Money returned by Seagate toward settlement class members will be the equivalent to 5 percent of the net amount paid for the Seagate hard drives, excluding taxes or rebates, according to court documents.

To qualify for cash payment benefit, the hard drives must have been bought before January 1, 2006, and will require the serial number for each drive or proper documentation. Customers who purchased Seagate hard drives between January 1, 2006, and September 26, 2007, are only eligible submit an online claim for free backup and recovery software.

The Seagate drives must have been purchased in the US from an authorized Seagate retailer or distributor, separately as a Seagate product that was not preinstalled into and bundled with a PC or any other type of electronic device.

A separate claim must be issued for each individual hard drive purchased and will require a documentary proof of purchase, the specified hard drive name and model number, the amount paid, the date of purchase and the name of the merchant.

Although Seagate denies each of the plaintiff's claims and feels that no one deserves compensation for its actions, the company ultimately decided to settle the class-action lawsuit in its "best interest," according to court documents. As part of the settlement, Seagate said it will make "certain disclosures" regarding storage capacity of its hard drives