Network storage company Quantum filed suit against Imation on Wednesday, alleging Imation misappropriated trade secrets and is engaged in deceptive and misleading advertising by releasing DLT (digital linear tape) products without meeting Quantum's qualifications. The suit comes two days after Imation filed a federal antitrust suit against Quantum, charging the company with conspiring to monopolize the digital linear tape storage market.
In Quantum's suit filed in California State Court in Santa Clara County, the company said Imation is taking "illegal and unfair advantage" of proprietary information received after Imation signed a 1999 license agreement giving Imation access to Quantum's DLT intellectual property.
Imation went ahead with a launch Monday of its own DLT tape line of Black Watch DLT IV data cartridges, compatible with DLTtape 4000, 7000 and 8000 drives, branding them "Imation-certified" instead of carrying Quantum's certification.
Quantum holds DLT patents, and licenses other companies to make DLT after a quality certification process. Imation couldn't have produced DLT tapes without using proprietary production methods revealed in the certification process, said Quantum's Chairman and Chief Executive Officer Michael Brown.
Imation "came into this market late," Brown said. "They wanted a piece of the biggest storage market out there." About half of the money spent on tape storage each year is for DLT tape, while about 29 percent of tape drives are DLT drives, he said.
In its suit filed Monday in the Federal District Court in St. Paul, Minnesota, Imation accuses Quantum of creating "an illegal tape cartel" of producers seeking to monopolize the market. Quantum offered to arrange for two of its DLT tape manufacturing licensees -- Fuji Photo Film Co. Ltd. and Hitachi Maxell Ltd. -- to sell Imation tape at below market prices for rebranding, according to an internal e-mail sent to Imation from a Quantum manager. In return, Quantum required that Imation cease efforts to get its own manufacturing certified, the e-mail said.
Quantum executives acknowledged that a Quantum manager sent the e-mail, but said that without context, the message was false and misleading.
In the e-mail, Quantum manager Phil Ritti offered a "special arrangement ... for a specific quantity that approximates you (sic) current unit purchases. In exchange we would want Imation to suspend plans to manufacture Tape IV and all related qualification activities."
Quantum planned to obtain tape from its manufacturers, then sell that tape at below-market cost to Imation, according to Barbara Nelson, Quantum's DLTtape division president. Imation would then be able to enter that market by reselling that tape under its own label for a profit, while working to certify in another format, Super DLT. Quantum would have been willing to absorb the cost of lower pricing for the arrangement, she said.
However, the e-mail does not mention Quantum taking on additional costs, neither is Super DLT tape qualification addressed.
Imation wants the court to grant an injunction barring Quantum from further antitrust violations in the DLT market and is asking for damages of at least US$150 million, which would be tripled under antitrust law to a minimum of $450 million.
In the suit filed Wednesday, Quantum seeks an injunction barring Imation from selling DLT tape products, and failing that, unspecified monetary damages, Brown said.