DLT Licensing Battle Moves to the Courts

A minor battle brewing in the DLT cartridge business may affect future licensing deals and the price of the tapes themselves.

The digital linear tapes, built on technology developed by the defunct Digital Equipment Corp. and acquired by Quantum Corp. in late 1994, are sold by Quantum and by licensees Fuji Photo Film USA Inc. and Maxell Corp. of America.

The current battle is over the licensing certification process: Imation Corp., which began the complex process in mid-1997, recently failed the process and is now suing Quantum for $450 million for alleged price fixing and conspiracy to monopolize the niche. The suit was filed in U.S. District Court in St. Paul, Minn.

The results of the suit, which could take years to iron out, could impact suppliers pricing or technology development, industry experts say.

Meanwhile, Imation, of Oakdale, Minn., launched a tape cartridge this week that company officials said is technically compatible with DLT-certified drives. But Quantum, of Milpitas, Calif., is suing Imation in the California state courts, trying to force an injunction to stop Imation. Quantum claims that Imation is only able to make the compatible but non-certified product because its illegally using Quantum intellectual property.

Imations also accusing Quantum of changing the certification process in midcourse and of illegally offering to sell Imation reduced-priced tape cartridges for resale if Imation agreed to not make its own, officials said.

"The whole qualification process was a sham," said Imations Brad Allen, vice president of investor relations. "We entered into that qualification process in good faith. It became clear to us that Quantum never intended to qualify us."

Quantum didnt provide the necessary testing equipment that it promised, he said. In some areas, like tape abrasiveness, Imation actually exceeded Quantums requirements, Allen said.

Quantum DLT President Barbara Nelson said the accusations are false. Quantums currently working on certifying a third licensee, and three companies are being certified for the more advanced SuperDLT technology, she said. Quantums resellers all price independently, and "the thought that Quantum could get all of those people to agree on a price, to fix a price, is absolutely ridiculous," Nelson said.

"They didnt even come close to qualifying," said Quantum CEO Mike Brown, declining to say which specific part of the three-part process—for manufacturing, compatibility and reliability—Imation failed.

"The plain and simple fact is that the more competition you have, theres a tendency to drive down pricing," said Fara Yale, a tape analyst with Gartner Inc.s Dataquest group, in San Jose, Calif.