Quantum, Imation Settle Suit

As part of settlement, storage tape behemoth Quantum will pay rival Imation a minimum of $5 million and give Imation a second chance at making its products Quantum-compatible.

Storage tape behemoth Quantum Corp. will pay smaller rival Imation Corp. a minimum of $5 million and will give Imation a second chance at making its products Quantum-compatible, as part of a lawsuit settled Wednesday, officials from both companies said.

Imation, of Oakdale, Minn., sued Quantum last fall in Federal District Court in St. Paul, for alleged price fixing and conspiracy to monopolize the niche of digital linear tape cartridges. DLT was originally invented by now defunct Digital Equipment Corp., acquired by Quantum in late 1994, and is currently sold by Quantum and its licensees, such as Fuji Photo Film USA Inc. and Maxell Corp. of America. Imation began the certification process to become a licensee in mid-1997, but failed, Quantum officials have said, declining to explain how or why.

Imation originally sought $450 million, so Quantums settlement is good for the company, said John Gannon, president of the DLTtape group. "Litigation is not cheap. The sooner we were able to reach a settlement, the better off wed all be," he said.

Gannon said Imations as-yet incompatible product has "not significantly" affected Quantum sales. He declined to say if Imation can sue again if it fails the certification process again, but "Im convinced that were not going to have anything like that occur," he said. He would not give a timetable for when Imation could achieve certification.

However, "we expect to be certified fairly quickly," said Brad Allen, vice president of investor relations and corporate communications at Imation. Besides the initial $5 million, Imation will likely get unknown revenue from its future tape sales and will receive undisclosed funds from Maxell.

Maxell, of Fair Lawn, N.J., was added as defendant in December, Allen said. Officials could not be reached for comment.

Despite Gannons claim, Imations tape product is significant because it established Imation as credible player and is helping to lower prices and open competition, Allen said. But Imation has been paying Quantum a 30 percent royalty on those sales, per an earlier court order, he noted.

Imation officials said last fall that Quantum, of Milpitas, Calif., probably never intended to certify them, and that they didnt supply the necessary testing equipment. Imation further accused Quantum of changing the certification process in midcourse and of illegally offering to sell Imation reduced-prices technology if Imation agreed to not make its own.

Imation began selling its own product anyway, as unofficially compatible tape. In California State Court, in Santa Clara County, Quantum sought an injunction against sales of the product, claiming that Imation was only able to make the product by illegally using its technology, acquired during the failed certification process, which has manufacturing, compatibility and reliability parts.