Seagate scores a patent victory: Jury ruled against Siemens over sensor

Dec 27, 2008 (Pioneer Press - McClatchy-Tribune Information Services via COMTEX) -- SI | Quote | Chart | News | PowerRating -- What started as a patent-infringement lawsuit over a tiny computer component could have put Seagate Technology on the hook for more than $1 billion in damages.

But when a California jury found earlier this week that the patent held by Siemens was invalid, the decision was a victory for hard-drive manufacturing giant Seagate, which has major operations in the Twin Cities.

"Siemens was very aggressive," said David Gross, an attorney who led a team of lawyers from Minneapolis-based Faegre & Benson to defend Seagate in the case. Siemens, a German industrial conglomerate, originally was seeking damages based on sales figures for all hard-disk drives built by Seagate -- not just the component with the patent problems -- dating back to 2000.

When the case finally went to the jury last week, earlier court rulings had reduced Siemens' claim to $160 million.

The component that led to Siemens' lawsuit is a sensor, or GMR head, in computer hard drives that allows stored data to be read. The technology, found in Seagate hard drives of all sizes, also is used in products such as iPods, Xbox game consoles and digital video recorders.

Just before the start of the monthlong trial, the judge did find that Seagate, which is the world's largest manufacturer of hard drives, had been infringing on Siemens' patent.

So what legal strategy did Seagate's attorneys pursue?

With a complex patent case at issue and technology that can't be seen by the naked eye,

Gross said the defense was simply that IBM already had a patent for the technology in question -- and Seagate had a license from IBM to use it.

Seagate had Stuart Parkin, the IBM engineer who invented the GMR elements, testify by videotape. Seagate's attorneys also argued that Siemens shouldn't be allowed to enforce its patent because it failed to tell the U.S. patent office about two professional papers published by the IBM inventors two years before Siemens sought a patent. The technology in Siemens' patent already was "obvious" in those professional papers, Seagate's attorneys argued.

Siemens called on experts of its own, including Sheldon Glashow, a Nobel Prize winner in physics, and Harry Manbeck, former Commissioner of the U.S. Patent and Trademark Office.

To visually make its point to the jury, Gross said Seagate's attorneys used a stack of rectangular plastic boxes. One stack was made up of five multicolored boxes, representing each layer of the sensor made by Siemens. Another stack used the same five colored boxes for the Seagate product invented by IBM, but added a sixth purple box. That box represented an additional, stabilizing component not found in the Siemens' sensor.

When the jury came back with its decision Tuesday, it not only meant that Siemens lost its lawsuit against Seagate, but that Siemens' patent for the sensor technology is invalid.

Attorneys for Siemens couldn't be reached Friday. It's unknown if they plan to appeal. The case was heard in U.S. District Court in Santa Ana, Calif.

Seagate is based in the Cayman Islands and operates out of corporate offices in Scotts Valley, Calif. In Minnesota, Seagate has a technology development center in Shakopee and a recording-head manufacturing operation in Bloomington.

Seagate and other disk-drive manufacturers have other problems tied to the slowing economic conditions around the world. As sales of computer equipment have slowed, so have profits for disk-drive manufacturers. Seagate's stock, which traded a year ago around $26 per share, closed Friday at $4.19, up 3 cents.

John Welbes can be reached at 651-228-2175.

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