Imation and Quantum Settle Lawsuit


Imation this month withdrew its $450 million lawsuit against Quantum after the two companies reached an out-of-court settlement deal in which Quantum agreed to certify Imation's DLT cartridges.

The agreement stipulates that Quantum will certify Imation's digital linear tape (DLT) products and also allow Imation to enter into the Super DLT market. Quantum will also give Imation a cash payment of $5 million.

"We feel this is a good settlement because it allows us to get back into the market profitable," says Brad Allen, vice president of investor relations and corporate communications at Imation. "We felt the market was not open and fair. Now, we believe the market is open and fair."

The initial lawsuit, filed in October 2001, charged that Quantum executives had tried to get Imation to suspend manufacturing of its DLT cartridges and limit production to a small number of manufacturers--named partners like Maxell and Fuji. In exchange for suspending manufacturing, Quantum would get Imation's source suppliers to reduce their costs.

Imation refused, filed a lawsuit charging Quantum with running a cartel, and then went on to resell its DLT cartridges from unnamed source suppliers under its own logo. Since 1999, Imation had been submitting samples of its DLT products to Quantum for certification.

Quantum makes the tape drives that work with the media cartridges developed by companies like Maxell, Fuji and Imation. In turn, those are sold to IBM and Hewlett-Packard for general release.

Imation, based in Oakdale, Minn., also had named Maxell as a defendant in the lawsuit. As part of the settlement, Maxell also agreed to pay an undisclosed cash payment to Imation. Allen says as part of the agreement, he could not publicly discuss Maxell's cash settlement.

All lawsuits and countersuits were formally withdrawn days after the settlement announcement on May 29.