Imation sues Quantum over alleged antitrust violations

Imation announced today that it has filed a $US450 million lawsuit in the US District Court charging Quantum with violating antitrust laws by price fixing and monopolising the digital linear tape (DLT) tape drive market.

The complaint, filed in Minnesota, alleges that Quantum forced Imation to pay more for DLT tapes "than it otherwise would have paid and has been . . . excluded from the manufacture and sale of data storage tape compatible with DLT tape drives".

Imation said Quantum kept it from selling compatible DLT tape cartridges by not allowing them to pass test requirements. DLT tape is a widely adopted technology for backing up and archiving data.

Minnesota-based data systems maker Imation said Quantum's unfair practices cost it $US150 million in research and development and lost sales since 1999, when it was prepared to produce the tape cartridges. The company is suing for triple damages under the Sherman Antitrust Act.

Imation also announced today that it's shipping its DLT cartridges -- the Black Watch Ultrium 3590E, 9840 and 9940 cartridges -- all of which are compatible with Quantum's model 4000, 7000 and 8000 drives.

Quantum chairman and CEO Michael Brown called the lawsuit "preposterous", saying his company has wasted its time and money during the past two years helping Imation to qualify its DLT cartridges.

"They've repeatedly failed our tests . . . and now they're using this as air cover to allow them to sell unqualified products on the marketplace, which I think is very confusing for customers," he said in a telephone interview.

In addition, the lawsuit charges that California-based Quantum "invited Imation to join an illegal tape cartel" comprising Fuji Photo Film and Hitachi Maxell, "inappropriately extended patents on licensed tape drives to tape media as a way to enforce its monopoly hold on the tape market and misrepresented DLT-compatible tape as an open standard with competitive pricing".

Brown said his company is currently qualifying a third "household name" company's DLT cartridges and that Imation "was a fourth company we were qualifying".

"It helps us in generating standards to have more qualified manufacturers," Brown said.

Brown said Imation, which is a reseller of Quantum's DLT cartridges, is also using its lawsuit as a "bait-and-switch" approach to selling its new product by building a customer base through Quantum's cartridges only to then introduce its own unqualified products.

Brown warned customers that using Imation's unqualified product may void Quantum's tape drive warranty.

Fara Yale, director and chief analyst at Dataquest in Connecticut, said Quantum has always used test-based licensing agreements to strictly control which companies can produce DLT cartridges compatible with their tape drives. To date, 1.7 million DLT tape drives have been sold by Quantum and one other qualified manufacturer.

Quantum charges Fuji and Maxell a royalty for each certified cartridge they sell, and in 1999 and 2000, Quantum collected about $386 million from Fuji and Maxell, both of which are based in Tokyo.

Frank Russomanno, vice president and general manager of data storage media and services at Imation, said in a statement that Quantum's "monopolistic practices hurt the market with higher, fixed prices and limited supply".

"The purpose of our suit is to bring them back to that promise of an open and fair market," Russomanno said. "Imation has met with, and remains willing to meet with, Quantum to try to resolve our differences and reach a negotiated settlement."

When Imation refused Quantum's price demands, Quantum introduced a new qualification process for DLT-compatible tape manufacture, requiring Imation to restart the lengthy process under new and different standards that have yet to be defined.

Until this year, Quantum had been the industry's largest manufacturer of hard disk drives for 22 years. It recently decided to sell off that part of its business and focus on being a pure-play enterprise storage provider.