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Seagate wins $525M in arbitration spat with Western Digital

Seagate alleges that Western Digital illegally obtained its trade secrets from a former employee.

Seagate has won a major payout in an arbitration dispute with its chief rival, Western Digital.

On Friday, an arbitrator in Minnesota awarded Seagate $525 million after the hard drive maker alleged that Western Digital misappropriated "confidential information and trade secrets" from a former Seagate employee. According to Western Digital, the sum does not include interest, which will need to be determined at a later point.

Details of the dispute are confidential at this time, but Western Digital said in a statement today that it believes the arbitrator's decision wouldn't hold up in court.

"We do not believe there is any basis in law or fact for the damage award of the arbitrator," Western Digital president and CEO John Coyne said in a statement. "We believe the company acted properly at all times and we will vigorously challenge the award."

Seagate declined CNET's request for comment on the matter.

Western Digital and Seagate are the two dominant players in the hard-drive business. In September, IHS iSuppli reported that Western Digital owned 32 percent of the hard disk drive (HDD) market in the second quarter, followed by Seagate with 31 percent share.

However, in March, Western Digital picked up Hitachi's hard drive business for $4.3 billion, which prompted Seagate to respond in April with the acquisition of Samsung's hard drive business for $1.38 billion. If those deals had been closed by the time IHS iSuppli performed its study, Western Digital would have owned 48 percent of HDD business in the second quarter, followed by Seagate with 41 percent share.

Western Digital's arbitration loss is just the latest issue the company has faced. Due to the devastating Thailand floods, many hard drive makers, which produce their components in the country, were hit hard. However, Western Digital, which produces 60 percent of its drives in that country, was hit hardest, and expects to have some trouble meeting customer orders over the next few quarters.

"The company now expects that the flooding of its Thailand facilities, combined with flood damage to the company's supply chain in Thailand, will have significant impact on the company's overall operations and its ability to meet customer demand for its products in the December quarter," Western Digital said in a statement last month.