Quantum countersues Imation in tape case

In the lawsuit, filed in California Superior Court in Santa Clara County, Quantum also requested a preliminary restraining order to stop Imation from selling tapes in a format called DLT (Digital Linear Tape) that haven't been certified by Quantum. However, the judge denied the request, Quantum and Imation representatives said.

The legal action comes two days after Imation accused Quantum of monopolizing the DLT market, fixing prices and inviting Imation to join a cartel. Imation also began selling its own DLT cartridges, saying they're compatible with DLT tape drives.

Imation was unable to pass qualification tests and decided to sell its DLT tape on its own without paying Quantum royalties, Quantum Chief Executive Michael Brown said in an interview. Quantum, which sells DLT drives and has patents to the technology, shared its DLT technology with Imation, he said.

Brad Allen, Imation's vice president of corporate communications, said Imation developed the tapes with its own expertise and didn't use intellectual property from Quantum. "We know how to design and develop cartridges," he said. "It's Imation's intellectual property and know-how in DLT."

Tape cartridges, often stacked by dozens in robotic "libraries" and used to back up gigabytes or even terabytes of corporate data, are an obscure but important part of the global computing infrastructure. And they're an important part of Quantum's business: Revenue from DLT drives, tapes and royalties accounted for about $1.1 billion of the company's $1.4 billion in revenue for the fiscal year ended March 31, Brown said.

The case for qualification
Certification and qualification--making sure a product meets standards and interoperates with other products--is a major part of the computing industry. For example, a key part of Network Appliance's ability to expand in the storage systems market was to make sure Oracle's database software was qualified to run on its products.

In the case of DLT cartridges, qualification is important to ensure a tape works with all possible tape drives and that the effect it has on tape drives, such as wearing down the drive heads that read the tape, don't stop other qualified tapes from working, Brown said. Quantum will warn customers about the problems of using unqualified tape, he added.

But Allen said Quantum considers DLT an "open" standard and that Imation has met the DLT standards set by groups such as the ECMA (formerly the European Computer Manufacturers' Association) and the American National Standards Institute (ANSI).

"We were passing the tests, and it was obvious to us and them that we were very qualifiable," Allen said. Qualification, though, isn't really the central issue, but rather "is the mechanism by which they're attempting to exclude us from the marketplace."

Quantum was using the qualification issue to protect its royalty revenue, Allen said. Threatening that the use of unqualified tape could void tape drive warrantees is a further attempt "to try to control access to the market," he said. "If DLT is an open standard, as they've purported, then statements like that are surprising, to say the least."

As soon as Imation was nearing qualification, Quantum changed its qualification procedures and said it would define new ones in 2002, Allen said. "We were back to square one. We don't even know what the rules of the game are until sometime in the future."

Quantum disagreed. It's in the company's best interests to have as many companies making DLT cartridges as possible, a Quantum representative said. The changed certification came because Quantum suggested Imation focus on qualifying cartridges for DLT's successor, SuperDLT.

Allen said Imation submitted "blind" samples of qualified manufacturers' tape to Quantum to see how it fared in qualification tests. "We did submit some blind samples of tape that had already been qualified by the other manufacturers...and they failed those as well as ours," Allen said.

Brown, though, said Imation had mixed parts from other manufacturers' products with its own products.

Crucial e-mail
Key to Imation's case is a June 14 e-mail message from Phil Ritti, Quantum's DLT media division general manager, to Frank Russomanno, Imation's general manager for data storage media and services.

In the e-mail, Ritti suggested an arrangement under which existing DLT licensees Fuji and Maxell would provide Imation with DLT cartridges at a lower cost. To accomplish this, Quantum "may be willing to modify its business agreements" with Maxell and Fuji, Ritti said.

"In exchange, we would want Imation to suspend plans to manufacture Tape IV (DLT cartridges) and all related qualification activities," Ritti said. The agreement would cover a specific number of cartridges per quarter, approximating how much tape Imation already was purchasing, he said.

Allen pointed to this memo as evidence that Quantum has influence over the price of tape that Imation buys from third parties and that through this influence Quantum was trying to "limit the amount of tape that we would resell." He further argued that Quantum was controlling supply by getting Imation to suspend manufacturing.

Not so, said Brown. In fact, the memo is evidence that Quantum was willing to reduce its own revenue to help Imation: "We'll try to work out another commercially viable arrangement at Quantum's expense to enable you to have a business that makes some money," Brown said.