Toshiba Corp said on Wednesday it is filing a lawsuit against joint venture partner Western Digital, as the company faced shareholders at its annual meeting on Wednesday with no deal in hand for the sale of its prized flash memory chip unit.
Toshiba filed a petition with the Tokyo District Court against Western Digital, seeking a provisional disposition order for an injunction against acts of unfair competition, and also brought suit for a permanent injunction, damages and payment of 120 billion yen, alleging violation of the Unfair Competition Prevention Act, among other things.
In the lawsuit, Toshiba accuses WD of interfering with the bid process related to the sale of Toshiba Memory Corp. (TMC).
Citing joint venture agreements between Toshiba and SanDisk LLC (including its affiliates, SanDisk), the lawsuit also says that WD has exaggerated its consent right - in both public statements and private communications to bidders and others involved in the sale process - in order to interfere with the sale of TMC which does not hold the ownership interests in joint venture companies co-owned with SanDisk. The complaint goes on to state that proceeding with the sales process for TMC does not violate any consent rights held by WD; WD's claims are false, designed only to interfere with the sale process, and have damaged Toshiba and TMC.
Toshiba and TMC have filed litigation in Japan because WD "has improperly obtained Toshiba and TMC's trade secrets by transferring employees of SanDisk to WD who have access to confidential information of Toshiba and TMC through their participation in the collaboration between SanDisk and Toshiba/TMC."
In addition to intentionally interfering with the TMC sale process via its false claims, the suit says that Toshiba did not object to WD access to information related to the joint venture and development under the assumption that WD will be entering into a contract in respect of information access, however WD had rejected to such contract. Accordingly, Toshiba has decided to shut out Western Digital employees based outside the Yokkaichi chip plant from accessing information relating to the two companies' joint venture.
Toshiba faced shareholders at its annual meeting on Wednesday with no deal in hand for the sale of its flash memory chip unit.
The Japanese company had pledged to have a signed definitive agreement for the $18 billion sale of the unit by the shareholders meeting.
But the conglomerate said in a statement on Wednesday that talks with some members of the preferred bidder consortium - which is led by Japanese government investors and includes U.S. private equity firm Bain Capital - were taking time.
"Western Digital has been interfering with no due cause in the process of the chip unit sale with its request for arbitration and its lawsuit," Toshiba CEO Satoshi Tsunakawa said at the shareholders meeting.
Further complicating matters, Western Digital and U.S. private equity firm KKR & Co LP (KKR.N) resubmitted an offer for the semiconductor business on Tuesday, in an eleventh hour effort to prevent a deal with the preferred bidder.
While Toshiba said late last week that it was open to talks with its U.S. chip partner, its response to the resubmitted bid has been to only say that is continuing to talk with its preferred bidder.
In addition, some Toshiba board members are said to be concerned about technology leaks to South Korean chip rival SK Hynix Inc , which is part of the consortium and will provide Bain with financing.
Western Digital has also said it is strongly opposed to SK Hynix's participation and has threatened further legal action.