Netlist Provides Update on Lawsuit Vs. Diablo and Smart Storage (Acquired by SanDisk)

Netlist, Inc. provided an update on its lawsuit against Diablo Technologies, Inc., Smart Modular Technologies, Inc., Smart Storage Systems, Inc. and Smart Worldwide Holdings, Inc.

As noted in its 8-K filed with the SEC on December 12, 2013, on November 13, 2013, Netlist’s CEO, C.K. Hong, received a whistleblower letter postmarked from Canada (where Diablo is based), and apparently written by a current or former Diablo employee.

The letter begins by stating that Diablo stole Netlist’s architecture and design. The letter goes on to explain that, in creating its new ULLtraDIMM product, Diablo took Netlist’s flagship product, HyperCloud, “as-is.”

Diablo then passed off the resulting product as its own to potential customers, including in demonstrations to IBM, HP and others. The letter further states that Diablo’s management conspired to hide this theft by instructing its employees not to speak to customers about the fact that Netlist’s product was incorporated into ULLtraDIMM.

The letter includes diagrams showing precisely how Diablo implemented the theft of Netlist’s trade secrets, as well as the names of former Diablo employees, customers and suppliers who can verify the theft. Netlist is aggressively pursuing an investigation into Diablo’s theft of Netlist’s trade secrets.

“HyperCloud technology addresses a multi-billion dollar market and was developed by Netlist over six years at a cost of $65 million. We have been issued new patents, the USPTO continues to validate claims under reexamination and there have been an increasing number of citations of Netlist patents by industry leaders,” said C.K. Hong, CEO, Netlist. “We are proud to have compiled significant and seminal intellectual property assets and we are committed to vigorously defending these assets against those that infringe on our IP, particularly those dishonest parties that seek to intentionally steal our most valuable intellectual assets.”

Netlist has invested in and grown its intellectual property, which now includes 41 issued U.S. patents and more than 40 U.S. and foreign pending patent applications in the areas of high performance memory subsystems and hybrid memory technologies. Patents have increasingly been cited by others such as Google and Micron as they seek to patent their work in the high-performance memory arena.

Analysts anticipate the market for HyperCloud-like products to grow exponentially over the next decade through DDR4.

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