Western Digital Hit With $315.7M Patent Infringement Verdict

Spex Technologies, Inc V. Western Digital Corporation Et Al

Case Background

On September 28, 2016, SPEX Technologies, Inc. filed a patent infringement lawsuit against Western Digital Corporation, Western Digital Technologies, Inc., and HGST, Inc. (collectively, "Defendants"). The case was filed in the United States District Court, California Central (Southern Division - Santa Ana). The lawsuit was assigned to Judge James V. Selna and referred to Magistrate Judge Alicia G. Rosenberg. [Case number: 8:16cv1799]

Cause

SPEX owns the patents-in-suit, originally assigned to Spyrus, Inc. SPEX acquired full rights to these patents from Spyrus. Founded in 1992, Spyrus aimed to make cryptography more affordable and practical for distributing and accessing electronic content. Unlike many startups, Spyrus avoided venture capital funding, relying instead on small investments from friends and family. Its first major success was securing a Department of Defense contract to design a hardware security module (HSM) for encrypting sensitive communications. In 1993, Spyrus launched the LYNKS HSM, followed by the Fortezza Crypto Card, developed in partnership with Mykotronx, to protect classified government data. By 1996, Spyrus expanded its cryptographic innovations, introducing the Hydra series. These products incorporated advanced features like flash memory and modem capabilities. Hydra products, including the PocketVault and Worksafe series, remain available today, earning industry awards and widespread acclaim for security. SPEX was formed to license Spyrus' technology globally. The patents-in-suit include U.S. Patent Nos. 6,088,802 ("Peripheral Device with Integrated Security Functionality") and 6,003,135 ("Modular Security Device"), issued in 2000 and 1999, respectively. SPEX owns full rights to these patents, including enforcement. All required maintenance fees had been paid. The complaint alleged that the Defendants manufactured, sold, used, and imported products that infringed on the patents. These products included Western Digital's Verdi Self-Encrypting Drive, My Book series, My Passport series, and Re series. It also cited HGST's Ultrastar and Travelstar series of hard drives as infringing items.

Damages

SPEX Technologies, Inc. requested several forms of relief from the court regarding the alleged patent infringement. The company sought judgments confirming that Defendants had infringed both the '802 and '135 patents. SPEX also asked for damages to cover past, ongoing, and future infringements, including interest, costs, and other compensation deemed appropriate. Additionally, the company sought a finding that Defendants’ actions were willful and deliberate, warranting treble damages and pre-judgment interest. SPEX argued that the case qualified as exceptional under the law and requested an award of attorneys’ fees, litigation costs, and expenses. Lastly, SPEX sought any other relief the court considered fair and just in addressing the alleged violations.

Key Arguments and Proceedings

Legal Representation

Plaintiff(s): SPEX Technologies, Inc
- Counsel for Plaintiff(s): Marc A Fenster | Adam S Hoffman | Andrew David Weiss | Benjamin T Wang | Jacob Robert Buczko | Justin Eric Maio | Kristopher R Davis | Mackenzie Paladino | Minna Jay | Paul A Kroeger | Reza Mirzaie

Defendant(s): Western Digital Technologies, Inc | HGST, Inc | Western Digital Corporation
- Counsel for Defendant(s): Jason C. Lo | Kenneth G. Parker | Christopher Wang | Daniel J. Thomasch | Darish Huynh | Frank P Cote | Helena Panayiota Ingram | Isaac Margolin Rottman | L. Kieran Kieckhefer | Stuart M Rosenberg | Yan Zhao

Claims

Count I: Infringement of the '802 Patent The '802 patent, titled Peripheral Device with Integrated Security Functionality, was issued on July 11, 2000. Defendants directly violated the '802 patent by integrating features like cryptographic processors, mass storage memory, and specialized interfaces into their products. They further induced infringement by encouraging customers to perform security operations and data mediation using these products, which contravened the patent. Despite knowing about the patent since at least 2005, Defendants allegedly continued infringing willfully. Count II: Infringement of the '135 Patent The '135 patent, titled Modular Security Device, was issued on December 14, 1999. The alleged infringement involved features such as cryptographic processors, secure memory modules, and specialized interfaces. Defendants also induced customers to violate the patent by promoting and enabling unauthorized uses of the products. Though Defendants knew about the '135 patent since at least 2006, they allegedly continued their infringing activities with full awareness.

Defense

On December 7, 2016, Western Digital Corporation, Western Digital Technologies, and HGST formally denied the patent infringement allegations against them. The allegations involved U.S. Patent Nos. 6,088,802 and 6,003,135. Alongside their denial, the companies asserted several defenses to challenge the claims. They argued that they did not infringe the patents and claimed the patents were invalid. Additionally, they invoked prosecution history estoppel to limit the scope of the patents. Finally, they asserted that their actions did not constitute willful infringement.

Jury Verdict

On October 18, 2024, a jury unanimously concluded that Western Digital's Ultrastar and My Book devices infringed SPEX's patent. After two days of deliberation, the jury reached this decisive verdict. The jury awarded SPEX a total of $315,715,899 in damages. This amount included $121,845,034 for the Ultrastar device and $193,870,865 for the My Book device. The decision underscored SPEX's right to receive a reasonable royalty for the infringement.

Post-Verdict Remarks

Spyrus co-founder Sue Pontius said she was grateful to the jury for the verdict. SPEX's lead attorney, Marc Fenster, said the verdict was "a vindication of Sue Pontius and her perseverance."

A Western Digital spokesperson said the company disagrees with the verdict and plans to challenge it in post-trial motions and an appeal if necessary.

Court Documents:

Available for purchase upon request

Press Release:

Reuters

Western Digital Hit With $315.7M Verdict For Data Security Patent Infringement