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SanDisk's flash chip nightmare: How I'd escape black hole if I was in charge

Reg man Mellor weighs into tech rights battle

Comment Apparently let down by a component supplier allegedly shipping technology it has no rights to, SanDisk now finds itself facing a FlashDIMM sales shutdown – just as the server world realizes that DIMM flash is much faster to access than PCIe flash and wants more of it.

As detailed here, Netlist has won an injunction preventing Diablo Technologies supplying MCS Rush and Bolt chips to SanDisk, thus preventing SanDisk from supplying ULLtraDIMM products to its server-building customers.

This is laid out in paperwork filed on 9 January, 2015, as part of the ongoing Netlist vs Diablo Technologies case, being played out in the Northern District California Court in Oakland. Document 269 is Netlist’s response to a SanDisk plea that it should not be part of the shipment-stopping injunction.

In that document, SanDisk is said to say that “it should be allowed to continue selling its inventory of Rush and Bolt chips.”

Also: “SanDisk now claims that it should be permitted to sell additional ULLtraDIMM modules with existing inventory of the Rush and Bolt chips previously purchased from Diablo, because that would not constitute aiding and abetting Diablo in violation of the Injunction. If this were the law, entities such as Diablo and SanDisk could circumvent a Court’s ruling by stockpiling large amounts of inventory just before issuance of an injunction.”

The injunction, whose full terms have not been publicly revealed by the court, orders SanDisk to cease sales of ULLtraDIMMs to its customers.

This is confirmed by a Netlist source, who told The Register: "The injunction halts all manufacturing, sales, and distribution of anything containing Diablo's Rush and Bolt devices, including MCS and ULLtraDIMM."

The Netlist-filed document argues that SanDisk must obey the injunction because the storage biz has been actively selling ULLtraDIMM technology since April 2014 while knowing Netlist was taking Diablo to court; it's claimed SanDisk was copied in on relevant documents:

Since April 2014, SanDisk has fully known of the potential for an injunction. Since at least that time, SanDisk has been operating in full concert with Diablo to sell the ULLtraDIMM modules with the Rush and Bolt chipset. Therefore, SanDisk was properly named in the January 6th Injunction Order.

SanDisk knew in April that Netlist “would seek a preliminary injunction to stop further shipments of the Rush and Bolt chips,” it's claimed.

What do we think?

Well, now. SanDisk may well feel let down by its MCS component supplier Diablo. It faces a two-month shipping shutdown to Lenovo, Huawei and Supermicro, which will not be pleased at having no product to sell after ULLtraDIMM stocks run out. They will tell SanDisk, surely, to do right by them and get it sorted. Its supply problems are its supply problems, not theirs. The immediate remedy is obvious; SanDisk should talk to Netlist about a technology licensing deal to settle the matter out of court.

As a new supplier in the enterprise flash market and one energetically growing its presence, SanDisk, in our view, has no option if it wants to avoid a disastrous weakening of its reputation as a reliable and trustworthy supplier to enterprise server OEMs.

But Diablo needs to be a party in these talks. SanDisk will have to convince Diablo CEO Riccardo Badalone to seek a negotiated licensing deal with Netlist, too, again as a blameless settlement. SanDisk is Diablo’s largest, and so far, only customer for its MCS technology and Diablo’s future strategy is MCS-dependent.

SanDisk will surely walk away if Diablo doesn’t settle with Netlist or quickly prove its innocence – and losing SanDisk could finish Badalone as Diablo’s boss. It’s that big a deal.

SanDisk must realise that attempts to sell ULLtraDIMM technology to other server and also storage OEMS, like Tegile will stall. Diablo’s future MCS sales efforts are effectively dead too, at least until legal proceedings, scheduled to continue from March 9, complete – which could take months.

There are also the associated legal costs mounting up for Diablo and SanDisk. Diablo may be convinced it can win its case, but the shipment-stopping injunction could force SanDisk to fold its hand and negotiate.

Right now El Reg would bet on Netlist being the winner here. Lenovo, Huawei and Supermicro will be urging SanDisk to end the legal action. SanDisk and Tegile will be telling Diablo to get it sorted or they’ll go deal direct with Netlist.

The reputational damage to Diablo will be huge. What other serious enterprise-supplying customers would want to deal with it in future? There’s nowhere to go, guys. It’s rock-and-a-hard-place time.

Pick up the phone, and call Netlist CEO C K Hong. He will screw a hard deal out of you, but what else can you do? ®

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