by Lyle Smith

Diablo Technologies Files Lawsuit Against Netlist

Diablo Technologies has announced is has filed a lawsuit in the United States District Court against Netlist, producer of high-performance modular memory subsystems, for unfair business practices that violate Diablo’s Intellectual Property rights. 

In December of 2013, Netlist accused Diablo of stealing their flagship proprietary technology, HyperCloud (developed over seven years ago for $65 million) for Diablo’s new ULLtraDIMM product. These accusations arose when Netlist received a letter from a whistleblower from Ottawa, Canada (where Diablo headquarters are currently located), who was seemingly a current or former Diablo employee. The letter said that Diablo's upper management tried to hide this theft by instructing its employees not to tell its customers that it had used Netlist's product inside the ULLtraDIMM.

Now, after roughly a year, Diablo is telling their side of the story via counter-suit. Diablo states their Memory Channel Storage (MCS) is a brand new architecture that neither infringes upon, nor misappropriates any of Netlist IP rights. They add that MCS-based products and Netlist’s HyperCloud DIMM are designed to serve two completely different purposes and are not interchangeable. In addition, Diablo claims that the contract between the two companies assigns legal ownership of the implementation IP in the HyperCloud chipset to Diablo. Therefore, the company is seeking damages for breach of contract for Netlist’s attempt to usurp the company’s IP rights.

It may take another year or longer to see who's right here, as spats over IP can often be very complex. While the issue is certainly critical to both companies, the impact is more outwardly evident for Netlist, who trades publicly under the symbol NLST. The $45 million company's stock price currently hovers around the $1.10 mark and seemingly moves more with progress on their lawsuit than any products the company may be selling.

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