Tandon Wins Round in Case Against Japan Firms

Tandon Corp. won an important round Friday in its patent-infringement case against three Japanese makers of disk drives, a step that could stem the importation of such drives and provide some financial relief to the hard-pressed Chatsworth company.

An administrative law judge of the International Trade Commission granted Tandon’s motion for temporary relief from the importation of certain so-called floppy-disk drives by Sony Corp., Mitsubishi Electric Corp. and TEAC Corp.

Tandon officials said the judge’s action means that the three firms must post bonds on each drive they import, to be forfeited if Tandon prevails before the full ITC later this year. Such bonds, to be set in 60 days by the ITC, can be more than double the stated value of the drives.

Strong Legal Support

The action by the judge, Sidney Harris, after a 12-day hearing also suggests strong legal support for Tandon’s claim. The company, the world leader in disk drives, says the Japanese firms used Tandon’s patented design to gain a big edge in product costs. At issue are drives for two-sided floppy, or flexible, disks, which constitute most of Tandon’s business.

There was no immediate comment from the defendant firms, which must decide whether to risk forfeiting sizable amounts of cash by continuing to import. Tandon attorney James Hamilton said the company also hopes that uncertainty over future availability of Sony, Mitsubishi and TEAC drives might prompt computer-industry customers to turn instead to Tandon or firms licensed to make its products.

Another option for the Japanese would be to become licensees of Tandon. In any event, analysts said, prices of the drives will probably climb.

Prices Undercut by 30%

The Japanese firms had been able to undercut Tandon’s prices by 30% or more, the U.S. firm argued in its ITC complaint.

A disk drive is a costly, box-shaped component of a computer with magnetic heads, similar to those in tape recorders, that store and “read” information contained on inserted disks. They can be bought separately or be self-contained in the computer. The drives in dispute are used in personal computers.

Tandon has lost money for three consecutive quarters, a victim of low-cost foreign competition, the slump in small computer sales and the cancellation of some orders by its biggest customer, IBM. Tandon Vice President Ranjit Sitlani said it is too early to measure the impact of the initial ITC action but added that “we’re certainly hopeful it will have a favorable effect.”