Milestone of China Company to Enforce Its Patent Rights Overseas

Netac Sued PNY to Enforce Its Flash Memory Drive Patent

(February 16, 2006. Beijing) The leading Digital Mobile Storage Equipment manufacturer, Netac Technology Co., Ltd. announced in news release today in Beijing that it had, on February 10th 2006, filed a complaint in the United States Federal District Court in the Eastern District of Texas. The complaint alleged that PNY, an American company, infringed Netac’s U.S. patent # 6, 829, 672. This patent provides fundamental patent rights on flash drives, flash based MP3 players, and other flash memory based portable digital devices.

The law firm representing Netac in this lawsuit is Morgan Lewis & Bockius LLP, which has more than 100 years history. The Morgan Lewis litigation team is headed by Mr. Stephen Judlowe and Mr. Scott Stimpson from the New York Office, assisted by Dr. Kevin He and other staff. In the complaint, Netac demands that PNY immediately cease its infringement and compensate Netac for significant financial damages. PNY is one of the market leaders in America’s computer storage retail market.

As one of the China IT pioneer companies to enforce their patents in U.S., Netac has set the milestones in the China IT industry, and will have the significant influences.

Netac Was Built from Scratch, and Its Patent Was Infringed by Others

Netac is a high-tech company founded by overseas returnees, and is one of China leading mobile storage and digital device companies. In 1999, founders of Netac, using their creativity, diligence and persistence in tough conditions, successfully invented the world’s first mobile flash memory drive that could be used for computer data storage and exchange. The mobile flash memory drive was given the name “You Pan” in Chinese. (“You Pan” and “OnlyDisk” is a registered trademark of Netac technology Co., Ltd in China)

During the development of flash memory drive, they always worked day and night in their small rented office. In order to study the flash memory drive and its stability, they even broke four computers during the experiment and test. They overcame all the hardship and difficulties, and finally successfully developed the new product.

Netac flash memory drive is the first mobile storage device in the world to combine flash memory and USB interface. It has many technical advantages comparing with floppy disks. These advantages include higher speed, larger memory, longer life, plug-and-play, easy to carry, and etc. It is one of the most important breakthroughs in the global computer mobile storage area in more than a decade. Nowadays, flash memory drives have largely replaced the floppy drive market. This is the first time for a China company to start and lead a global industry in computer storage area.

In July 2002, Netac obtained their China patent for the invention. The patent is titled “Flash Memory Methods and Devices for Digital Processing Systems.” (Patent No.: ZL99 1 17225.6). In December 2004, this invention was also granted a patent by United States Patent Office.

In September 2002, Netac had filed similar litigations against Beijing Hua Qi Information Digital Technology Co., Ltd. (Product brand: Aigo) and Shenzhen Fu Guang Hui Electronics Co., Ltd. (OEM factory for Hua Qi) in China, and won the first verdict of the patent litigation against Hua Qi and etc. in middle court on June 1, 2004. Hua Qi was adjudicated to cease the infringement of manufacture and sale flash memory drive immediately and compensate Netac for the financial damages.

Netac Seeks Substantial Damages

According to Gartner’s market research report, the US flash related product market was over $1 billion back in 2003. Moreover, in the past several years, the U.S. market of flash memory drive, flash based MP3 Player, and other flash based portable digital products also enjoys tremendous growth, and the current America’s market has well exceeded China market.

If the infringement is confirmed by the US court, PNY will face considerably severe penalty. The financial award to Netac could be among the largest amounts ever in the USB flash storage industry.

Netac CEO Frank Deng indicated that over the life of the patent, potential damages awarded to Netac and royalty could be very significant given the size of the market.

Netac’s action against PNY clearly shows its intent to expand and protect its business in the US flash memory market. This “patent first” way is similar to most international technology companies’ globalization strategy. China companies strive to participate the global competition with new approach, and the intellectual property will be respected worldwide.