Ready, Litigate, Settle

The high technology community prides itself on competing in terms of innovation, but most major companies have also competed in the courtroom. Sun Microsystems and Microsoft have jousted with each other in lawsuits nonstop for years. A couple of weeks ago, the current incarnation of the SCO Group sued IBM for $1 billion, claiming that IBM misappropriated trade secrets by revealing aspects of the UNIX OS, which the SCO Group claims it currently owns, to the open-source community.

The storage community has also seen its share of litigation. About this time last year, EMC filed suit against Hitachi Data Systems (HDS) for infringing on EMC's patents for its Symmetrix Remote Data Facility, TimeFinder remote storage and data migration applications, mainframe storage patents, and business continuity software. EMC named Hitachi's Open Remote Copy, Open Synchronous Remote Copy, and ShadowImage as products violating the patents. When EMC filed suit, the company claimed that it had negotiated with Hitachi for 4 years to resolve the suit, to no avail. After EMC filed suit, Hitachi countersued, claiming that EMC had violated eight of Hitachi's patents.

Last September, Hewlett-Packard (HP) sued EMC in retaliation for EMC's suit against Hitachi. HP has partnered with Hitachi in the Storage Area Network (SAN) area and has had ongoing legal problems with EMC following HP's acquisition of StorageApps in 2002. At that point in time, the three largest SAN vendors were all at a legal standstill.

Against this stormy background, 2 weeks ago, EMC and Hitachi announced that they had settled their suit. In addition to what were described as "balancing payments" from Hitachi to EMC, both companies agreed to cross-license the patents at issue and provide access to each others' API. In essence, not only have these companies settled their legal differences, they now embrace each other.

So, what changed? After 4 years of negotiating, why did EMC feel the need to sue Hitachi? And, after 5 years, why were the companies finally able to resolve their legal problems with each other? One reason is product cycle. Over the past 2 years, Hitachi has grabbed a significant share of the enterprise storage market from EMC. But last month, EMC released a new generation of high-end storage arrays, following the release of a new generation of midtier solutions in December. This new technology has reinvigorated EMC and very possibly will blunt Hitachi's momentum.

Another reason for the legal breakthrough is due to open data storage systems. Although companies with well-accepted proprietary technology resist mightily, there's an inexorable move in the market toward open data storage systems. In settling the suit with EMC, Hitachi spokesperson Hirotaka Ono acknowledged that the suit was a step toward open systems and that Hitachi has basically bowed to the wishes of its customers.

Single sourcing is another factor in the companies' ability to resolve their problems. The consolidation that has characterized information technology over the past 3 years has meant doing more with less and beefing up the data center at the expense of departmental and midrange systems also, to a large degree, as systems have aged, consolidation has meant specifying a single source for specific technology. Consequently, although large companies might have storage technology from every provider under the sun due to merger, acquisition, and other major corporate changes, administrators are trying to pare their vendor list. Interestingly, when faced with an installed base supplied by a wide range of vendors, chief information officers (CIOs) have no specific brand preference. Instead, they let the vendors compete, and whoever offers the best deal gets all the business.

The EMC-Hitachi settlement is a reflection of changes taking place now in the development of enterprise storage. The pressure for technology to interoperate is steadily building. If a vendor's products can't play nicely with other companies' solutions, that vendor risks losing all its business in specific accounts.

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