District Court Judge Grants Lexar Motion for Preliminary Injunction

Sept. 27, 1999--Lexar Media, a leading supplier of High Performance Digital Film(TM), today announced that United States District Court Judge Charles R. Breyer has granted Lexar's motion for a preliminary injunction against SanDisk(Nasdaq:SNDK - news) in a false advertising lawsuit (Lexar Media, Inc. v. SanDisk Corporation, Case No. C99-02463 CRB). The Court's ruling relates to a chart distributed by SanDisk, which contains claims that a SanDisk memory card product was faster than Lexar Media digital film memory cards in specific digital cameras. Judge Breyer described SanDisk's chart as false and deceptive, and ordered SanDisk to stop distributing the ``Capture Time Comparison'' chart. The Court's decision to grant the motion for preliminary injunction is a major win for Lexar Media.

``It is an undeniable fact that Lexar Media's products are technically superior to SanDisk's products in terms of write speed performance,'' said John Reimer, President and CEO of Lexar Media. ``Most photography enthusiasts and professionals who use high-end cameras use Lexar Media's digital film because of this speed advantage which allows pictures to be captured faster. SanDisk's false and misleading advertising has attempted to distort this truth. We hope the judge's ruling will halt SanDisk's unfair and anti-competitive behavior.''

Details of the Case

SanDisk had claimed for months that its products were faster than Lexar's in SanDisk's Capture Time Comparison chart. Judge Breyer's decision vindicates Lexar's position that the chart was inaccurate and was used to mislead Lexar's customers.

The judge's ruling targets claims in SanDisk's chart that the 'capture times' of SanDisk memory cards in particular digital cameras are faster than those for specific Lexar cards in the same cameras. The Court observed that in the digital camera industry, Capture Time, sometimes referred to as 'click-to-click' time, is the measure of the time elapsed between when ``the camera starts to record and store the image (upon depression of the shutter button) until the camera is ready to take another photo.''

In support of its ruling, the Court noted that Nelson Chan, Vice President of Marketing at SanDisk, did not dispute the widely accepted definition of click-to-click. Accordingly, the Court found that ``Lexar is likely to succeed on its claim that SanDisk's 'click-to-click' comparisons are literally false and therefore violate...the Lanham Act....''

SanDisk's Advertising Likely to Deceive Consumers

By SanDisk's own admission, click-to-click speed is a key factor in a consumer's purchasing decision. The two components of click-to-click speed are 1)camera engine processor speed and 2)the write speed of the digital film. As cameras with faster processing capabilities come into the market, the sustained write capabilities of digital film become more critical in click-to-click comparisons. The longer the click-to-click time, the more likely the user is to miss that ``great'' shot while he waits for the camera to be ready to take the next shot.

The Court found that SanDisk wrongly measured 'release-to-click' time and claimed it was click-to-click time. Release-to-click measures the time when the tester releases the fully depressed shutter button until the camera is ready to take another picture. This methodology is inconsistent with industry standards and more difficult to measure objectively.

Lexar to Seek Damages

The Court found that ``Lexar has suffered irreparable injury'' as a result of SanDisk's false and misleading advertising.

``We believe that SanDisk's distribution of the Capture Time Comparison chart was specifically intended to damage Lexar's credibility and good reputation, and also to divert customers to SanDisk,'' said Carlton Osborne, General Counsel, Lexar Media. ``Plaintiffs in other false advertising cases have sought tens of millions of dollars in damages. We are currently evaluating the magnitude of the damages we will seek.''

Lexar's Speed Claims Verified by Third Party

After learning of SanDisk's chart, Lexar commissioned the independent NTS-XXCAL Testing Laboratories to perform a scientifically designed test of commercially available Lexar and SanDisk cards in the same cameras identified in SanDisk's chart. The NTS-XXCAL testing demonstrated that SanDisk's claims were, in fact, false, and Lexar filed suit on May 25, 1999, in the United States District Court for the Northern District of California in San Francisco.