By Don Clark 

A federal judge issued a preliminary injunction against a Canadian company barring sales of chips used in a new variety of data storage products sold by SanDisk Corp. and International Business Machines Corp.

The injunction issued Monday against Diablo Technologies Inc. was sought by Netlist Inc., a Southern California company that in 2013 filed a suit accusing Diablo of stealing trade secrets and violating contracts between the companies.

Diablo, which is based in Ottawa, didn't respond to requests for comment Monday. It has previously called Netlist's charges baseless and filed counterclaims accusing Netlist of unfair business practices.

IBM and SanDisk representatives also didn't respond to requests for comment.

Chuck Hong, Netlist's chief executive officer, said the injunction would effectively stop sales of SanDisk and IBM products that incorporate Diablo chips--at least until a trial on the merits of the case, set to begin March 9 in U.S. District Court in Oakland, Calif.

"We feel very good," Mr. Hong said. He said the ruling clarifies confusion in the industry about rights to intellectual property covering an important new class of data storage products. "This is a strategic technology," he said.

Netlist's shares rose nearly 13% Monday to $1.16, up 13 cents.

The technology at issue is designed to wring greater performance from server systems by using flash memory chips in a different way than earlier hardware.

Such chips, known for mobile products such as smartphones, are most often used in servers in the form of solid state drives--hardware modules that use the same sockets as drives based on spinning disks. Alternatively, some companies sell flash-based boards that transfer data over a faster connection called PCIe.

Netlist focused on developing technology to exploit an even faster pathway, normally used for plugging in another class of memory chips called DRAMs, or dynamic random access memory.

The company, based in Irvine, Calif., has been working on the technology for about 10 years, Mr. Hong said. It forged a relationship in 2008 with Diablo to help produce chips and other hardware based on Netlist's technology, according to court filings.

Netlist alleged that Diablo violated agreements between the companies to develop and sell its own products. One Diablo customer is SanDisk, according to court filings. The Milpitas, Calif., company, which sells a variety of products based on flash chips, began using the Diablo technology in products under the name ULLtraDIMM SSD following its 2013 acquisition of Smart Modular Technologies.

Injunctions are much rarer than monetary damages in such disputes. But U.S. District Judge Yvonne Gonzales Rogers concluded that an injunction was warranted based on the odds that Netlist will prevail following a trial.

"The evidence strongly indicates that Diablo breached the parties' agreements, and that these breaches allowed Diablo to bypass many months in normal development time to get its own product to market," the judge wrote.

Write to Don Clark at don.clark@wsj.com

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