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The US class action suit was brought by Sara Cho, who alleges that drives sold by Seagate actually have 7% less usable storage capacity than advertised.

At the heart of the suit is the definition of a gigabyte. Whereas Seagate and other hard disk manufacturers define a gigabyte as being one billion bytes, Cho argued that this misled customers, as "operating systems report hard drive capacity using a binary definition, whereby 1 GB = 1,073,741,824 bytes, a difference of approximately seven percent."

Though still protesting its innocence Seagate says it has settled in order to avoid a potentially

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expensive court case.

As part of the settlement the hard disk manufacturer has agreed to change the packaging and marketing of its hard drives to explain the difference in usable storage. The packaging will read:

"1 gigabyte (GB) = 1 billion bytes when referring to hard drive capacity. Your computer's operating system may use a different standard of measurement and report a lower capacity. In addition, some of the listed capacity is used for formatting and other functions, and thus will not be available for data storage."

The hard drive manufacturer will also offer customers a refund equivalent to 5% of the purchase price of their hard drive, about $7 per customer according to company estimates.

There are notable caveats however. Customers will need to have purchased a Seagate hard disk in the US between the 22 March 2001 and 26 September 2007 and provide proof of purchase.

They will also need to have purchased a retail hard drive through Seagate or an approved reseller. The refund will not be offered on hard drives that were bundled with PCs or other hardware.

The court papers suggest the settlement could affect 6.2 million retail hard drives in the US.