Cisco 2013 Annual Report Download - page 117

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The Company was subject to patent claims asserted by VirnetX, Inc. on August 11, 2010 in the United States District Court for
the Eastern District of Texas. VirnetX alleged that various Cisco products that implement a method for secure communication
using virtual private networks infringe certain patents. VirnetX sought monetary damages. The trial on these claims began on
March 4, 2013. On March 14, 2013, the jury entered a verdict finding that the Company’s accused products do not infringe any
of VirnetX’s patents asserted in the lawsuit. On April 3, 2013, VirnetX filed a motion seeking a new trial on the issue of
infringement, which the Company has opposed. The Court held a hearing on VirnetX’s motion for a new trial in June 2013 but
has not issued a ruling.
The Company was subject to numerous patent, tort, and contract claims asserted by XpertUniverse on March 10, 2009 in the
United States District Court for the District of Delaware. Shortly before trial, the Court dismissed on summary judgment all
claims initially asserted by XpertUniverse except a claim for infringement of two XpertUniverse patents and a claim for fraud
by concealment. XpertUniverse’s remaining patent claims alleged that three Cisco products in the field of expertise location
software infringed two XpertUniverse patents. XpertUniverse’s fraud by concealment claim alleged that the Company did not
disclose its decision not to admit XpertUniverse into a partner program. The trial on these remaining claims began on
March 11, 2013. On March 22, 2013, the jury entered a verdict finding that two of the Company’s products infringed two of
XpertUniverse’s patents and awarded XpertUniverse damages of less than $35 thousand. The jury also found for
XpertUniverse on its fraud by concealment claim and awarded damages of $70 million. The Company believes it has strong
arguments to overturn the fraud damage award or to obtain a new trial. In May and June, 2013, the Company filed post-trial
motions. The Court has not yet set a date for a hearing. If the Court does not grant the Company’s post-trial motions, the
Company will pursue an appeal. While the ultimate outcome of the case may still result in a loss, the Company does not expect
it to be material.
The Company and a service provider customer were subject to patent claims asserted by TiVo, Inc. (“TiVo”) on June 4, 2012
in the United States District Court for the Eastern District of Texas. TiVo alleged that the Company’s digital video recorders
deployed by the service provider customer infringed certain of its patents. TiVo sought monetary damages and injunctive
relief. The trial on these claims was scheduled to begin in March 2014. TiVo previously filed a similar patent lawsuit, which
was scheduled for trial in June 2013, against the same service provider customer, accusing digital video recorders
manufactured by one of the Company’s competitors. Beginning in late May 2013, prior to that trial, the parties to that case and
the Company conducted a mediation which resulted in a settlement and dismissal of all outstanding litigation between the
parties. Under the terms of the settlement, in exchange for a single, lump sum monetary payment to TiVo by the Company of
$294 million, the Company received a perpetual license to the patents-in-suit, the Company and TiVo entered into a ten year
cross license applicable to the video field, and the Company and TiVo agreed not to sue one another for infringement of any
other patents for a period of five years. In connection with the settlement, the Company recorded $172 million to cost of sales
during the fourth quarter of fiscal 2013, with the remainder of the settlement recorded against the amounts previously reserved
and as an intangible asset to be amortized over its estimated useful life.
In addition, the Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business,
including intellectual property litigation. While the outcome of these matters is currently not determinable, the Company does
not expect that the ultimate costs to resolve these matters will have a material adverse effect on its consolidated financial
position, results of operations, or cash flows.
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