Cricket Wireless 2010 Annual Report Download - page 136

“Security Cellular Telecommunications System,” and U.S. Patent No. 6,236,851 entitled “Prepaid Security Cellular
Telecommunications System.” Freedom Wireless alleged that its patents claim a novel cellular system that enables
subscribers of prepaid services to both place and receive cellular calls without dialing access codes or using
modified telephones. The complaint sought unspecified monetary damages, increased damages under 35 U.S.C.
§ 284 together with interest, costs and attorneys’ fees, and an injunction. On September 3, 2008, Freedom Wireless
amended its infringement contentions to assert that the Company’s Cricket unlimited voice service, in addition to its
Jump»Mobile and Cricket by Week
TM
services, infringes claims under the patents at issue.
DNT
On May 1, 2009, the Company was sued by DNT LLC (“DNT”) in the United States District Court for the
Eastern District of Virginia, Richmond Division, for alleged infringement of U.S. Reissued Patent No. RE37,660
entitled “Automatic Dialing System.” DNT alleges that the Company uses, encourages the use of, sells, offers for
sale and/or imports voice and data service and wireless modem cards for computers designed to be used in
conjunction with cellular networks and that such acts constitute both direct and indirect infringement of DNT’s
patent. DNT alleges that the Company’s infringement is willful, and the complaint seeks an injunction against
further infringement, unspecified damages (including enhanced damages) and attorneys’ fees. On July 23, 2009, the
Company filed an answer to the complaint as well as counterclaims. On December 14, 2009, DNT’s patent was
determined to be invalid in a case it brought against other wireless providers. DNT’s lawsuit against the Company
has been stayed, pending resolution of that other case.
Digital Technology Licensing
On April 21, 2009, the Company and certain other wireless carriers (including Hargray Wireless, a company
which Cricket acquired in April 2008 and which was merged with and into Cricket in December 2008) were sued by
Digital Technology Licensing LLC (“DTL”) in the United States District Court for the Southern District of New
York, for alleged infringement of U.S. Patent No. 5,051,799 entitled “Digital Output Transducer.” DTL alleges that
the Company and Hargray Wireless sell and/or offer to sell Bluetooth»devices or digital cellular telephones,
including Kyocera and Sanyo telephones, and that such acts constitute direct and/or indirect infringement of DTL’s
patent. DTL further alleges that the Company and Hargray Wireless directly and/or indirectly infringe its patent by
providing cellular telephone service and by using and inducing others to use a patented digital cellular telephone
system by using cellular telephones, Bluetooth devices, and cellular telephone infrastructure made by companies
such as Kyocera and Sanyo. DTL alleges that the asserted infringement is willful, and the complaint seeks a
permanent injunction against further infringement, unspecified damages (including enhanced damages), attorneys’
fees, and expenses. On January 5, 2010, this matter was stayed, pending final resolution of another case that DTL
brought against another wireless provider in which it alleged infringement of the patent that is at issue in this matter.
That other case has been settled and dismissed but the stay in the Company’s matter has not been lifted.
Securities and Derivative Litigation
Leap was a nominal defendant in two shareholder derivative suits and a consolidated securities class action
lawsuit. As indicated further below, each of these matters settled and the settlements received final court approval.
The two shareholder derivative suits purported to assert claims on behalf of Leap against certain of its current
and former directors and officers. One of the shareholder derivative lawsuits was filed in the California Superior
Court for the County of San Diego on November 13, 2007 and the other shareholder derivative lawsuit was filed in
the United States District Court for the Southern District of California on February 7, 2008. The state action was
stayed on August 22, 2008 pending resolution of the federal action. The plaintiff in the federal action asserted,
among other things, claims for alleged breach of fiduciary duty, gross mismanagement, waste of corporate assets,
unjust enrichment, and proxy violations based on the November 9, 2007 announcement that the Company was
restating certain of its financial statements, claims alleging breach of fiduciary duty based on the September 2007
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LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)