Cricket Wireless 2010 Annual Report Download - page 48

Item 3. Legal Proceedings
As more fully described below, we are involved in a variety of lawsuits, claims, investigations and proceedings
concerning intellectual property, securities, commercial, consumer business practices and other matters. Due in part
to the growth and expansion of our business operations, we have become subject to increased amounts of litigation,
including disputes alleging intellectual property infringement.
We believe that any damage amounts alleged by plaintiffs in the matters discussed below are not necessarily
meaningful indicators of our potential liability. We determine whether we should accrue an estimated loss for a
contingency in a particular legal proceeding by assessing whether a loss is deemed probable and whether its amount
can be reasonably estimated. We reassess our views on estimated losses on a quarterly basis to reflect the impact of
any developments in the matters in which we are involved.
Legal proceedings are inherently unpredictable, and the matters in which we are involved often present
complex legal and factual issues. We vigorously pursue defenses in legal proceedings and engage in discussions
where possible to resolve these matters on terms favorable to us. It is possible, however, that our business, financial
condition and results of operations in future periods could be materially adversely affected by increased litigation
expense, significant settlement costs and/or unfavorable damage awards.
Patent Litigation
Freedom Wireless
On November 2, 2010, a matter between Freedom Wireless, Inc., or Freedom Wireless, and us was dismissed
with prejudice following the parties’ entry on July 23, 2010 into a license agreement covering the patents at issue in
the matter. We were sued by Freedom Wireless on December 10, 2007 in the United States District Court for the
Eastern District of Texas, Marshall Division, for alleged infringement of U.S. Patent No. 5,722,067 entitled
“Security Cellular Telecommunications System,” U.S. Patent No. 6,157,823 entitled “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 our Cricket unlimited voice service, in
addition to our Jump»Mobile and Cricket by Week
TM
services, infringes claims under the patents at issue.
DNT
On May 1, 2009, we were sued by DNT LLC, or 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 we use, encourage the use of, sell, offer for sale and/or import 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 our
infringement is willful, and the complaint seeks an injunction against further infringement, unspecified
damages (including enhanced damages) and attorneys’ fees. On July 23, 2009, we 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 us has been stayed, pending resolution of
that other case.
Digital Technology Licensing
On April 21, 2009, we and certain other wireless carriers (including Hargray Wireless LLC, or 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, or 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 we and Hargray Wireless sell and/or offer to sell Bluetooth»devices or digital
42