Cricket Wireless 2011 Annual Report Download - page 140

LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 14. Commitments and Contingencies
As more fully described below, the Company is involved in a variety of lawsuits, claims, investigations and
proceedings concerning intellectual property, commercial, business practices and other matters. Due in part to the
expansion and development of its business operations, the Company has become subject to increased amounts of
litigation, including disputes alleging intellectual property infringement.
The Company believes that any damage amounts alleged by plaintiffs in the matters discussed below are not
necessarily meaningful indicators of its potential liability. The Company determines whether it should accrue an
estimated loss for a contingency in a particular legal proceeding by assessing whether a loss is deemed probable
and whether the amount can be reasonably estimated. The Company reassesses its views on estimated losses on a
quarterly basis to reflect the impact of any developments in the matters in which it is involved.
Legal proceedings are inherently unpredictable, and the matters in which the Company is involved often
present complex legal and factual issues. The Company vigorously pursues defenses in legal proceedings and
engages in discussions where possible to resolve these matters on favorable terms. The Company’s policy is to
recognize legal costs as incurred. It is possible, however, that the Company’s 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
DNT
On December 11, 2011, the Company entered into an agreement with DNT LLC (“DNT”) to settle a matter
brought against the Company 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 alleged that the Company used, encouraged the use of, sold, offered for sale and/or imported voice and data
service and wireless modem cards for computers designed to be used in conjunction with cellular networks and
that such acts constituted both direct and indirect infringement of DNT’s patent. DNT alleged that our
infringement was willful, and the complaint sought an injunction against further infringement, unspecified
damages (including enhanced damages) and attorneys’ fees.
Digital Technology Licensing
On October 31, 2011, the Company entered into an agreement with Digital Technology Licensing LLC
(“DTL”) to settle a matter brought against the Company and certain other wireless carriers (including Hargray
Wireless LLC (“Hargray Wireless”), a company which Cricket acquired in April 2008 and which was merged
with and into Cricket in December 2008) on April 21, 2009 in the United States District Court for the Southern
District of New York. DTL alleged that the Company and Hargray Wireless sold and/or offered to sell
Bluetooth®devices or digital cellular telephones, including Kyocera and Sanyo telephones, and that such acts
constituted direct and/or indirect infringement of U.S. Patent No. 5,051,799 entitled “Digital Output Transducer.”
DTL further alleged that the Company and Hargray Wireless directly and/or indirectly infringed 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 alleged that the asserted infringement was willful, and the complaint sought a
permanent injunction against further infringement, unspecified damages (including enhanced damages),
attorneys’ fees, and expenses. The action was dismissed on August 24, 2011, subject to the right of the parties to
refile the action in the event that the settlement had not been finalized.
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