HP 2005 Annual Report Download - page 130

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
Settled Litigation and Proceedings
In March 2003, the Korea Fair Trade Commission commenced an investigation of the Korean
printing and supplies market and contacted HP requesting information on its printing systems business.
A hearing was held on August 10, 2005, and the matter was concluded without the imposition of any
fine on HP.
EMC Litigation. HP and EMC Corporation (‘‘EMC’’) announced on May 2, 2005 that they
agreed to dismiss all claims and counterclaims with no findings or admissions of liability in a settlement
of a longstanding patent dispute involving patent infringement allegations between the two companies,
as described below. As a part of the settlement agreement, HP agreed to pay $325 million (the net
amount of the valuation of EMC’s claims against HP less the valuation of HP’s claims against EMC) to
EMC, which HP can satisfy through the purchase for resale or internal use of complementary EMC
products, such as the VMware product line, in equal installments over the next five years. In addition,
if EMC purchases HP products during the five-year period, HP will be required to purchase an
equivalent amount of additional product or services from EMC of up to an aggregate of $108 million.
EMC and HP also signed a five-year patent cross-license agreement. HP did not incur a charge with
respect to the settlement because HP expected to meet its minimum future purchase commitments
under the settlement agreement. HP v. EMC Corporation was a lawsuit filed in United States District
Court for the Northern District of California on September 30, 2002, in which HP accused EMC of
infringing seven HP patents. HP sought damages, an injunction, prejudgment interest, costs and
attorneys’ fees. On July 21, 2003, EMC filed its answer and a cross-claim and asserted, among other
things, that numerous HP storage, server and printer products infringed six EMC patents. EMC sought
a permanent injunction as well as unspecified monetary damages, costs and attorneys’ fees for patent
infringement. On November 27, 2004, HP filed a second lawsuit against EMC in United States District
Court for the Northern District of California, in which HP accused additional models of certain EMC
products of infringing the same seven HP patents. HP sought damages, an injunction, prejudgment
interest, costs and attorneys’ fees. EMC also filed suit against StorageApps, a company acquired by HP
in fiscal 2001, in United States District Court in Worcester, Massachusetts on October 20, 2000. The
suit accused StorageApps of infringement of EMC patents relating to storage devices and sought a
permanent injunction as well as unspecified monetary damages for patent infringement. Following a
trial in May 2004, the jury found that three of EMC’s patents were valid and infringed. The parties
agreed to binding arbitration on the issue of damages. HP appealed the judgment of liability. All of the
foregoing litigation has been resolved in connection with the settlement agreement discussed above.
Intergraph Litigation. On January 21, 2005, HP announced that it had settled all ongoing patent
litigation with Intergraph Corporation, as described below, and that the companies had entered into a
patent cross-license agreement. The agreement resolved all legal claims between the two companies and
their subsidiaries. Under the terms of the agreement, HP agreed to pay Intergraph $141 million, of
which $116 million was recorded as a charge in the first quarter of fiscal 2005 since it related to the
cross-license agreement for products shipped in prior years. Both HP and Intergraph have since
dismissed, withdrawn or terminated with prejudice all pending lawsuits, and neither company will have
any further financial obligations stemming from any such disputes. According to the terms of the cross-
license agreement, HP was granted a license to all Intergraph patents for all fields of use. Intergraph
was granted a license to all HP patents in specific fields covered by Intergraph’s then current product
categories. Intergraph Hardware Technologies Company v. HP, Dell & Gateway was a lawsuit filed in
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