HTC 2009 Annual Report Download - page 100

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proceedings at the European Patent Office and the German Federal
Patents Court. As of January 18, 2010, the date of the
accompanying independent auditors’ report, there had been no
further hearing nor had a court decision been made.
On other lawsuits, the Company had examined their circumstances
and related information, including past experiences, expert
opinions, results of the evaluation of contingencies and estimation
of the degree of actual occurrence, and concluded that the
amounts of contingent assets or liabilities were appropriately
accounted.
b. Construction for Taipei R&D headquarter
In September 2009, the Company’s board of directors resolved to
build the Taipei R&D headquarter in Xindian City and the land was
bought from Yulon Motors Ltd.
The estimated budget for the construction is NT$3,380,000
thousand (US$105,658 thousand) for a total floor space of 92
thousand square meters. Construction is scheduled to be
completed by August 31, 2011 (Note 15 has more information).
32. SEGMENT INFORMATION
Industry Type
The Company mainly manufactures and sells smart handheld
devices.
Foreign Operations
Because sales to unaffiliated customers and identifiable assets of
foreign segments were less than 10 percent of that of the
Company, the Company was exempt from disclosing information on
foreign operations.
Export Revenues
Export revenues in 2008 and 2009 were as follows:
2008 2009
NT$ NT$ US$(Note 3)
Asia $ 22,772,833 $ 19,310,968 $ 603,656
North 53
,
916
,
578 69
,
711
,
852 2
,
179
,
176
Europe 60,176,261 44,021,684 1,376,108
Others 11,532,155 6,620,411 206,953
$
148
,
397
,
827
$
139
,
664
,
915
$
4
,
365
,
893
Major Customers
Sales to major customers were as follows:
2008 2009
NT
$
NT
$
US
$(
Note 3
)
A
$
21
,
639
,
592
$
28
,
816
,
033
$
900
,
783
B
$
21
,
375
,
563
$
27
,
213
,
647 850
,
692
C $ 26,859,037 $ 12,665,806 395,930
$
69
,
874
,
192
$
68
,
695
,
486
$
2
,
147
,
405
6.THE COMPANY SHOULD DISCLOSE THE
FINANCIAL IMPACT TO THE COMPANY IF THE
COMPANY AND ITS AFFILIATED COMPANIES HAVE
INCURRED ANY FINANCIAL OR CASH FLOW
DIFFICULTIES IN 2008
None.
7.OTHER MATTERS REQUIRING SUPPLEMENTARY
EXPLANATION
Explanation of significant accounting policies:
1.Financial assets/liabilities at fair value through profit or loss
The financial products whose change in fair value is recognized in
earnings are forward foreign exchange contracts. Because of the
small differences in buying prices, selling prices, and mid-market
prices, estimated fair value for outstanding contracts at period end
is generally based on the public market quotes of financial
institutions (usually the mid-market price).
2.Available-for-sale financial assets
The available-for-sale financial assets are listed stocks and quasi
money market fund. Estimates of fair value are based on the closing
price for exchange- or OTC-listed securities on the balance sheet
date.
3.Revenue recognition and allowance for doubtful accounts
Revenue is measured at fair value as the transaction price agreed
between HTC and buyers (considering trade discounts and volume
discounts). As HTC operations have shifted toward primarily brand
business, added trade discounts have included price protection,
marketing development fund, and mail-in rebate. Allowances for
doubtful accounts are estimated using aging analysis, which is
reviewed and updated regularly by assessing the probability of
recovering outstanding receivables, credit ratings and general
economic factors. HTC assigns a rating to each customer based
on their financial health. The allowance accounts of customers
with good credit ratings are accrued by 1% ~ 5% when such are
31~90 days overdue and by 5% ~ 100% when such exceed 91
days overdue. Individual determinations are made for customers
with poor credit, as well as reasonable estimates of allowances for
receivables not yet due.
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30. SIGNIFICANT CONTRACTS
Patent Agreements
To enhance the quality of its products and manufacturing technologies, the Company has patent agreements as follows:
Contractor Contract Term Description
Microsoft February 1, 2009 - January 31, 2011 Authorization to use embedded operating system; royalty
payment based on agreement.
Texas Instruments France January 14, 2000 - January 13, 2010 Authorization to use GSM system software; royalty payment
based on agreement.
Qualcomm Incorporated December 20, 2000 to the following dates: 
a.If the Company materially breaches any covenant and
fails to take remedial action within 30 days after
Qualcomm’s issuance of a written notice, the
Company will be prohibited from using Qualcomm’s
property or patents.
Authorization to use CDMA technology to manufacture and
sell units; royalty payment based on agreement.
b.Any time when the Company is not using any of
Qualcomm’s intellectual property, the Company may
terminate this agreement upon 60 days’ prior written
notice to Qualcomm.
Ericsson Mobile Platform AB April 2003 - March 2011 Authorization to use EDGE reference design license and
support agreement; royalty payment based on agreement.
Telefonaktiebolaget LM Ericsson December 15, 2008 - December 14, 2013 Authorization to use platform patent license agreement;
royalty payment based on agreement.
Nokia Corporation January 1, 2003 to the expiry dates of these patents. Authorization to use wireless technology, like GSM; royalty
payment based on agreement.
InterDigital Technology Corporation. December 31, 2003 to the expiry dates of these
patents.
Authorization to use TDMA and CDMA technology; royalty
payment based on agreement.
KONINKLIJKE PHILIPS ELECTRONICS N.V. January 5, 2004 to the expiry dates of these patents GSM/DCS 1800/1900 Patent License; royalty payment
based on agreement.
Motorola, Inc. December 23, 2003 to the latest of the following
dates:
a.Expiry dates of patents
b.Any time when the Company is not using any
of Motorola’s intellectual property,
TDMA, NARROWBAND CDMA, WIDEBAND CDMA or
TD/CDMA Standards patent license or technology; royalty
payment based on agreement.
ALCATEL LUCENT November 2009 - November 2012 Authorization to use 2G(GSM/GPRS/EDGE/CDMA)ˣ
3G(CDMA2000/WCDMA)ˣHTMLˣMPEGˣAMR patent license
or technology; royalty payment based on agreement.
Siemens Aktiengesellschaft July 1, 2004 to the expiry dates of these patents. Authorization to use GSM, GPRS or EDGE patent license or
technology; royalty payment based on agreement.
31. OTHER EVENTS
a. Lawsuit
In April 2008, IPCom GMBH & CO., KG (“IPCom”) filed a multi-claim lawsuit against the Company with the District Court of Mannheim in Germany,
alleging that the Company infringed IPCom’s patents. IPCom requested the court to issue an injunction to prevent the Company from exporting to
and selling in Germany devices made using IPCom’s patents. In March 2009, the Company was served with the court decision that was in favor of
some of IPCom’s claims. The court also granted IPCom’s request for an injunction, with the serving of this injunction pending IPCom’s placement
with the court of a security bond of 1 million. The Company appealed this decision to the German Federal Patents Court in Munich and
requested a stay of the injunction pending the outcome of this appeal. In May 2009, the court of appeals issued a stay of the injunction and
enforced this stay after the Company submitted to the court a bank guarantee amounting to 7.5 million, the amount of the required security bond.
Thus, the Company has continued to ship products regularly to Germany.
On December 18, 2009, the District Court of Mannheim further ruled that it will stay the proceedings on one of IPCom’s claims of breach of patents
because of the Court’s doubts about its validity. The case will remain suspended pending the end of the claim invalidity
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