HTC 2010 Annual Report Download - page 76

150 2 0 1 0 H T C A N N U A L R E P O R T 151
FINANCIAL INFORMATION
The Company’s disclosure of the compensation of directors, supervisors and management personnel for the years ended December 31, 2009 and 2010 was in compliance with
Order VI-0970053275 issued by the Financial Supervisory Commission under the Executive Yuan.
The compensation of directors, supervisors and management personnel for the year ended December 31, 2009 included the bonuses appropriated from the earnings of 2009,
which had been approved by stockholders in their annual meeting in 2010.
25. PLEDGED ASSETS
As of December 31, 2009 and 2010, the Company had provided time deposits of NT$63,900 thousand and NT$63,900 thousand
(US$2,194 thousand) to the National Tax Administration of Northern Taiwan Province as part of the requirements for the Company to
get a certificate stating that it had no pending income tax.
26. COMMITMENTS AND CONTINGENCIES
As of December 31, 2010, unused letters of credit amounted to EUR 86 thousand.
The Company provided NT$436,950 thousand (US$15,000 thousand) guarantee for HTC Electronics (Shanghai)’s bank loans. HTC
Electronics (Shanghai) has drawn down NT$78,195 thousand (US$2,684 thousand) from banks within the guarantee amount as of
December 31, 2010.
27. 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.
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:
TDMA, NARROWBAND CDMA, WIDEBAND CDMA
or TD/CDMA Standards patent license or technology;
royalty payment based on agreement.
Contractor Contract Term Description
a. Expiry dates of patents
b. Any time when the Company is not using any
of Motorola’s intellectual property,
ALCATEL LUCENT November 2009 - November 2012 Authorization to use 2G (GSM/GPRS/EDGE/CDMA), 3G
(CDMA2000/WCDMA), HTML, MPEG, AMR 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.
IV International Licensing Netherlands, B.V. November 2010 - June 2020 Authorization to use wireless technology; royalty
payment based on agreement.
28. OTHER EVENTS
Lawsuit
a. 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. In February 2009, the court granted a ruling on
patent #100 (EP 186189B1) which granted IPCom’s request for an injunction to prevent the Company from importing devices
into Germany, 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 court of Appeal in Karlsruhe and requested a stay of the injunction pending the outcome of
this appeal. In May 2009, the court of Appeal in Karlsruhe 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.
In December 2009, the District Court of Mannheim ruled that it will stay the proceedings on patent #107 (EP 122782) because of
the Court’s doubts about its validity. The case was therefore stayed pending the decision of the EPO opposition division on validity.
The EPO subsequently revoked the patent #107 (EP 122782) for all designated states in June 2010. Also, in February 2010, the
District Court of Mannheim further ruled that the Company had not infringed IPCom’s patent #173 (EP 1018849).
In October 2010, IPCom filed a new complaint against the Company alleging patent infringement of patent #114 (EP 1226692B1) in
District Court of Dusseldorf. The Company has previously filed patent invalidity action against patent #114 (EP 1226692B1) in EPO
and patent #114 (EP 1226692B1) has already been revoked by EPO and IPCom is appealing EPO’s decision. In December 2010, the
#100 (EP 186189B1) was upheld in the Federal Patents Court; however, the chances of IPCom proving infringement are very low
because the revised claim is very restricted. The risk of this newly asserted patent is very low. As of January 18, 2011, the date of the
accompanying independent auditors’ report, there had been no further hearing nor had a court decision been made.
b. In March 2010, Apple Inc. (“Apple”) filed a lawsuit against the Company, H.T.C. (B.V.I.) Corp., HTC America, Inc. and Exedea, Inc.
(“the Company’) concurrently with the U.S. International Trade Commission (“ITC”) and U.S. District Court in Delaware (“Delaware
court”), alleging that the Company infringed its patents. Apple requested ITC and Delaware court to prevent the Company from
importing to and selling devices in the United States and damage compensation, respectively. The Company, subsequently filed ITC
investigation and filed counterclaim with Delaware court against Apple for patent infringements. The Company requested ITC and
Delaware court to prevent Apple from importing and selling devices in the United States and damage compensation, respectively.
The Company evaluated that there was indirect association between the patents used by the Company‘s devices and those claimed
by Apple. The Company believes the lawsuits have limited impact on its financial results or sales activities. As of January 18, 2011,
the date of the accompanying independent auditors’ report, there had been no further hearing nor had a court decision been made.