HTC 2011 Annual Report Download - page 109

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Contractor Contract Term Description
KONINKLIJKE PHILIPS ELECTRONICS N.V. January 5, 2004 to the expiry dates of these patents in the
agreement.
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 in the agreement.
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),
3G (CDMA2000/WCDMA), HTML, MPEG, AMR
patent license or technology; royalty payment
based on agreement.
Siemens Aktiengesellschaft July 2004 to the expiry dates of these patents in the agreement.
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.
(Concluded)
(31) OTHER EVENTS
1. Lawsuit
(1) 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 European Patent Office ("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 of the revised very
restricted claim. The risk of this newly asserted patent is very low.
In June 2011, IPCom filed a new complaint against the Company alleging patent infringement of patent #100a (EP 1841268B1) with the High
Court in London. Preliminary injunction and summary judgment against the Company are very unlikely.
In December 2011, the Company withdrew its appeal with the court of Appeal in Karlsruhe, Germany, in order to avoid possible finding of
infringement on #100a (EP 1841268B1). IPCom has started enforcement proceedings of original #100 injunction. The Company has now
fully implemented workaround in place, so business is not affected in Germany.
Also, IPCom filed a multi-claim lawsuit against the Company in multiple jurisdictions, including USA, UK and Italy. After that, the
Company filed patent non-infringement and patent invalidity in those jurisdictions. As of February 14, 2012, the date of the accompanying
independent auditors' report, there had been no critical hearing nor had a court decision been made, except for the above.
(2) In March 2010, Apple Inc. ("Apple") filed a lawsuit against 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.
3. Compensation of Directors, Supervisors and Management Personnel
2010 2011
NT$ NT$ US$ (Note 3)
Salaries $140,216 $166,422 $5,496
Incentives 300,734 134,924 4,456
Special compensation 3 - -
Bonus 1,386,441 (Note) (Note)
$1,827,394 $301,346 $9,952
Note: The appropriation of the 2011 earnings is not shown because the Board of Directors had not yet made the related proposal.
The Company's disclosure of the compensation of directors, supervisors and management personnel for 2010 and 2011 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, 2010 included the bonuses appropriated
from the earnings of 2010, which were approved by the stockholders in their annual meeting in 2011.
(28) PLEDGED ASSETS
As of December 31, 2010 and 2011, the Company had provided time deposits of NT$95,688 thousand and NT$68,700 thousand (US$2,269
thousand), respectively, as collaterals for secured loans, as rental deposits and as a meeting of one of the requirements of the National Tax
Administration of Northern Taiwan Province for the Company to get a certificate stating that it had no pending income tax.
(29) COMMITMENTS AND CONTINGENCIES
1. As of December 31, 2011, unused letters of credit amounted to US$1,951 thousand.
2.
The Company provided a US$15,000 thousand guarantee for HTC Electronics (Shanghai) Co., Ltd.'s bank loans. The Company terminated the
guarantee in April 2011.
3.
Under the unit purchase agreement between HTC and Beats Electronics, LLC, the founding members of Beats Electronics, LLC shall have a put
right to sell HTC all of the interests by years. In addition, HTC shall have a call right to make a purchase of all the founding members' interests.
The put right and call right are terminated automatically upon the consummation of a qualified IPO.
(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 - March 31, 2015 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 agreement term 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.
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.
Authorization to use CDMA technology to
manufacture and sell units; 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 - December 31, 2016 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 in the
agreement.
Authorization to use TDMA and CDMA technology;
royalty payment based on agreement.
(Continued)
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