HTC 2011 Annual Report Download - page 59

13. Other important risks and mitigating measures being or to be taken: None
14. Risk Management Organization Structure
Responsible/Implementation Unit Control Item Implementation Tasks
Legal Department Contractual and Legal Risk Manage overall corporate contractual risk
Finance and Accounting Division Business Strategy and Financial
Risks
Responsible for capital allocation and management, investment
planning, customer credit control, operational analysis, and cost
analysis
Internal Audit Internal Control Risk Assess comprehensiveness and effectiveness of internal control
systems
Global Product Division Product Trend Risk Identify future product development trends and customer
demands
Design Quality & Engineering Service
Division Product Design and Quality Risks Ensure design quality of HTC products with regard to hardware, software and product safety
Manufacturing Operation Center Production Quality Risk Enhance production quality
Customer Service and Quality Assurance
Division Product Quality Risk Provide after-sales service and enhance the quality of such
7. Other Important Matters
(1) Certification Details of Employees Whose Jobs are Related to the Release of the Company's
Financial Information
Number of Employees
Certification Finance and Accounting Division Internal Audit
Certified Public Accountants (CPA) 6 2
Internal Auditor 3 3
US Certified Public Accountants (US CPA) 3 1
Certified Internal Auditor (CIA) - 2
Chartered Financial Analyst (CFA) 3 -
Financial Risk Manager (FRM) 2 -
the risk of patents-in-suits are low. Also, preliminary
injunction and summary judgment against HTC
are very unlikely. In March 2012, Washington Court
granted on HTC's summary judgment motion and
ruled on non-infringement of two of patents-in-
suit (the other patent is still reviewed by the court.)
As of April 24, 2012, the date of the accompanying
independent accountants' review 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, H.T.C. (B.V.I.) Corp., HTC
America, Inc. and Exedea, Inc. (“the Company’)
concurrently with the U.S. International Trade
Commission (“ITC”) (ITC No. 337-TA-710) 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 (ITC No. 337-TA-721) 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.
In July, 2011, the Company acquired the business
operation and ownership of patent portfolio of
S3 Graphics Co., Ltd. (“S3 Graphics”) and the
acquisition has been completed in November, 2011.
In July, 2011, Apple filed another ITC investigation
(ITC No. 337-TA-797) and a companion district
court case in Delaware against the Company
alleging patent infringement; Apple also filed patent
infringement lawsuits against the Company with the
District Courts of Munich and Mannheim, Germany.
In response to those German lawsuits filed by Apple,
the Company filed nullity actions against all patents
asserted by Apple in German Federal Patent Court
and UK High Court. In August 2011, the Company
filed another ITC investigation (ITC No. 337-TA-808)
and a companion district court case in Delaware
against Apple alleging patent infringement against
Apple. On September 22, 2011, S3 Graphics filed
another ITC investigation (ITC No. 337-TA-813) and
a companion district court case in Delaware against
Apple alleging infringement of its patents.
In December 2011, the Company received the notice
of ITC committee’s final determination in the Apple
vs. HTC case, (ITC No. 337-TA-710). Apple originally
asserted 10 of its patents against the Company in
March 2010, and the ITC Committee ruled that the
Company infringed on 1 patent. Apple has appealed
and the Company is implementing workaround
into new products. As for the investigation filed by
the Company against Apple (ITC No. 337-TA-721),
on October 17, 2011, the ITC judge issued his initial
determination and ruled that Apple does not infringe
the 4 asserted patents owned by the Company. The
Company has appealed.
(3) In January 2012, Eastman Kodak (Kodak) filed a
lawsuit against HTC concurrently with the U.S.
International Trade Commission (ITC) and U.S.
District Court of Western District of New York
(New York court), alleging that these companies
infringed its patents. Kodak requested ITC and New
York court to prevent HTC from exporting to and
selling in United States devices made using Kodak's
patents and damage compensation, respectively.
HTC evaluated that there was indirect association
between the patents used by HTC's devices and
those claimed by Kodak. HTC believes the lawsuits
have limited impact on its financial results or sales
activities. As of April 24, 2012, the date of the
accompanying independent accountants' review
report, there had been no further hearing nor had a
court decision been made.
(4) HTC had examined circumstances and related
information of the cases, 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 for.
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