HTC 2011 Annual Report Download - page 90

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, 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.
In November, 2011, the Company acquired the business operation and ownership of patent portfolio of S3 Graphics Co., Ltd. ("S3
Graphics"). In July, 2011, Apple filed another ITC investigation and a companion district court case in Delaware against the Company
alleging patent infringement (ITC No. 337-TA-797). In August 2011, the Company filed another ITC investigation and a companion district
court case in Delaware against Apple alleging patent infringement (ITC No. 337-TA-808) 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, so business is not affected in the
US. 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.
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.
(3) In March 2008, Flashpoint Technology, Inc., a U.S. entity, sued the Company and HTC America ("the Company') with 10 patents in the
District Court of Delaware alleging the Company infringed its patents and seeking damage compensation. The Company filed re-exams
and the district court case was stayed pending the result of the re-examination from U.S. Patent and Trademark Office on November 2009,
and is still stayed.
In May 2010, Flashpoint filed an ITC investigation against the Company with ITC alleging that the Company infringed its patents and
requested ITC to prevent the Company from importing to and selling devices in the United States. In November 2011, the ITC Committee
issued its Final Determination and ruled that the Company does not infringe patents owned by Flashpoint.
(4) The Company had shared lawsuit-related costs on the basis of common benefits and agreements between its vendors and customers. For
2011, companies that the Company shared lawsuit-related costs with included VIA Technologies Inc. and its subsidiaries.
(5) On the basis of its past experience and consultations with its legal counsel, the Company has evaluated the possible effects of the above
lawsuits on its business and financial condition as well as on relevant matters.
2. Construction of the Taipei R&D Headquarters
In September 2009, the Company's board of directors resolved to build the Taipei R&D headquarters in Xindian City and the land was bought
from Yulon Motors Ltd. The estimated budget for the construction is NT$3,380,000 thousand for a total floor space of 92 thousand square
meters. Construction is scheduled to be completed by February 2012 (Note 15 has more information).
(28) 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.
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.
(29) 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.
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