HTC 2013 Annual Report Download - page 115

FINANCIAL INFORMATION FINANCIAL INFORMATION
226 227
Acquisition of Property, Plant and
Equipment
For the Year Ended
December 31
2013 2012
Subsidiaries $175,444 $23,421
Other related parties - other
related parties' chairperson or
its significant stockholder, is the
Company's chairperson
3,238 61,155
$178,682 $84,576
As of December 31, 2013 and 2012, the unpaid
amounts were NT$175,931 and NT$25,548
thousand, respectively.
Other Related-party Transactions
a. To enhance product diversity, the Company
entered into a trademark and technology license
agreement with subsidiaries, associate of subsidiary
and other related parties. The royalty expense was
NT$222,760 thousand and NT$292,321 thousand
for the years ended December 31, 2013 and 2012,
respectively. As of December 31, 2012 the amounts
of unpaid royalty was NT$130,960 thousand. As of
December 31, 2013 and 2012 the amounts of prepaid
royalty were NT$55,311 thousand and NT$28,999
thousand, respectively.
b. Subsidiaries and other related parties assisted
the Company to expand business overseas and
render design, research and development support,
consulting services and after-sales services. The
Company recognized related expenses amounting
to NT$9,815,920 thousand and NT$14,359,973
thousand for the years ended December 31, 2013
and 2012, respectively. The unpaid amount were
NT$2,440,229 thousand, NT$2,196,174 thousand and
NT$3,459,293 thousand as of December 31, 2013,
December 31, 2012 and January 1, 2012, respectively.
c. The Company leased staff dormitory owned by a
related party under an operating lease agreement.
The term of the lease agreement is from April 2012
to March 2015 and the rental payment is determined
at the prevailing rates in the surrounding area. The
Company recognized and paid rental expenses
amounting to NT$5,209 thousand for the years
ended December 31, 2013 and 2012, each.
In October 2010, IPCom filed a new complaint
against the Company alleging patent
infringement of patent owned by IPCom in
District Court of Dusseldorf, Germany.
In June 2011, IPCom filed a new complaint
against the Company alleging patent
infringement of patent owned by IPCom
with the High Court in London, the United
Kingdom. In September 2011, the Company
filed declaratory judgment action for non-
infringement and invalidity in Milan, Italy. Legal
proceedings in above-mentioned courts in
Germany and the United Kingdom are still
ongoing. The Company evaluated the lawsuits
and considered the risk of patents-in-suits are
low. Also, preliminary injunction and summary
judgment against the Company are very
unlikely.
In March 2012, Washington Court granted on
the Company's summary judgment motion and
ruled on non-infringement of two of patents-
in-suit. As for the third patents-in-suit, the
Washington Court has granted a stay on case
pending appeal decision. In January 2014, the
Court of Appeal for the Federal Circuit affirmed
the Washington Court's decision.
As of the date that the board of directors
approved and authorized for issuing parent
company only financial statements, there had
been no critical hearing nor had a court decision
been made, except for the above.
b. From May 2011 onwards, Nokia Corporation
("Nokia") and the Company filed patent
infringement actions against the other
respectively in the U.S. International
TradeCommission ("ITC"), U.S. District Court for
the District of Delaware, German district courts,
and English High Court. On February 8, 2014,
the two companies reached a settlement that
included the dismissal of all current lawsuits
and a patent and technology collaboration
agreement. The Company will make payments
to Nokia and the collaboration will involve
the Company's LTE patent portfolio, further
strengthening Nokia's licensing offering. The
d. In 2013, the Company increased investment of
NT$1,048,593 thousand in HTC Investment One
(BVI) Corporation and retained 100% ownership.
In 2012, the Company increased investment of
NT$1,181,915 thousand in H.T.C. (B.V.I.) Corp.,
NT$3,403,451 thousand in High Tech Computer
Asia Pacific Pte. Ltd. and NT$956,002 thousand
in HTC Investment One (BVI) Corporation,
respectively. After these investments, the
Company retained 100% ownership in each
subsidiary.
34. PLEDGED ASSETS
To protect the rights and interests of its employees,
in September 2012, the Company deposited unpaid
employee bonus in a new trust account. The trust
account, which is under other current financial
assets, had amounted to NT$2,359,041 thousand
and NT$3,645,820 thousand as of December 31,
2013 and 2012, respectively.
As of January 1, 2012 the Company had provided
time deposits of NT$63,900 thousand had
been classified as other current financial assets,
respectively, as part of the requirements for the
Company to get a certificate from the National Tax
Administration of the Northern Taiwan Province
stating that it had no pending income tax.
35. COMMITMENTS,
CONTINGENCIES AND
SIGNIFICANT CONTRACTS
a. In April 2008, IPCom GMBH & CO., KG ("IPCom")
filed a multi-claim lawsuit against the Company
with the District Court of Mannheim, Germany,
alleging that the Company infringed IPCom's
patents. In November 2008, the Company
filed declaratory judgment action for non-
infringement and invalidity against three of
IPCom's patents with the Washington Court,
District of Columbia.
companies will also explore future technology
collaboration opportunities.
c. In March 2008, Flashpoint Technology, Inc., a
U.S. entity, sued 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 in November
2009, and is still stayed.
In May 2010, Flashpoint filed the first 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.
In May 2012, Flashpoint filed another 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 September 2013, the ITC
Administrative Law Judge made an Initial
Determination that favors the Company on
two of the three patents in suit. On the matter
of the third patent, only two End-of-Life HTC
device models are potentially impacted. The
Company believes the Committee will made a
final determination that favors the Company;
the final determination will be granted in March
14, 2014. Meanwhile, the Company has also
worked on design around solution for all future
products to ensure no business disruption in the
US market.
d. On the basis of its past experience and
consultations with its legal counsel, the
Company has measured the possible effects
of the contingent lawsuits on its business and
financial condition.