Intel 2003 Annual Report Download - page 87

Table of Contents
Index to Financial Statements
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In October 2002, the Texas District Court ruled that Intel infringed both patents at issue in that case. Pursuant to the settlement
agreement, Intel paid Intergraph $150 million. Intel then appealed the trial court’s decision. In February 2004, the Court of Appeals for the
Federal Circuit found that the District Court erred in construing a claim term, revised the claim construction, vacated the District Court ruling
and remanded the case to the District Court to determine in the first instance whether the Intel Itanium processor infringes the patents. Intel is
currently evaluating the impact that the Court of Appeals’ opinion has on the 2002 settlement agreement.
In December 2002, Intergraph filed suit in the Eastern District of Texas against Dell Inc., Gateway Inc. and Hewlett-Packard Company,
alleging infringement of three of Intergraph’s patents. These three patents are a subset of the patents that were the subject of a now settled
lawsuit that Intergraph had filed against Intel in Alabama. In May 2003, Dell filed its answer and counterclaim and named Intel as well as
Intergraph in a counterclaim for declaratory judgment. None of the other defendants have named Intel as a counter-defendant. The claim
against Intel does not seek any monetary or other specific relief. Rather, Dell seeks a judicial interpretation of the April 2002 settlement and
license agreement between Intel and Intergraph insofar as that agreement relates to any express and implied licenses and patent exhaustion
defenses Dell has raised to defend the Intergraph claims. Dell has also issued a request for indemnity from Intel for any damages awarded
against Dell, although this issue has not been made an element of the pending litigation. Intel intends to participate vigorously in the defense of
all relevant claims.
In May 2000, various plaintiffs filed a class-action lawsuit in the U.S. District Court for the Northern District of California, alleging
violations of the Securities Exchange Act of 1934 (Exchange Act) and Rule 14d-10 of the Exchange Act in connection with Intel’s acquisition
of DSP Communications, Inc. The complaint alleged that Intel and CWC (Intel’s wholly owned subsidiary at the time) agreed to pay certain
DSP executives additional consideration of $15.6 million not offered or paid to other stockholders. The alleged purpose of this payment to the
insiders was to obtain DSP insiders’ endorsement of Intel’s tender offer in violation of the anti-
discrimination provision of Section 14(d)(7) and
Rule 14d-10. The plaintiffs sought unspecified damages for the class, and unspecified costs and expenses. In July 2002, the District Court
granted Intel’s motion for summary judgment, but in October 2002, the District Court vacated the summary judgment. In January 2003, the
parties reached a settlement agreement, which was reviewed and approved by the court in June 2003. The settlement did not have a material
impact on the company’s results of operations or financial condition.
In September 2001, VIA Technologies, Inc. and Centaur Technology, Inc. sued Intel in the U.S. District Court for the Western District of
Texas, alleging that the Intel
®
Pentium
®
4 processor infringes a VIA microprocessor-related patent. In October 2001, Intel filed counterclaims
against VIA, asserting that VIA’s C3* microprocessors infringe Intel patents. In January 2002, VIA amended its complaint to allege that Intel’
s
Pentium
®
II, Pentium
®
III , Celeron
®
and Pentium 4 processors infringe another patent. In August 2002, Intel added an additional claim that
VIA’s C3 microprocessors infringe an additional Intel patent, and VIA added an additional claim that Intel’s Pentium III and Pentium 4
processors infringe another VIA patent. In April 2003, the parties entered into a settlement agreement, pursuant to which they agreed to dismiss
with prejudice the claims and counterclaims in this lawsuit, and to dismiss all other pending legal claims between them in all jurisdictions. The
confidential settlement agreement includes a patent cross-license agreement covering certain of each company’s products, subject to certain
terms and limitations. The settlement agreement did not have a material impact on the company’s results of operations or financial condition.
In 2001, various plaintiffs filed five class-action lawsuits against Intel alleging violations of the Securities Exchange Act of 1934. These
complaints were consolidated in an amended complaint filed in the U.S. District Court for the Northern District of California. The lawsuit
alleged that purchasers of Intel stock between July 19, 2000 and September 29, 2000 were misled by false and misleading statements by Intel
and certain of its officers and directors concerning the company’s business and financial condition. In July 2003, the court granted Intel’s
motion to dismiss the plaintiffs’ second amended complaint in its entirety with prejudice, and the plaintiffs did not appeal the court’s dismissal
of the suit.
In addition, various plaintiffs filed stockholder derivative complaints in California Superior Court and Delaware Chancery Court against
the company’s directors and certain officers, alleging that they mismanaged the company and otherwise breached their fiduciary obligations to
the company. The plaintiffs in the California action filed the original and two successive amended complaints, and the California Superior
Court sustained Intel’s demurrers on each of these complaints. Following the court’s dismissal without prejudice of these complaints, the
plaintiffs notified the court and Intel in June 2003 that they would not file a fourth complaint, and they signed a stipulation withdrawing their
lawsuit with prejudice, which the court approved. In December 2003, the plaintiffs in the Delaware action withdrew their complaint, and the
case was dismissed with prejudice.
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