Memorex 2010 Annual Report Download - page 17

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We are the subject of various pending or threatened legal actions in the ordinary course of our business. All such
matters are subject to many uncertainties and outcomes that are not predictable with assurance. Additionally, our
electronics and accessories business is subject to allegations of patent infringement by our competitors as well as by non-
practicing entities (NPEs), sometimes referred to as “patent trolls,” who may seek monetary settlements from us, our
competitors, suppliers and resellers. Consequently, as of December 31, 2010, we are unable to ascertain the ultimate
aggregate amount of any monetary liability or financial impact that we may incur with respect to these matters. While
these matters could materially affect operating results depending upon the final resolution in future periods, it is our opinion
that after final disposition, any monetary liability beyond that provided in the Consolidated Balance Sheet as of
December 31, 2010 would not be material to our Consolidated Financial Statements.
In 2007 SanDisk Corporation (SanDisk) filed a patent infringement action in U.S. District Court, Western District of
Wisconsin, against Imation and its subsidiaries and 20 other defendants, relating to flash drives and other solid state
memory products, seeking damages for prior sales and an injunction and/or royalties on future sales. SanDisk also filed a
complaint with the U.S. International Trade Commission (ITC) against the same defendants, relating to the same patents
and products, seeking to block the defendants’ importation of these products into the United States. The U.S. District Court
stayed the court proceeding until resolution of the ITC claim. The ITC claim was resolved in the fall of 2009, with SanDisk
withdrawing its claims with respect to certain patents and the ITC ruling that the remaining patents were invalid and or not
infringed. The U.S. District Court lifted the stay of its proceedings in the fall of 2009 and one of the patents in the case
was withdrawn without prejudice by SanDisk. On May 4, 2010, SanDisk filed an additional patent infringement lawsuit in
the U.S. District Court, Western District of Wisconsin, based on seven new patents against Imation and its subsidiaries
and one other company named as defendants seeking an injunction and damages.
On January 11, 2011, we signed a patent cross-license agreement with SanDisk to settle the two patent cases filed
by SanDisk in Federal District Court against our flash memory products, including USB drives and solid state disk (SSD)
drives. Under the terms of the cross-license, we will pay SanDisk royalties on certain flash memory products that were
previously not licensed. The specific terms of the cross-license are confidential. The cross-license agreement requires us
to make a one time payment of $2.6 million. The one time payment was recognized in the fourth quarter of 2010 and
recorded as litigation settlement expense in the Consolidated Statements of Operations.
On June 19, 2009, Advanced Research Corp. (ARC) sued Imation for breach of contract relating to a supply
agreement under which we purchase our requirements for magnetic heads to write servo patterns on magnetic tape prior
to sale of the finished cartridges, requesting the court to order that Imation pay damages and return the purchased heads
to ARC. ARC is alleging that we misrepresented the volumes of heads that we would require, and that ARC invested in a
new facility in reliance on our forecasts. ARC has claimed damages in excess of $27.2 million and we have filed
counterclaims against ARC for its failure to comply with the supply agreement and other agreements, claiming damages in
excess of $8.5 million. In March, 2010, both Imation and ARC filed motions for partial summary judgment, which motions
were denied by the court on July 6, 2010. On July 27, 2010, the court granted ARC’s motion to amend its complaint to
add a claim for trade secret misappropriation. On December 20, 2010, the court provided Imation ten weeks to conduct
additional discovery relating to ARC’s new claim. A trial date has been set for October 2011. Imation believes ARC’s
claims are without merit.
See Note 15 to the Consolidated Financial Statements for further information.
Item 4. (Removed and Reserved).
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
(a) — (b)
As of February 24, 2011, there were 38,819,639 shares of our common stock, $0.01 par value (common stock),
outstanding and held by 21,785 shareholders of record. Our common stock is listed on the New York Stock Exchange and
the Chicago Stock Exchange under the symbol “IMN.” No dividends were declared or paid during 2010 or 2009.
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