Metro PCS 2007 Annual Report Download - page 39

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If Leap were successful in its claim for injunctive relief in either action, we and Royal Street Communications
could be enjoined from operating our respective businesses in the manner in which we and Royal Street
Communications currently operate, which could require us and Royal Street Communications to expend additional
capital to change certain technologies and operating practices, or could prevent both us and Royal Street
Communications from offering some or all of the services we each provide using some or all of the existing systems.
In addition, if Leap were successful in its claim for monetary damages, we both could be forced to pay Leap
substantial damages, including treble damages, for past infringement and/or ongoing royalties on a portion of both
our revenues, which could materially adversely impact our financial performance and Royal Street
Communications’ financial performance.
A patent infringement suit has been filed against us by Freedom Wireless which could have a material adverse
effect on our business or results of operations.
On January 7, 2008, Freedom Wireless, Inc., or Freedom Wireless, filed suit against us in the United States
District Court for the Northern District of California, San Francisco, for infringement of U.S. Patent No. 5,722,067
entitled “Security Cellular Telecommunications System,” U.S. Patent No. 6,157,823 entitled “Security Cellular
Telecommunications System,” and U.S. Patent No. 6,236,851 entitled “Prepaid Security Cellular
Telecommunications System” held by Freedom Wireless. The complaint seeks both injunctive relief and monetary
damages, including treble damages, for our alleged infringement of these patents. We have tendered this action to
Verisign, our billing vendor, and they have indicated that they are reviewing our indemnification request. Verisign,
also has indicated that it plans to leave the telecommunications service business and cease providing us with billing
services at the end of our current contract. We can give no assurance that Verisign will defend us against this action
or that Verisign may not cease providing us with billing services altogether.
If Freedom Wireless is successful in its claim for injunctive relief, we could be enjoined from operating our
business in the manner we operate currently, which could require us to redesign our current billing or other systems,
to expend additional capital to change certain of our technologies and operating practices, or could prevent us from
offering certain of our services. In addition, if Freedom Wireless is successful in its claim for monetary damage, we
could be forced to pay substantial damages, including treble damages, for past infringement and/or ongoing royalties
on a portion of our revenues, which could materially adversely impact our financial performance. If Freedom
Wireless prevails in its action, it could have a material adverse effect on our business, financial condition and results
of operations. Moreover, the actions may consume valuable management time, may be very costly to defend and
may distract management attention away from our business.
We and our suppliers may be subject to claims of infringement regarding telecommunications technologies that
are protected by patents and other intellectual property rights.
Telecommunications technologies are protected by a wide array of patents and other intellectual property rights.
As a result, third parties may assert infringement claims against us or our suppliers from time to time based on our
or their general business operations, the equipment, software or services we or they use or provide, or the specific
operation of our wireless networks or service. We generally have indemnification agreements with the
manufacturers, licensors and suppliers who provide us with the equipment, software and technology that we use in
our business to protect us against possible infringement claims, but we cannot guarantee that we will be fully
protected against all losses associated with an infringement claim. Our suppliers may be subject to infringement
claims that if proven could preclude the supplier from supplying us with the products and services we require to run
our business or offer our services, require the supplier to change the products and services they provide to us in a
way which could have a material adverse effect on us, or cause the supplier to increase the charges for their products
and services to us. In addition, our suppliers may be unable to pay any damages or honor their indemnification
obligations to us, which may result in us having to bear such losses. We may also have to buy equipment and
services from other third party suppliers.
Moreover, we may be subject to claims of infringement that products, software and services provided by different
vendors which we combine with products or with services provided by other vendors or our services in order to offer
services to our customers and we may not have any indemnification protection from our vendors for these claims.
Further, we have been, and may be, subject to further claims that certain business processes we use may infringe on
the rights of third parties, and we may have no indemnification rights from any of our vendors or suppliers. Whether
or not an infringement claim is valid or successful, it could adversely affect our business by diverting management’ s
attention, involving us in costly and time-consuming litigation, requiring us to enter into royalty or licensing
agreements (which may not be available on acceptable terms, or at all), requiring us to pay royalties for prior
periods, requiring us or our suppliers to redesign our or their business operations, processes or systems to avoid