Netgear 2012 Annual Report Download - page 90

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to sue by both parties for the life of the patents in suit between the parties that applies to the patents in suit and all related patents, including without
limitation the foreign counterparts. Each party agreed to bear its own costs and attorneys' fees. This arrangement does not have a material impact on
the Company's consolidated financial position, results of operations, or cash flows. The Company allocated a portion of the one-time lump-
sum
payment to the quarterly period ended September 30, 2012, and the majority of the one-time lump-
sum payment was recorded in prepaids and other
current assets in the fourth quarter of 2012.
U.S. Ethernet Innovation, LLC v. NETGEAR
On June 22, 2012, U.S. Ethernet Innovations, LLC (“USEI”)
sued the Company in the District Court for the Eastern District of Texas, alleging
infringement of certain of its Ethernet-related patents: U.S. Patent Numbers 5,732,094 (“Method for automatic initiation of data transmission”
);
5,434,872 (“Apparatus for automatic initiation of data transmission”); 5,299,313 (“Network interface with host independent buffer management”
)
and 5,530,874 (“Network adapter with an indication signal mask and an interrupt signal mask”).
USEI is a patent holding entity with a nominal office
in the Eastern District of Texas. The accused products include products such as the “Netgear RT311 Internet Gateway Router.”
The Company
received an extension until August 17, 2012 to answer the complaint. USEI has sued, in addition to the Company, the following companies on the
same and other of its Ethernet-
related patents: Ricoh Americas Corporation, TRENDnet, Inc., Xerox Corporation, Konica Minolta Business Solutions
U.S.A., Inc., Freescale Semiconductor, Inc., Sharp Electronics Corporation, Digi International Inc., NetSilicon, Inc., Epson America, Inc., Cirrus
Logic, Inc., Yamaha Corporation of America, Control4 Corporation, Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung
Telecommunications America, LLC, Samsung Austin Semiconductor, LLC, Oki Data Americas, Inc., STMicroelectronics N.V., and
STMicroelectronics, Inc. (collectively, “Defendants”).
The Company received a further extension to answer the complaint and answered on September 4, 2012 via a 12(b)(6) motion to dismiss the
complaint for various reasons, including a lack of pleading specificity. USEI responded to the Company's motion to dismiss under Rule 12(b)(6) on
September 21, 2012. The Company submitted its Reply in Support of its Motion to Dismiss on October 1, 2012.
USEI served its infringement contentions on the Company on October 10, 2010. The Company filed its transfer motion for a transfer to the
Northern District of California and supporting declarations on November 16, 2012. On December 3, 2012, Defendants filed their joint invalidity
contentions.
Because the Eastern District of Texas's preferred time for deciding motions to transfer is after the Markman Hearing, the defendants filed a
motion to stay the litigation pending the result of the Eastern District of Texas's decisions on the motion to transfer on January 29, 2013. A mediation
in this case is scheduled for May 15, 2013.
The Court has consolidated for discovery purposes USEI's cases against the aforementioned defendants and scheduled a consolidated Markman
hearing for April 4, 2013 for the asserted patents. The Court also indicated that the court would consider any of Defendants' transfer motions as soon
as possible. The trial date has been set for April 14, 2014.
It is too early to reasonably estimate any financial impact to the Company because of this litigation matter.
ReefEdge Networks, LLC v. NETGEAR, Inc.
On September 17, 2012, the Company was sued by ReefEdge Networks, LLC, a non-
practicing entity. The Company received an extension
from the plaintiff until November 8, 2012 to answer the complaint and answered the complaint on that date.
The complaint alleges that NETGEAR infringes three
related patents: 6,633,761 B1; 6,975,864 B2; 7,197,308 B2. In general terms, these
asserted patents involve seamlessly handing-
off portable wireless devices from one access point to another so as to provide roaming within a wireless
network.
The complaint specifically accuses the Company's ProSafe wireless controller of infringing these three patents. On August 15, 2012, ReefEdge
filed complaints in Delaware against Aruba Networks Inc., Cisco Systems Inc., Meru Networks Inc., and Ruckus Wireless Inc. alleging infringement
of the same three patents. In the second tranche of lawsuits, ReefEdge sued--in addition to the Company-
Brocade Communications Systems, Inc.,
Extreme Networks Inc., ADTRAN, Inc., Alcatel-Lucent Inc., D-
Link Systems, Inc., Enterasys Networks, Inc., Motorola Solutions Inc., CDW
Corporation, Avaya Inc., and ZyXEL Communications Corporation. It is too early to reasonably estimate any financial impact to the Company
because of this litigation matter.
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