Qualcomm 2006 Annual Report Download - page 87

qualcomm 2006 73
Broadcom also led a complaint in the United States International
Trade Commission (ITC) alleging infringement of ve of the same
patents at issue in the Central District Court cases seeking
a determination and relief under Section 337 of the Tariff Act
of 1930. On July 1, 2005, Broadcom led an action in the United
States District Court for the District of New Jersey against the
Company alleging violations of state and federal antitrust and
unfair competition laws as well as common law claims, generally
relating to licensing and chip sales activities, seeking monetary
damages and injunctive relief based thereon. On September 1,
2006, the New Jersey District Court dismissed the complaint;
Broadcom has led notice of appeal. Discovery is underway in one
of the Central District Court patent actions, with trial scheduled
for May 2007. On December 12, 2005, the Central District Court
ordered two of the Broadcom patent claims led in the other
Central District patent action (which is stayed pending completion
of the ITC action) to be transferred to the Southern District
of California to be considered in the case led by the Company
on August 22, 2005. That case now contains additional related
claims led by the Company and Broadcom. On February 14, 2006,
the ITC hearing commenced as to three of the patents alleged.
On October 10, 2006, the Administrative Law Judge (ALJ) issued
an interim decision in which he recommended against any down-
stream remedies, and found no infringement by the Company
on two of the three remaining patents and most of the asserted
claims of the third patent. The ALJ did nd infringement on some
claims of one patent. The Company will petition the Commission
for review of at least the limited infringement ndings and patent
validity ndings.
QUALCOMM Incorporated v. Broadcom Corporation: On July 11,
2005, the Company led an action in the United States District
Court for the Southern District of California against Broadcom
alleging infringement of seven patents, each of which is essential
to the practice of either the GSM or 802.11 standards, and seeking
monetary damages and injunctive relief based thereon. On
September 23, 2005, Broadcom answered and counterclaimed,
alleging infringement of six patents. On October 14, 2005, the
Company led another action in the United States District Court
for the Southern District of California against Broadcom alleging
infringement of two patents, each of which relates to video encod-
ing and decoding for high-end multimedia processing, and seeking
monetary damages and injunctive relief based thereon. That action
is scheduled for trial in January 2007. On March 24, 2006, the
Company led another action in the United States District Court
for the Southern District of California, alleging that Broadcom,
during the period in which it has been attempting to bring to market
a WCDMA baseband solution, misappropriated QUALCOMM con-
dential and trade secret information relating to QUALCOMM’s
WCDMA baseband chips, and relating to the Company’s multimedia
capabilities for such chips. The complaint also asserts another
patent claim against Broadcom’s wireless local area network prod-
ucts, including such capability bundled with Broadcom’s WCDMA
product offerings. Broadcom counterclaimed with the assertion
of two patents. On October 27, 2006, the Court issued a preliminary
injunction against Broadcom, prohibiting the future use or solicita-
tion of certain of the Company’s condential business and
technical documents and information.
At September 24, 2006, total unrecognized estimated compensation
cost related to non-vested purchase rights granted prior to that
date was $7 million. The Company recorded cash received from
the exercise of purchase rights of $69 million during scal 2006.
Executive Retirement Plans
The Company has voluntary retirement plans that allow eligible
executives to defer up to 100% of their income on a pre-tax basis.
On a quarterly basis, the Company matches up to 10% of the
participants’ deferral in Company common stock based on the then-
current market price, to be distributed to the participant upon
eligible retirement. The income deferred and the Company match
held in trust are unsecured and subject to the claims of general
creditors of the Company. Company contributions begin vesting
based on certain minimum participation or service requirements and
are fully vested at age 65. Participants who terminate employment
forfeit their unvested shares. During scal 2006, 2005 and 2004,
approximately 47,000, 92,000 and 108,000 shares, respectively,
were allocated under the plans. The Company recorded $2 million,
$3 million and $5 million in compensation expense during scal
2006, 2005 and 2004, respectively, related to its net matching
contributions to the plans.
note 9. commitments and contingencies
Litigation
Zoltar Satellite Alarm Systems, Inc. v. QUALCOMM Incorporated
and SnapTrack, Inc.: On March 30, 2001, Zoltar Satellite Alarm
Systems, Inc. led suit against QUALCOMM and its subsidiary
SnapTrack, Inc. in the United States District Court for the Northern
District of California seeking monetary damages and injunctive
relief based on the alleged infringement of three patents. Follow-
ing a verdict and nding of no infringement of Zoltar’s patent
claims, the Court entered a judgment in favor of the Company and
SnapTrack on Zoltar’s complaint and awarded the Company and
SnapTrack their costs of suit. Zoltar led a notice of appeal that
was dismissed as premature. While the Company has already
obtained a verdict of non-infringement of Zoltar’s patents, the
Company’s additional afrmative claims seeking declarations
of the non-enforceability and invalidity of those patents were set
to be retried in the same Court on October 10, 2006. However,
Zoltar has informed the Court that it will covenant not to sue the
Company or SnapTrack on the patents. The nal form of dismissal
and judgment in favor of the Company and SnapTrack remains
to be determined.
Whale Telecom Ltd. v. QUALCOMM Incorporated: On November 15,
2004, Whale Telecom Ltd. sued the Company in the New York State
Supreme Court, County of New York, seeking monetary damages
based on the claim that the Company fraudulently induced it to
enter into certain infrastructure services agreements in 1999
and later interfered with their performance of those agreements.
On March 15, 2006, the Court dismissed all claims against the
Company. The plaintiff has led a notice of appeal.
Broadcom Corporation v. QUALCOMM Incorporated: On May 18,
2005, Broadcom led two actions in the United States District
Court for the Central District of California against the Company
alleging infringement of ten patents and seeking monetary
damages and injunctive relief based thereon. On the same date,