SanDisk 2004 Annual Report Download - page 38

Table of Contents
trademarks and other intellectual property rights. We expect that we may be involved in similar disputes in the future. We cannot
assure you that:
• any of our existing patents will not be invalidated;
• patents will be issued for any of our pending applications;
• any claims allowed from existing or pending patents will have sufficient scope or strength;
• our patents will be issued in the primary countries where our products are sold in order to protect our rights and potential
commercial advantage; or
• any of our products do not infringe on the patents of other companies.
In addition, our competitors may be able to design their products around our patents.
Several companies have recently entered or announced their intentions to enter the flash memory market, and we believe these
companies may require a license from us. Enforcement of our rights may require litigation. If we bring a patent infringement action
and are not successful, our competitors would be able to use similar technology to compete with us. Moreover, the defendant in such
an action may successfully counter sue us for infringement of their patent or assert a counterclaim that our patents are invalid or
unenforceable. If we did not prevail as a defendant in a patent infringement case, we could be required to pay substantial damages,
cease the manufacture, use and sale of infringing products, expend significant resources to develop non−infringing technology,
discontinue the use of specific processes or obtain licenses to the infringing technology.
We may be unable to license intellectual property to or from third parties as needed, or renew existing licenses, and we have
agreed to indemnify various suppliers and customers for alleged patent infringement, which could expose us to liability for damages,
increase our costs or limit or prohibit us from selling products. If we incorporate third−party technology into our products or if we are
found to infringe others’ intellectual property, we could be required to license intellectual property from a third party. We may also
need to license some of our intellectual property to others in order to enable us to obtain important cross−licenses to third−party
patents. We cannot be certain that licenses will be offered when we need them, or that the terms offered will be acceptable, or that
these licenses will help our business. If we do obtain licenses from third parties, we may be required to pay license fees or royalty
payments. In addition, if we are unable to obtain a license that is necessary to the manufacture of our products, we could be required to
suspend the manufacture of products or stop our product suppliers from using processes that may infringe the rights of third parties.
We cannot assure you that we would be successful in redesigning our products or that the necessary licenses will be available under
reasonable terms, or that our existing licensees will renew their licenses upon expiration, or that we will be successful in signing new
licensees in the future.
We have historically agreed to indemnify suppliers and customers for alleged patent infringement. The scope of such indemnity
varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. We may periodically
engage in litigation as a result of these indemnification obligations. Our insurance policies exclude coverage for third−party claims for
patent infringement. Any future obligation to indemnify our customers or suppliers could harm our business, financial condition or
results of operations.
We are currently and may in the future be involved in litigation, including litigation regarding our intellectual property rights or
those of third parties, which would be costly and would divert the efforts of our key personnel. We are involved in a number of
lawsuits, including among others, several cases involving our patents and the patents of third parties. We are the plaintiff in some of
these actions and the defendant in other of these actions. Some of the actions seek injunctions against the sale of our products and/or
substantial monetary damages, which if granted or awarded, could have a material adverse effect on our business, financial condition
and results of operations. 33