SanDisk 2005 Annual Report Download - page 96

to occur in one or more or these areas, our disaster recovery processes may not provide adequate business continuity.
In addition, we do not have insurance for most natural disasters, including earthquakes. This could harm our
business and results of operations.
We may be unable to protect our intellectual property rights, which would harm our business, financial
condition and results of operations. We rely on a combination of patents, trademarks, copyright and trade secret
laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. In the past,
we have been involved in significant and expensive disputes regarding our intellectual property rights and those of
others, including claims that we may be infringing third parties’ patents, 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 or technologies do not infringe on the patents of other companies.
In addition, our competitors may be able to design their products around our patents and other proprietary
rights.
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 countersue 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 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 may not be successful in redesigning our products,
the necessary licenses may not be available under reasonable terms, our existing licensees may not renew their
licenses upon expiration and we may not be successful in signing new licensees in the future.
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 may be costly, may divert the efforts of our key personnel and could
result in adverse court rulings which could materially harm our business. 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 could 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.
21
Annual Report