SanDisk 2006 Annual Report Download - page 142

District Court. The District Court issued an order on claim construction on February 22, 2007. No trial date has been
set for this case.
On or about June 9, 2003, the Company received written notice from Infineon Technologies AG, or Infineon,
that it believes the Company has infringed its U.S. Patent No. 5,726,601 (the ‘601 patent). On June 24, 2003, the
Company filed a complaint against Infineon for a declaratory judgment of patent non-infringement and invalidity
regarding the ‘601 patent in the United States District Court for the Northern District of California, captioned
SanDisk Corporation v. Infineon Technologies AG, a German corporation, et al., Civil Case No. C 03 02931 BZ. On
October 6, 2003, Infineon filed an answer and counterclaim: (a) denying that the Company is entitled to the
declaration sought by the Company’s complaint; (b) requesting that the Company be adjudged to have infringed,
actively induced and/or contributed to the infringement of the ‘601 patent and an additional patent, U.S. Patent
No. 4,841,222 (the ‘222 patent). On August 12, 2004, Infineon filed an amended counterclaim for patent
infringement alleging that the Company infringes U.S. Patent Nos. 6,026,002 (the ‘002 patent); 5,041,894 (the
’894 patent); and 6,226,219 (the ‘219 patent), and omitting the ‘601 and ‘222 patents. On August 18, 2004, the
Company filed an amended complaint against Infineon for a declaratory judgment of patent non-infringement and
invalidity regarding the ‘002, ‘894, and ‘219 patents. On February 9, 2006, the Company filed a second amended
complaint to include claims for declaratory judgment that the ‘002, ‘894 and ‘219 patents are unenforceable. On
March 17, 2006, the Court granted a stipulation by the parties withdrawing all claims and counterclaims regarding
the ‘002 patent. On February 20, 2007, the Court entered an order staying the case to facilitate settlement
negotiations.
On February 20, 2004, the Company and a number of other manufacturers of flash memory products were sued
in the Superior Court of the State of California for the City and County of San Francisco in a purported consumer
class action captioned Willem Vroegh et al. v. Dane Electric Corp. USA, et al., Civil Case No. GCG 04 428953,
alleging false advertising, unfair business practices, breach of contract, fraud, deceit, misrepresentation and
violation of the California Consumers Legal Remedy Act. The lawsuit purports to be on behalf of a class of
purchasers of flash memory products and claims that the defendants overstated the size of the memory storage
capabilities of such products. The lawsuit seeks restitution, injunction and damages in an unspecified amount. The
parties have reached a settlement of the case, which is pending final court approval. In April 2006, the Court issued
an order preliminarily approving the settlement. In August 2006, the Court held a hearing to consider final approval
of the settlement, and on November 20, 2006, the Court issued its formal written order of approval. Two objectors to
the settlement have filed separate appeals from the Court’s order granting final approval.
On October 15, 2004, the Company filed a complaint for patent infringement and declaratory judgment of non-
infringement and patent invalidity against STMicroelectronics N.V. and STMicroelectronics, Inc. (collectively,
“ST”) in the United States District Court for the Northern District of California, captioned SanDisk Corporation v.
STMicroelectronics, Inc., et al., Civil Case No. C 04 04379JF. The complaint alleges that ST’s products infringe one
of the Company’s U.S. patents and seeks damages and an injunction. The complaint further seeks a declaratory
judgment that the Company does not infringe several of ST’s U.S. patents. By order dated January 4, 2005, the court
stayed the Company’s claim that ST infringes the Company’s patent pending an outcome in the ITC investigation
initiated on November 15, 2004 (discussed below). On January 20, 2005, the court issued an order granting
ST’s motion to dismiss the declaratory judgment causes of action. The Company has appealed this decision to the
U.S. Court of Appeals for the Federal Circuit. The remainder of the case, including the Company’s infringement
claim against ST, is stayed pending the outcome of the appeal.
On October 15, 2004, the Company filed a complaint under Section 337 of the Tariff Act of 1930 (as amended)
(Case No. 337-TA 526) titled, “In the matter of certain NAND flash memory circuits and products containing same”
in the United States International Trade Commission (“ITC”), naming STMicroelectronics N.V. and
STMicroelectronics, Inc. (collectively, “ST”) as respondents. In the complaint, the Company alleges that ST’s
NAND flash memory infringes U.S. Patent No. 5,172,338 (the ‘338 patent), and seeks an order excluding ST’s
products from importation into the United States. On November 15, 2004, the ITC instituted an investigation
pursuant to 19 U.S.C. § 1337 against ST in response to the Company’s complaint. On December 9, 2004, ST filed a
response to the complaint, denying that they infringe the ‘338 patent and alleging that the patent is invalid and/or
Annual Report
F-43
Notes to Consolidated Financial Statements — (Continued)