SanDisk 2007 Annual Report Download - page 140

stockholders of record as of the close of business on September 25, 2003. In November 2006, the Company
extended the term of the rights plan, such that the rights will expire on April 28, 2017 unless redeemed or
exchanged. Under the new rights agreement and after giving effect to the Company’s stock dividend effected on
February 18, 2004, each right will, under the circumstances described below, entitle the registered holder to buy one
two-hundredths of a share of Series A Junior Participating Preferred Stock for $225.00. The rights will become
exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company’s common
stock or commences a tender offer or exchange offer upon consummation of which such person or group would
beneficially own 15% or more of the Company’s common stock.
Note 16: Litigation
From time-to-time, it has been and may continue to be necessary to initiate or defend litigation against third
parties. These and other parties could bring suit against us. In each case listed below where we are the defendant, we
intend to vigorously defend the action. At this time, the Company does not believe it is reasonably possible that
losses related to the litigation described below have occurred beyond the amounts, if any, that have been accrued.
On October 31, 2001, the Company filed a complaint for patent infringement in the United States District
Court for the Northern District of California against Memorex Products, Inc. (“Memorex”), Pretec Electronics
Corporation (“Pretec”), RITEK Corporation (“RITEK”), and Power Quotient International Co., Ltd (“PQI”). In the
suit, captioned SanDisk Corp. v. Memorex Products, Inc., et al., Civil Case No. CV 01 4063 VRW, the Company
seeks damages and injunctions against these companies from making, selling, importing or using flash memory
cards that infringe its U.S. Patent No. 5,602,987. On May 6, 2003, the District Court entered a stipulated consent
judgment against PQI. The District Court granted summary judgment of non-infringement in favor of defendants
RITEK, Pretec and Memorex and entered judgment on May 17, 2004. On June 2, 2004, the Company filed a notice
of appeal of the summary judgment rulings to the United States Court of Appeals for the Federal Circuit. On July 8,
2005, the Federal Circuit held in favor of the Company, vacating the judgment of non-infringement and remanding
the case back to the District Court. The District Court issued an order on claim construction on February 22, 2007.
On June 29, 2007, defendant RITEK entered into a settlement agreement and cross-license with the Company. In
light of the agreement, the Company agreed to dismiss all current patent infringement litigation against RITEK. A
stipulated dismissal with prejudice between the Company and RITEK was entered on July 23, 2007. On August 30,
2007, the Company entered into a settlement agreement with Memorex regarding the accused products. On
September 7, 2007, in light of the settlement between the Company and Memorex, the Court entered a stipulation
dismissing the Company’s claims against Memorex. On October 25, 2007, the Court Clerk entered a default against
Pretec. On January 14, 2008, the Company filed a motion for default judgment against Pretec. The Court scheduled
a hearing regarding the Company’s motion for April 3, 2008.
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 received final approval from the Court on November 20, 2006.
Four objectors to the settlement filed appeals from the Court’s order granting final approval. On November 30,
2007, the First District of the California Court of Appeal affirmed in full the trial court’s judgment and final
approval of the settlement. The objectors then filed petitions for the Court of Appeal to rehear the matter en banc,
which petitions were denied on December 21, 2007. The objectors have now filed petitions with the California
Supreme Court, currently pending in Case No. S159760, asking the Supreme Court to review of the decision of the
Court of Appeal.
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,
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Notes to Consolidated Financial Statements — (Continued)