SanDisk 2008 Annual Report Download - page 38

On December 6, 2005, the Company filed a complaint for patent infringement in the United States District
Court for the Northern District of California against ST (Case No. C0505021 JF). In the suit, the Company seeks
damages and injunctions against ST from making, selling, importing or using flash memory chips or products
that infringe the Company’s U.S. Patent No. 5,991,517 (the “’517 patent”). As discussed above, the ’517 patent
will be litigated together with the ’338 patent in Civil Case No. C 04 04379JF.
On September 11, 2006, Mr. Rabbi, a shareholder of msystems Ltd. (“msystems”), a company subsequently
acquired by the Company in or about November 2006, filed a derivative action in Israel and a motion to permit
him to file the derivative action against msystems and four directors of msystems arguing that options were
allegedly allocated to officers and employees of msystems in violation of applicable law. Mr. Rabbi claimed that
the aforementioned actions allegedly caused damage to msystems. On January 25, 2007, SanDisk IL Ltd.
(“SDIL”), successor in interest to msystems, filed a motion to dismiss the motion to seek leave to file the
derivative action and the derivative action on the grounds, inter alia, that Mr. Rabbi ceased to be a shareholder of
msystems after the merger between msystems and the Company. On March 12, 2008, the court granted SDIL’s
motion and dismissed the motion to seek leave to file the derivative action and consequently, the derivative
action itself was dismissed. On May 15, 2008, Mr. Rabbi filed an appeal with the Supreme Court of Israel, the
hearing of which is set for March 19, 2009.
On February 16, 2007, Texas MP3 Technologies, Ltd. (“Texas MP3”) filed suit against the Company,
Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Apple Inc., Case No. 2:07-CV-52, in the
Eastern District of Texas, Marshall Division, alleging infringement of U.S. Patent 7,065,417 (the “’417 patent”).
On June 19, 2007, the Company filed an answer and counterclaim: (a) denying infringement; (b) seeking a
declaratory judgment that the ’417 patent is invalid, unenforceable and not infringed by the Company. On
July 31, 2007, Texas MP3 filed an amended complaint against the Company and the other parties named in the
original complaint, alleging infringement of the ’417 patent. On August 1, 2007, defendant Apple, Inc. filed a
motion to stay the litigation pending completion of an inter-partes reexamination of the ’417 patent by the U.S.
Patent and Trademark Office. That motion was denied. On August 10, 2007, the Company filed an answer to the
amended complaint and a counterclaim: (a) denying infringement; (b) seeking a declaratory judgment that the
’417 patent is invalid, unenforceable and not infringed by the Company. Texas MP3 and the Company have
reached a settlement, effective January 16, 2009. As a result of the settlement the Court dismissed all claims
against the Company with prejudice on January 23, 2009.
On or about May 11, 2007, the Company received written notice from Alcatel-Lucent, S.A. (“Lucent”),
alleging that the Company’s digital music players require a license to U.S. Patent No. 5,341,457 (the “’457
patent”) and U.S. Patent No. RE 39,080 (the “’080 patent”). On July 13, 2007, the Company filed a complaint for
a declaratory judgment of non-infringement and patent invalidity against Lucent Technologies Inc. and Lucent in
the United States District Court for the Northern District of California, captioned SanDisk Corporation v. Lucent
Technologies Inc., et al., Civil Case No. C 07 03618. The complaint sought a declaratory judgment that the
Company does not infringe the two patents asserted by Lucent against the Company’s digital music players. The
complaint further sought a judicial determination and declaration that Lucent’s patents are invalid. Defendants
answered and asserted a counterclaim of infringement in connection with the ‘080 patent. Defendants also moved
to dismiss the case without prejudice and/or stay the case pending their appeal of a judgment involving the same
patents in suit entered by the United States District Court for the Southern District of California. The Company
moved for summary judgment on its claims for declaratory relief and moved to dismiss defendant Lucent’s
counterclaim for infringement of the ‘080 patent as a matter of law. The Court granted Defendants’ motion to
stay and dismissed all other motions without prejudice. In November 2008, this case was settled with Lucent
stipulating to non-infringement by the Company and dismissing its counterclaim with prejudice.
On August 10, 2007, Lonestar Invention, L.P. (“Lonestar”) filed suit against the Company in the Eastern
District of Texas, Civil Action No. 6:07-CV-00374-LED. The complaint alleges that a memory controller used in
the Company’s flash memory devices infringes U.S. Patent No. 5,208,725. Lonestar sought a permanent
injunction, actual damages, treble damages for willful infringement, and costs and attorney fees. The Company
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