SanDisk 2010 Annual Report Download - page 153

This is a TAB type table. Insert
conts here. Annual Report
resources to fund our operations as well as our anticipated investments in Flash Ventures for at least the next
twelve months; however, we may decide to raise additional funds to maintain the strength of our balance sheet,
and we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. The
current worldwide financing environment is challenging, which could make it more difficult for us to raise funds
on reasonable terms, or at all. From time-to-time, we may decide to raise additional funds through equity, public
or private debt, or lease financings. If we issue additional equity securities, our stockholders will experience
dilution and the new equity securities may have rights, preferences or privileges senior to those of existing
holders of common stock. If we raise funds through debt or lease financing, we will have to pay interest and may
be subject to restrictive covenants, which could harm our business. If we cannot raise funds on acceptable terms,
if and when needed, our credit rating may be downgraded, and we may not be able to develop or enhance our
technology or products, fulfill our obligations to Flash Ventures, take advantage of future opportunities, grow our
business or respond to competitive pressures or unanticipated industry changes, any of which could harm our
business.
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 will be involved in similar disputes in the future.
We cannot assure you that:
• any of our existing patents will continue to be held valid, if challenged;
• 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. We also have patent cross-license agreements with several of our leading competitors. Under these
agreements, we have enabled competitors to manufacture and sell products that incorporate technology covered
by our patents. While we obtain license and royalty revenue or other consideration for these licenses, if we
continue to license our patents to our competitors, competition may increase and may harm our business,
financial condition and results of operations.
There are both flash memory producers and flash memory card manufacturers who we believe may require a
license from us. Enforcement of our rights often requires 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 patents or assert a
counterclaim that our patents are invalid or unenforceable. If we do not prevail in the defense of patent
infringement claims, 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 technology infringed.
For example, on October 24, 2007, we initiated two patent infringement actions in the United States District
Court for the Western District of Wisconsin and one action in the United States International Trade Commission,
or ITC, against certain companies that manufacture, sell and import USB flash drives, CF cards, multimedia
cards, MP3/media players and/or other removable flash storage products. In this ITC action, an Initial
Determination was issued in April 2009 and a Final Determination was issued in October 2009 finding
25