SanDisk 2010 Annual Report Download - page 233

This is a TAB type table. Insert
conts here. Annual Report
Notes To Consolidated Financial Statements
Quotient International Co., Ltd., and PQI Corp., (collectively, “PQI”); PNY Technologies, Inc. (“PNY”);
Kingston Technology Co., Inc., Kingston Technology Corp., Payton Technology Corp., and MemoSun, Inc.
(collectively, “Kingston”); Buffalo, Inc., Melco Holdings, Inc., and Buffalo Technology (USA), Inc.
(collectively, “Buffalo”); Verbatim Corp. (“Verbatim”); Transcend Information Inc. (Taiwan), Transcend
Information Inc. (California), and Transcend Information Maryland, Inc., (collectively, “Transcend”); Imation
Corp., Imation Enterprises Corp., and Memorex Products, Inc. (collectively, “Imation”); Add-On Computer
Peripherals, Inc. and Add-On Computer Peripherals, LLC (collectively, “Add-On Computer Peripherals”);
Add-On Technology Co., A-Data Technology Co., Ltd., and A-Data Technology (USA) Co., Ltd., (collectively,
“A-DATA”); Apacer Technology Inc. and Apacer Memory America, Inc. (collectively, “Apacer”); Acer, Inc.;
Behavior Tech Computer Corp. and Behavior Tech Computer (USA) Corp. (collectively, “Behavior”); Corsair
Memory, Inc. (“Corsair”); Dane-Elec Memory S.A., and Dane-Elec Corp. USA, (collectively, “Dane-Elec”)
EDGE Tech Corp. (“EDGE”); Interactive Media Corp, (“Interactive”); LG Electronics, Inc., and LG Electronics
U.S.A., Inc., (collectively, “LG”); TSR Silicon Resources Inc. (“TSR”); and Welldone Co. (“Welldone”). In this
action, Case No. 07-C-0607-C (“the ’607 Action”), the Company initially asserted that the defendants infringed
U.S. Patent No. 5,719,808 (the “’808 patent”), U.S. Patent No. 6,763,424 (the “’424 patent”); U.S. Patent
No. 6,426,893 (the “’893 patent”); U.S. Patent No. 6,947,332 (the “’332 patent”); and U.S. Patent No. 7,137,011
(the “’011 patent”). The Company has since entered into a stipulation dismissing the ’332 patent. The Company
concurrently filed a second complaint for patent infringement in the same court against the following defendants:
Phison, Silicon Motion, Synergistic, USBest, Skymedi, Zotek, Infotech, PQI, PNY, Kingston, Buffalo, Verbatim,
Transcend, Imation, A-DATA, Apacer, Behavior, and Dane-Elec. In this action, Case No. 07-C-0605-C (“the
’605 Action”), the Company asserted that the defendants infringed U.S. Patent No. 6,149,316 (the “’316 patent”)
and U.S. Patent No. 6,757,842 (the “’842 patent”). The Company seeks damages and injunctive relief in both
actions. Settlement agreements have subsequently been reached with, and the Company has dismissed its claims
against, Imation, Phison, Silicon Motion, Skymedi, Verbatim, Corsair, Add-On Computer Peripherals, EDGE,
Infotech, Interactive, PNY, TSR and Welldone. In addition, the Company’s claims against Chipsbank, Acer,
Behavior, Dane-Elec, LG, PQI, USBest, Transcend, A-DATA, Apacer, Buffalo, and Synergistic have been
dismissed without prejudice. In light of these settlements and dismissals, Kingston is the only remaining
defendant.
Kingston has answered the Company’s complaints by denying infringement and raising several affirmative
defenses and related counterclaims. These defenses and related counterclaims include, among others, lack of
standing, unclean hands, non-infringement, invalidity, unenforceability for alleged patent misuse, express
license, implied license, patent exhaustion, waiver, laches and estoppel.
The Court consolidated the ’605 and ’607 Actions and stayed these actions during the pendency of related
proceedings before the U.S. International Trade Commission, which are now closed. After lifting the stay, the
Court set the trial to begin on February 28, 2011. On September 22, 2010, the Court issued a Markman Order
construing certain terms from the remaining patents. In light of the Court’s Markman Order, the Company
withdrew its allegations regarding the ’808 and ’893 patents. On February 15, 2011, the Court issued a Summary
Judgment Order that found that certain Kingston products with a Phison PS3006 controller contributorily
infringed claims 20, 24, 28 and 30 of the ’424 Patent. In doing so, the Court found that there were no substantial
non-infringing uses for these Kingston products. As part of the order, the Court also ruled that the majority of
accused Kingston products (ones that did not contain the Phison PS3006 controller) did not infringe the asserted
claims of the ’424 patent. The Summary Judgment Order further found that none of the accused Kingston
products infringed the asserted claims of the ’842 and ’316 patents. The Summary Judgment Order also found
that the Company had standing to sue Kingston on the ’842 and ’316 patents and that the Company was not
entitled to damages for Kingston’s sales prior to October 2007. The Company disagrees with various aspects of
the Court’s rulings in the Summary Judgment Order. On February 17, 2011, the Company and Kingston filed a
stipulated dismissal with the Court, stating that rather than proceeding to trial against Kingston products
containing the Phison PS3006 controller, which represented a small amount of damages, the Company agreed to
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