SanDisk 2010 Annual Report Download - page 234

Notes To Consolidated Financial Statements
dismiss its claim against the Kingston PS3006 product and Kingston agreed to dismiss its invalidity and/or
enforceability counterclaims against the Company’s patents, thereby allowing either party to appeal. Under the
terms of the stipulated dismissal, if granted by the Court, the Company and Kingston have the right to re-file the
dismissed claims if (a) an appellate court reverses, remands, or vacates, in whole or in part, the Court’s
September 22, 2010 Claim Construction Order, or the Court’s February 15, 2010 Summary Judgment, and (b) the
case is returned to the Wisconsin District Court for further proceedings. The stipulation for dismissal does not
prejudice either the Company or Kingston’s right to appeal this matter in whole or in part.
Federal Civil Antitrust Class Actions. Between August 31, 2007 and December 14, 2007, the Company
(along with a number of other manufacturers of flash memory products) was sued in the Northern District of
California, in eight purported class action complaints. On February 7, 2008, all of the civil complaints were
consolidated into two complaints, one on behalf of direct purchasers and one on behalf of indirect purchasers, in
the Northern District of California in a purported class action captioned In re Flash Memory Antitrust Litigation,
Civil Case No. C07-0086. Plaintiffs alleged the Company and a number of other manufacturers of flash memory
and flash memory products conspired to fix, raise, maintain, and stabilize the price of NAND flash memory in
violation of state and federal laws and sought an injunction, damages, restitution, fees, costs, and disgorgement
of profits. The direct purchaser lawsuit was recently dismissed with prejudice. On March 31, 2010, the Court
denied the indirect purchaser plaintiffs’ class certification motion, and denied plaintiffs’ motion for leave to
amend the Consolidated Amended Complaint to substitute certain class representatives. Indirect purchaser
plaintiffs have moved for leave to file a motion for reconsideration of that decision.
Patent Infringement Litigation Initiated by SanDisk. On May 4, 2010, the Company filed a complaint for
patent infringement in the United States District Court for the Western District of Wisconsin against Kingston
and Imation. The Company has since dismissed its claims against Imation in light of a confidential settlement
agreement between the parties. In this action, Case No. 3:10-cv-00243, the Company asserts U.S. Patent
No. 7,397,713; U.S. Patent No. 7,492,660; U.S. Patent No. 7,657,702; U.S. Patent No. 7,532,511; U.S. Patent
No. 7,646,666; U.S. Patent No. 7,646,667; and U.S. Patent No. 6,968,421. The Company seeks damages and
injunctive relief. Kingston has answered the complaint denying infringement and raising several affirmative
defenses and related counterclaims. These defenses and related counterclaims include, among others,
non-infringement, invalidity, implied license, express license, unenforceability for alleged patent misuse, lack of
standing, and bad faith litigation. Kingston also asserted antitrust counterclaims against the Company alleging
monopolization, attempted monopolization, and agreement in restraint of trade, all under the Sherman Act.
Kingston also asserted state law unfair competition counterclaims. The Company has answered Kingston’s
counterclaims. On August 3, 2010, the Court issued a scheduling order setting the claim construction hearing for
January 14, 2011, requiring that dispositive motions be filed by May 9, 2011 and that a trial commence on
November 7, 2011. The Court has consolidated discovery in this action with the other Wisconsin case described
above.
Ritz Camera Federal Antitrust Class Action. On June 25, 2010, Ritz Camera & Image, LLC (“Ritz”) filed a
complaint in the United States District Court for the Northern District of California, alleging that the Company
violated federal antitrust law by conspiring to monopolize and monopolizing the market for flash memory
products. The lawsuit, Ritz Camera & Image, LLC v. SanDisk Corporation, Inc. and Eliyahou Harari, Case
No. 5:10-cv-02787-HRL, purports to be on behalf of purchasers of flash memory products sold by the Company
and joint ventures controlled by the Company from June 25, 2006 through the present. The Complaint alleges
that the Company created and maintained a monopoly by fraudulently obtaining patents and using them to
restrain competition and by allegedly converting other patents for its competitive use. On October 1, 2010, the
Company filed a motion to dismiss Ritz’s claims. The court stayed discovery pending a ruling on the motion and
set a further case management conference for February 11, 2011. At the February 11, 2011 hearing the Court said
it would issue a ruling on the Company’s motion to dismiss by February 18, 2011; however, the Court has not yet
issued its ruling.
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