SanDisk 2012 Annual Report Download - page 131

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conts here. Annual Report
There are flash memory producers, flash memory card manufacturers and other companies that utilize flash
memory who we believe may infringe our IP. 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 in one or more geographic locations, expend significant resources to develop
non-infringing technology, discontinue the use of specific processes or obtain licenses to the technology
infringed. If we are enjoined from selling our products, or if we are required to develop new technologies or pay
significant monetary damages or are required to make substantial royalty payments, our business and results of
operations would be harmed.
We and certain of our officers are at times involved in litigation, including litigation regarding our IP rights
or that of third parties, which may be costly, may divert the efforts of our key personnel and could result in
adverse court rulings, which could materially harm our business. We are often involved in litigation, including
cases involving our IP rights and those of others. We are the plaintiff in some of these actions and the defendant
in others. Some of the actions seek injunctions against the sale of our products and/or substantial monetary
damages, which if granted or awarded, could materially harm our business, financial condition and operating
results.
Litigation is subject to inherent risks and uncertainties that may cause actual results to differ materially from
our expectations. Factors that could cause litigation results to differ include, but are not limited to, the discovery
of previously unknown facts, changes in the law or in the interpretation of laws, and uncertainties associated with
the judicial decision-making process. If we receive an adverse judgment in any litigation, we could be required to
pay substantial damages and/or cease the manufacture, use and sale of products. Litigation, including IP
litigation, can be complex, can extend for a protracted period of time, can be very expensive, and the expense can
be unpredictable. Litigation initiated by us could also result in counter-claims against us, which could increase
the costs associated with the litigation and result in our payment of damages or other judgments against us. In
addition, litigation may divert the efforts and attention of some of our key personnel.
We may be obligated to indemnify our current or former directors or employees, or former directors or
employees of companies that we have acquired, in connection with litigation or regulatory investigations. These
liabilities could be substantial and may include, among other things, the costs of defending lawsuits against these
individuals; the cost of defending shareholder derivative suits; the cost of governmental, law enforcement or
regulatory investigations; civil or criminal fines and penalties; legal and other expenses; and expenses associated
with the remedial measures, if any, which may be imposed.
Moreover, from time-to-time, we agree to indemnify certain of our suppliers and customers for alleged
patent infringement. The scope of such indemnity varies but generally includes indemnification for direct and
consequential damages and expenses, including attorneys’ fees. We may be engaged in litigation as a result of
these indemnification obligations. Third-party claims for patent infringement are excluded from coverage under
our insurance policies. A future obligation to indemnify our customers or suppliers may harm our business,
financial condition and operating results. For additional information concerning legal proceedings, see Item 3,
“Legal Proceedings.”
We may be unable to license, or license at a reasonable cost, IP from third parties as needed, which could
expose us to liability for damages, increase our costs or limit or prohibit us from selling products. If we
incorporate third-party technology into our products or if we are found to infringe the IP of others, we could be
required to license IP from third-parties. We may also need to license some of our IP to others in order to enable
us to obtain important cross-licenses to third-party patents. We cannot be certain that licenses will be offered
when we need them, that the terms offered will be acceptable, or that these licenses will help our business. If we
do obtain licenses from third parties, we may be required to pay license fees, royalty payments, or offset license
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