SanDisk 2012 Annual Report Download - page 213

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“District Court”) alleging various claims against Panasonic Corporation and Panasonic Corporation of North
America (collectively, “Panasonic”) and SD-3C, LLC (“SD-3C”) under federal antitrust law pursuant to Sections
1 and 2 of the Sherman Act, and under California antitrust and unfair competition laws relating to the licensing
practices and operations of SD-3C. The complaint seeks an injunction against collection of Secure Digital (“SD”)
card royalties, treble damages, restitution, pre- and post-judgment interest, costs, and attorneys’ fees, as well as a
declaration that Panasonic and SD-3C engaged in patent misuse and that the patents subject to such alleged
misuse should be held unenforceable. The Company is not named as a defendant in this case, but it established
SD-3C along with Panasonic and Toshiba, and the complaint includes various factual allegations concerning the
Company. As a member of SD-3C, the Company may be responsible for a portion of any monetary award. Other
requested relief, including an injunction or declaration of patent misuse, could result in a loss of revenue to the
Company. Defendants filed a motion to dismiss on September 24, 2010, and Samsung filed a First Amended
Complaint (“FAC”) on October 14, 2010. On August 25, 2011, the District Court dismissed the patent misuse
claim with prejudice, but gave Samsung leave to amend its other claims. On January 3, 2012, the District Court
granted defendants’ motion to dismiss Samsung’s complaint without leave to amend. Samsung has appealed,
dated January 25, 2012. The briefing on appeal is complete but a hearing date has not yet been set.
Federal Antitrust Class Action Against SanDisk, et al. On March 15, 2011, a putative class action
captioned Oliver v. SD-3C LLC, et al was filed in the U.S. District Court for the Northern District of California
(the “District Court”) on behalf of a nationwide class of indirect purchasers of SD cards alleging various claims
against the Company, SD-3C, Panasonic, Toshiba, and Toshiba America Electronic Components, Inc. under
federal antitrust law pursuant to Section 1 of the Sherman Act, California antirust and unfair competition laws,
and common law. The complaint seeks an injunction of the challenged conduct, dissolution of “the cooperation
agreements, joint ventures and/or cross-licenses alleged herein,” treble damages, restitution, disgorgement, pre-
and post-judgment interest, costs, and attorneys’ fees. Plaintiffs allege that the Company (along with the other
members of SD-3C) conspired to artificially inflate the royalty costs associated with manufacturing SD cards in
violation of federal and California antitrust and unfair competition laws, which in turn allegedly caused plaintiffs
to pay higher prices for SD cards. The allegations are similar to, and incorporate by reference the complaint in
the Samsung Electronics Co., Ltd. v. Panasonic Corporation; Panasonic Corporation of North America; and
SD-3C LLC described above. On May 21, 2012, the District Court granted Defendants’ motion to dismiss the
complaint with prejudice. Plaintiffs have appealed. Appellate briefing should be completed in the first half of
2013.
Insurance Litigation. On November 30, 2012, the Company filed a complaint in the U.S. District Court for
the Northern District of California against Zurich American Insurance Company (“Zurich”) for breach of an
insurance contract issued by Zurich to the Company (the “Policy”). The action relates to Zurich’s denial of the
Company’s claim under the Policy for coverage of losses suffered in connection with a power outage that
occurred in December 2010 at the Fab 3 and Fab 4 facilities in Yokkaichi, Japan. The Company is seeking
damages in an amount to be proven at trial, but in excess of approximately $60 million, less any applicable
deductible, as well as costs and other associated remedies. Zurich filed its answer to the Company’s complaint on
December 21, 2012. No trial date has been set.
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