Western Digital 2007 Annual Report Download - page 65

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in a prior year). In exchange for the payment, Papst has dismissed with prejudice its lawsuit pending against the
Company, granted the Company a fully-paid license to certain patents owned by Papst, and released the Company of all
past, present and future claims alleging infringement by the Company of those Papst patents. The Settlement and License
Agreement resolved all outstanding litigation between the two companies without any admission of infringement by the
Company.
Since the Company’s announcement on July 27, 2006 that it was conducting a company-initiated, voluntary review
of its historical stock option grants, several purported derivative actions were filed nominally on behalf of the Company
against certain current and former directors and officers of the Company in the United States District Court for the
Central District of California and the Superior Court of the State of California for the County of Orange. These
complaints assert claims for violations of Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act, accounting,
breach of fiduciary duty and/or aiding and abetting, constructive fraud, waste of corporate assets, unjust enrichment,
rescission, breach of contract, violation of the California Corporations Code, abuse of control, gross mismanagement, and
constructive trust in connection with the Company’s option granting practices. The complaints seek unspecified
monetary damages and other relief against the individual defendants and certain governance reforms affecting the
Company. The Company is named solely as a nominal defendant in each action. The parties in the actions engaged in a
voluntary mediation on June 6, 2007, and these discussions are continuing.
On January 22, 2007, StorMedia Texas LLC filed a complaint against the Company and several other companies,
including other disk drive manufacturers, for patent infringement in the Eastern District of Texas alleging infringement
of U.S. Patent No. 6,805,891. The Company served an answer to the complaint denying all material allegations and
asserting affirmative defenses, and has also filed counterclaims against StorMedia. The Company intends to defend itself
vigorously in this matter. As described elsewhere in this Annual Report on Form 10-K, the Company has entered into a
definitive agreement to acquire Komag. Komag has provided its customers with certain contractual indemnification
undertakings for patent infringement involving its products and Komag has received claims for reimbursement of legal
defense costs from its customers related to the StorMedia patent infringement litigation. The Company is evaluating the
position of Komag in relation to this litigation.
Note 6. Business Segment, International Operations and Major Customers
Segment Information
The Company operates in one segment, the hard drive business.
59
WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)