NVIDIA 2006 Annual Report Download - page 93

NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
mandated mediation was held in January 2006 and did not resolve the matter. Discovery continues, as well as preparation for the
Markman hearing on claim construction. The Markman hearing is scheduled for April 13, 2006. We believe the claims asserted
against us are without merit and we will continue to defend ourselves vigorously. We do not have sufficient information to determine
whether a loss is probable. As such, we have not recorded any liability in our consolidated financial statements for such, if any, loss.
American Video Graphics
In August 2004, a Texas limited partnership named American Video Graphics, LP, or AVG, filed three separate complaints for
patent infringement against various corporate defendants, not including NVIDIA, in the United States District Court for the Eastern
District of Texas. AVG initially asserted that each of the approximately thirty defendants sells products that infringe one or more of
seven separate patents that AVG claims relate generally to graphics processing functionality. In November 2004, NVIDIA sought and
was granted permission to intervene in two of the three pending AVG lawsuits. Our complaint in intervention alleged that both of the
patents in suit were invalid and that, to the extent AVG's claims target NVIDIA products, the asserted patents were not infringed.
On December 19, 2005, AVG and substantially all of the named defendants and intervenors, including NVIDIA, settled all of
pending claims; the only surviving claims will relate solely to two non−settling defendants. As part of the settlement, the defendants
and intervenors paid an undisclosed aggregate amount to AVG. In exchange, all pending claims between the settling parties were
dismissed with prejudice, and AVG granted to all settling parties a full release of all claims for past damages and a full license for all
future sales of accused products under all of AVG's patents, including the patents in suit. In addition, as part of the settlement, all
settling defendants and intervenors fully and finally waived any claims for indemnification they may have had against any other
settling party.
We are subject to other legal proceedings, but we do not believe that the ultimate outcome of any of these proceedings will have a
material adverse effect on our financial position or overall trends in results of operations. However, if an unfavorable ruling were to
occur in any specific period, there exists the possibility of a material adverse impact on the results of operations of that period.
Note 12 − Settlement Costs
Settlement costs were $14.2 million for fiscal 2006. The settlement costs are associated with two litigation matters, 3dfx and
AVG. AVG is settled. The 3dfx matter is not finally settled and is subject to judicial review and the completion of appropriate
procedures and documents. However, based on the potential settlement in this case, we have concluded that a loss is probable and that
we can reasonably estimate the amount of loss. Please refer to Note 11 of the Notes to Consolidated Financial Statements for further
information.
85