Netgear 2011 Annual Report Download - page 92

Table of Contents
of third parties. The terms of these indemnification agreements are generally perpetual any time after execution of the agreement. The maximum
amount of potential future indemnification is unlimited. The Company believes the estimated fair value of these agreements is minimal.
Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 2011.
Litigation and Other Legal Matters
Wi-Lan Inc. v. NETGEAR
In October 2007, a lawsuit was filed against the Company by Wi-Lan Inc. (“Wi-Lan”), a patent-holding company existing under the laws
of Canada, in the U.S. District Court, Eastern District of Texas. Wi-Lan alleged that the Company infringed U.S. Patent Nos. 5,282,222,
RE37,802 and 5,956,323. Wi-Lan accused the Company of infringement with respect to its wireless networking products compliant with the
IEEE 802.11 standards and ADSL products compliant with the ITUG.992 standards. Wi-Lan also sued 21 other technology companies alleging
similar claims of patent infringement. The Company filed its answer to the lawsuit in the first quarter of 2008. A claim construction hearing took
place for the ‘222 and ‘802 Patents on March 11, 2010, and on May 11, 2010, the Court issued its order interpreting the claims of these patents
(claim construction order). The claim construction hearing on the ‘323 patent occurred on September 1, 2010, and the Court subsequently issued
its claim construction order for this patent. The Court ordered that infringement of the RE37,802 and 5,282,222 (Wi-Fi) patents would be tried
first, as to all defendants, and infringement of the 5,956,323 (DSL) patent would be addressed in a second trial. Shortly before the beginning of
the first trial, the Company and Wi-Lan entered into settlement discussions. Without admitting any wrongdoing or violation of law and to avoid
the distraction and expense of continued litigation and the uncertainty of a jury verdict on the merits, the Company and Wi-Lan signed a binding
release agreement in which the Company agreed to make a one-time lump sum payment to be paid by May 15, 2011 in consideration for mutual
general releases. In the agreement, each party agreed to release the other party from all claims, known or unknown, under any of the ‘222, ‘802
and ‘323 Patents with respect to the manufacture, use, sale, etc. of products by the Company. Each party agreed to bear its own costs and
attorneys’ fees. The Company made the required one-time lump sum payment that was due by May 15, 2011. This arrangement is not expected
to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. The Court has dismissed all
claims between Wi-Lan and the Company, including all claims presented by Wi-Lan’s complaint and all of the Company’s counterclaims, and
neither of the scheduled trials between Wi-Lan and the Company will occur. This litigation matter is now concluded.
Fujitsu et. al v. NETGEAR
In December 2007, a lawsuit was filed against the Company by Fujitsu Limited, LG Electronics, Inc. and U.S. Philips Corporation in the
U.S. District Court, Western District of Wisconsin. The plaintiffs allege that the Company infringes U.S. Patent Nos. 6,018,642, 6,469,993 and
4,975,952. The plaintiffs accuse the Company’s wireless networking products compliant with the IEEE 802.11 standards of infringement. The
Company filed its answer to the lawsuit in the first quarter of 2008. The District Court held a claim construction hearing on August 15, 2008. On
September 10, 2008, the District Court issued a claim construction order. In February 2009, the parties filed numerous motions for summary
judgment concerning, among other things, non
-infringement, invalidity, and other affirmative defenses. In September 2009, the District Court
granted the Company’s motion for summary judgment of non-infringement of the three patents-in-suit. The District Court determined that the
Company’s compliance with the 802.11 standard did not necessarily infringe the patents-in-suit and that the plaintiffs did not provide adequate
evidence regarding the function of the Company’s products to put the issue of infringement before a jury. In light of the District Court’s
determination that the patents-in-suit were not infringed, the District Court declined to address the Company’s summary judgment claims of the
invalidity of the patents in question. On December 23, 2009, the Plaintiffs filed two briefs with the Federal Circuit appealing the District Court’s
summary judgment rulings. On December 30, 2009, the District Court ordered litigation costs in the amount $175,000 to be reimbursed to the
Company, which were never collected or recognized. The Company’s opposition brief to the Plaintiff’s appeal was submitted on February 18,
2010. The Federal Circuit heard oral arguments on the Plaintiffs’ appeal on June 7, 2010. On September 20, 2010, the Federal Circuit
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