Netgear 2011 Annual Report Download - page 99

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Table of Contents
its U.S. Patent No. 6,218,930. Network-1 also sued six other companies alleging similar claims of patent infringement. The Company filed its
answer in the second quarter of 2008. In May 2009, without admitting any patent infringement, wrongdoing or violation of law and to avoid the
distraction and expense of continued litigation, the Company agreed to make a one-time lump sum payment of $350,000, which the Company
recorded as a litigation settlement in fiscal 2009, in consideration for a license to the patent in suit as well as a dismissal with prejudice of the
lawsuit. Under the license, the Company will pay future running royalties on certain of its PoE products which will be recognized as a
component of cost of revenue as the related products are sold.
Chalumeau Power Systems v. NETGEAR.
On June 28, 2011, Chalumeau Power Systems LLC (“Chalumeau”) filed a complaint against several technology companies—
including the
Company, Cisco Systems Inc., Hewlett-Packard Co., D-Link, and Avaya Inc. —in the U.S. District Court, District of Delaware alleging
infringement of a patent for a remote device detection method. The patent number is U.S. Patent No. 5,991,885 (‘885 Patent) and is entitled
“Method and apparatus for detecting the presence of a remote device and providing power thereto.”
Chalumeau claimed that the defendants have
all made or sold devices that make use of infringing PoE technology, which allows electrical power and data to pass safely on Ethernet cabling.
The Company answered Chalumeau’s complaint on September 1, 2011, and asserted various defenses and counterclaims, including those of
noninfringement and invalidity of the ‘885 Patent. In October 2011, a settlement of this lawsuit was reached between Chalumeau and the
Company through a third-party intermediary. 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 Chalumeau signed a binding release agreement in
which both parties agreed to mutual general releases from all claims, known or unknown, under the ‘885 Patent and its foreign counterparts with
respect to the manufacture, use, sale, etc. of products by the Company. The Court has since dismissed Chalumeau’s claims for relief against the
Company and the Company’s counterclaims for relief against Chalumeau, with prejudice and with all attorneys’ fees, costs and expenses levied
against the party incurring the same.
Powerline Innovations, LLC v. NETGEAR
On August 6, 2011 the Company, along with 16 other companies, was sued in the U.S. District Court, Eastern District of Texas, Tyler
Division for patent infringement by a non-practicing entity called Powerline Innovations, LLC (“Powerline Innovations”). This is a single patent
case, involving U.S. Patent No. 5,471,190, entitled “Method and Apparatus for Resource Allocation in a Communication Network System.” On
the same day that it filed suit against the Company and 16 other companies, Powerline Innovations sued 14 additional companies in a separate
suit in U.S. District Court, Eastern District of Texas for infringement of the same patent. The complaint against the Company alleges that it
infringes the 5,471,190 patent based on the Company’s use of methods for establishing control relationships between plural devices and names
the Company’s Powerline AV Ethernet Adapter, Model XAV101, as an accused infringing product. The Company answered the plaintiff’s
complaint on December 12, 2011, and asserted that it has not infringed the patent in suit and that the patent in suit is invalid. In addition, the
Company asserted various affirmative defenses. Powerline Innovations has not yet served all the parties. The Court will likely not set an initial
status conference before service is completed.
Summit Data Systems LLC v. NETGEAR.
On September 1, 2010, a non-practicing entity, Summit Data Systems LLC (“Summit Data Systems”), sued the Company and seven other
companies in the U.S. District Court, District of Delaware alleging infringement of two patents—U.S. Patent No. 7,392,291 (‘291 Patent),
entitled Architecture for Providing Block-Level Access over a Computer Network and U.S. Patent No. 7,428,581 (‘581 Patent), entitled
Architecture for Providing Block-Level Access over a Computer Network. The ‘581 Patent is a continuation of the ‘291 Patent. The Company’s
ReadyNAS and NVX products were listed by the plaintiff in the complaint as accused infringing
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