Netgear 2012 Annual Report Download - page 88

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On September 28, 2012, the Court issued its summary judgment ruling. The Court did not invalidate the '769 Patent and ruled that some of the
Company's cards infringed the '769 Patent.
In addition, the Court rejected Fujitsu's narrowing arguments for the terms “card” and “slot”
that are contained in the claims of the patent in
suit, expressly holding that “card” should be given its plain and ordinary meaning and agreeing with Defendants that “slot”
was a broad term
meaning “an opening.”
After a 10-day trial in November and December of 2012, the eight-member jury sided with the remaining defendants -
NETGEAR, Belkin, and
D-Link -
and found Fujitsu's claims under the '769 patent for a "card type input/output interface device" to be invalid. The jury found the defendants
proved by clear and convincing evidence that each claim raised by Fujitsu was anticipated by prior art and would have been obvious to a person of
ordinary skill in the art as of April 1991 -
in other words the asserted claims of the '769 Patent were both anticipated and obvious. The jury also found
the defendants had not caused infringement by selling routers and access points that were compatible with wireless interface cards. Fujitsu could
theoretically bring another infringement suit on other claims of the '769 Patent that were not invalidated at the trial, but the Company does not expect
there to be a material financial impact to the Company because of this litigation matter.
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
(“Powerline I”) for patent infringement by a non-practicing entity called Powerline Innovations, LLC (“Powerline Innovations”).
This was 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 alleged 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. An initial status conference took place on August 6, 2012. On October 1, 2012, the defendants remaining in the case filed a
motion to transfer venue from the U.S. District Court, Eastern District of Texas to the U.S. District Court, Northern District of California.
On October 10, 2012, the Company was sued for a second time in the U.S. District Court, Eastern District of Texas, Tyler Division (“
Powerline
II”) for patent infringement by Powerline Innovations. The patent involved in this case is United States Patent No. 8,157,581, titled “
Thermal
Management Method and Device for Powerline Communications”.
The accused Company products include Powerline Models XAVB1501,
XAVB1601, XAV2001, XAVN2001, XAVB2001, XAVNB2001, XAV2101, XAVB2101, XAUB2511, XWN5001, XAVB5001, XAVB5101,
XWNB5201, XAVB5601, XAVB5602 products. The Company answered the complaint on December 21, 2012.
Through the Company's membership in RPX Corporation, a company whose market-
based solution to patent litigation involves preemptive
purchases of patents in the open market, a settlement of the Powerline I and Powerline II litigations was recently reached between Powerline
Innovations and the Company. In return for a payment by RPX to Powerline Innovations, the Company and other RPX members received a license to
the '190 Patent and '581 Patent. After such payment and 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 Powerline Innovations signed a binding release
agreement, which included mutual general releases from all claims, known or unknown, under the '190 Patent and '581 Patent with respect to the
manufacture, use, sale, etc. of products by the Company. The Court has since dismissed Powerline Innovations' claims for relief against the Company
and the Company's counterclaims for relief against Powerline Innovations in Powerline I and Powerline II, with prejudice and with all attorneys' fees,
costs and expenses levied against the party incurring the same. The Company does not expect there to be a material financial impact to the Company
because of this litigation matter.
NETGEAR v. Innovatio IP Ventures LLC.
On November 16, 2011, the Company filed a declaratory judgment action in the District of Delaware for non-infringement and invalidity of
17
WiFi-related patents brought in the approximately 15 actions throughout the United States by Innovatio IP Ventures LLC (“Innovatio”)
against end
user customers of the Company and other companies. Shortly after filing the declaratory judgment action, the Company filed a response supporting
Cisco Systems, Inc.'s ("Cisco") and Motorola Solutions, Inc.'s ("Motorola") Motion to Transfer for Coordinated Pretrial Proceedings Pursuant to 28
U.S.C. § 1407 that was before the United
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