Netgear 2012 Annual Report Download - page 91

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pragmatus Telecom, LLC v. NETGEAR, Inc.
On December 6, 2012, Pragmatus Telecom, LLC (“Pragmatus”),
filed a lawsuit against the Company asserting that the Company's use of a
system “to provide live chat service over the Internet”
infringes U.S. Patent Nos. 6,311,231, 6,668,286, and 7,159,043 ("'231 patent", "'286 patent",
and "'043 patent", respectively).
The '231 patent is entitled "Method and System for Coordinating Data and Voice Communications via Customer Contact,”
the '286 patent is
entitled "Method and System for Coordinating Data and Voice Communications via Customer Contact Channel Changing System Over IP," and the
'043 patent is entitled "Method and System for Coordinating Data and Voice Communications via Contact Channel Changing System," The patents
very generally allegedly relate to “
live chat" services of companies, which can give customers the ability to exchange text messages with a virtual or
real customer support person. It appears that most companies named in the various lawsuits by Pragmatus license the “live chat”
technology and
software from a third-party supplier. A few of these third-party suppliers have been named in some of the over 100
lawsuits filed by Pragmatus in
California, Delaware, and the Eastern District of Texas, and two third-party suppliers of text-
chat (LivePerson and LogMeIn) have filed declaratory
judgment actions on the patents in suit in Delaware. There is a pending reexamination on
one of the three asserted patents.
Pragmatus and the Company agreed to extend the deadline for the Company to answer or otherwise respond to Pragmatus's complaint until
February 11, 2013. The Company answered the complaint on that day by denying Pragmatus's infringement allegations and requesting a declaratory
judgment by the Court that the patents in suit are not infringed and invalid. It is too early to reasonably estimate any financial impact to the Company
because of this litigation matter.
Voice Integration Technologies, LLC v. NETGEAR, Inc.
On December 28, 2012, Voice Integration Technologies, LLC (“VIT”)
sued the Company alleging direct, indirect, and willful infringement of
U.S. Patent No. 7,127,048 (the "'048 Patent"), entitled "Systems and Methods for Integrating Analog Voice Service and Derived POTS Voice Service
in a Digital Subscriber Line Environment." The '048 Accused Products include integrated access device ("IAD") products that allow users to place
and receive both telephone and VoIP calls over the same telephone line, and VIT specifically named the Company's DG 834GV Integrated ADSL2+
Modem and Wireless Router with Voice in the complaint. The Company believes that a broad reading of the complaint would mean that the
Company's ADSL modems having VOIP functionality are accused, which suggests relatively low exposure because these products have not been in
the United States. It is too early, however, to reasonably estimate any financial impact to the Company because of this litigation matter.
IP Indemnification Claims
In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers (the “Indemnified Parties”)
for
any expenses or liability resulting from claimed infringements by the Company's products of patents, trademarks or copyrights of third parties that
are asserted against the Indemnified Parties, subject to customary carve outs. The terms of these indemnification agreements are generally perpetual
after execution of the agreement. The maximum amount of potential future indemnification is generally unlimited. From time to time, the Company
receives requests for indemnity and may choose to assume the defense of such litigation asserted against the Indemnified Parties.
Environmental Regulation
The European Union (“EU”)
enacted the Waste Electrical and Electronic Equipment Directive, which makes producers of electrical goods,
including home and commercial business networking products, financially responsible for specified collection, recycling, treatment and disposal of
past and future covered products. The deadline for the individual member states of the EU to transpose the directive into law in their respective
countries was August 13, 2004 (such legislation, together with the directive, the “WEEE Legislation”).
Producers participating in the market were
financially responsible for implementing these responsibilities under the WEEE Legislation beginning in August 13, 2005. The Company adopted the
authoritative guidance for asset retirement and environmental obligations in the third quarter of fiscal 2005 and has determined that its effect did not
have a material impact on the Company's consolidated results of operations and financial position for the three and nine months ended September 30,
2012 and October 2, 2011. The WEEE Directive was recast on July 24, 2012, published on August 13, 2012, and will be implemented by all member
states on February 14, 2014. The Company expects no material impact on its consolidated results of operations and financial positions due to this
recasting. Similar WEEE Legislation has been or may be enacted in other jurisdictions, including in the United States, Canada, Mexico, China, India,
Australia and Japan. The Company continues to monitor WEEE Legislation and similar legislation in other jurisdictions as individual countries issue
their implementation guidance. The Company believes
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