Netgear 2013 Annual Report Download - page 89

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such
cases, the Company accrues for the amount, or if a range, the Company accrues the low end of the range as a component of legal expense in litigation
reserves. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. In relation to
such matters, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its
financial position within the next twelve months, or the outcome of these matters is currently not determinable. There are many uncertainties associated
with any litigation, and these actions or other third-
party claims against the Company may cause the Company to incur costly litigation and/or
substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments,
which could have an adverse effect in future periods. If any of those events were to occur, the Company's business, financial condition, results of
operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's
estimates, which could result in the need to adjust the liability and record additional expenses.
Ruckus Wireless v. NETGEAR Inc.
On May 5, 2008, a lawsuit was filed against the Company by Ruckus Wireless (“Ruckus”), a developer of Wi-
Fi technology, in the U.S. District
Court, Northern District of California (case number C08-2310-PJH (“NETGEAR I”)).
Ruckus alleges that the Company infringes U.S. Patent Nos.
7,358,912 ("the '912 Patent") and 7,193,562 ("the '562 Patent") in the course of deploying Wi-
Fi antenna array technology in its WPN824 RangeMax
wireless router. Ruckus also sued Rayspan Corporation alleging similar claims of patent infringement. The Company filed its answer to the lawsuit in
the third quarter of 2008. The Company and Rayspan Corporation jointly filed a request for inter partes
reexamination of the Ruckus patents with the
USPTO on September 4, 2008. The Court issued a stay of the litigation while the reexaminations proceeded in the USPTO. On November 28, 2008, a
reexamination was ordered with respect to claims 11-17 of the '562 Patent, but denied with respect to claims 1-10 and 18-
36. On December 17, 2008, the
defendants jointly filed a petition to challenge the denial of reexamination of claims 1-10 and 18-
36 of the '562 Patent. In July 2009, the petition was
denied, and the remaining claims 11-
17 were confirmed by the USPTO. On December 2, 2008, reexamination was granted with regard to the '912
Patent. In early October 2009, the Company received an Action Closing Prosecution in the reexamination of the '912 Patent. All the claims of the '912
Patent, with the exception of the unchallenged claims 7 and 8, were finally rejected by the USPTO. On October 30, 2009, Ruckus submitted an “after-
final” amendment in the '912 Patent reexamination proceeding. The Company's comments to Ruckus' “after-final”
amendment were submitted on
November 30, 2009. On December 1, 2009, the Court found that bifurcating the '562 Patent from the '912 Patent and commencing litigation on the '562
Patent while the USPTO reexamination process and appeals are still pending would be an inefficient use of the Court's resources. Accordingly, the Court
ruled that the litigation stay should remain in effect. On September 12, 2010, the Company filed the rebuttal brief in its appeals of the USPTO's rulings
during the reexamination of the '562 Patent, and the Company requested an oral hearing with the Board of Appeals at the USPTO to discuss this brief.
On September 13, 2010, Ruckus filed a notice of appeal of the '912 Patent to appeal the adverse rulings it received from the USPTO in the
reexamination of this patent. The Company filed a respondent's brief in the '912 Patent case on January 24, 2011. An oral hearing in the '562 case was
set for February 1, 2011, but the Company decided to cancel it and let the USPTO decide the '562 case based solely on the previously submitted papers.
On May 13, 2011, the USPTO indicated that the Company was successful in its appeal of the examiner's previous decision to allow claims 11-
17 in the
'562 reexamination, and the USPTO Board of Appeals reversed the examiner's decision and declared those claims invalid. On June 13, 2011, Ruckus
submitted a request for rehearing by the Board of Appeals of its decision to reject claims 11-
17 of the '562 Patent. On September 28, 2011, the Board of
Patent Appeals and Interferences denied Ruckus's request for a rehearing in the '562 Patent reexamination case. Ruckus did not timely file a notice of
appeal to the Court of Appeals for the Federal Circuit appealing the USPTO's cancellation of claims 11-
17 of the '562 patent. Therefore, a reexamination
certificate will issue with claims 11-17 cancelled and claims 1-10 and 18-36 confirmed.
On November 4, 2009, Ruckus filed a complaint in the U.S. District Court, Northern District of California (case number C09-5271-
PJH
(“NETGEAR II”)),
alleging the Company and Rayspan Corporation infringed a patent that is related to the patents previously asserted against the
Company and Rayspan Corporation by Ruckus, as discussed above. The asserted patent in the second case was U.S. Patent No. 7,525,486 entitled
“Increased wireless coverage patterns.”
As with the previous Ruckus action, the WPN824 RangeMax wireless router was the alleged infringing device.
The Company challenged the sufficiency of Ruckus's complaint and moved to dismiss the complaint. Ruckus opposed this motion. The Court partially
agreed with the Company's motion and ordered Ruckus to submit a new complaint, which Ruckus did. The initial case management conference occurred
on February 11, 2010. On March 25, 2010, the Court ordered a stay until the completion of the reexamination proceedings instigated on the patents in
NETGEAR I.
Ruckus and the Company in December 2012 requested that the stay of the California actions be lifted. This request to lift the stay was predicated
on Ruckus's Withdrawal of Appeal and Cancellation of Claims ("Withdrawal") of the '912 Patent that was
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