Netgear 2013 Annual Report Download - page 98

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Innovative Wireless Solutions LLC v. NETGEAR, Inc.
In November of 2013, Innovative Wireless Solutions filed a new wave of suits targeting 14
wireless router and networking companies, Adtran, Arris,
Aruba Networks, Belkin, Buffalo Technology, Engenius Technologies, Fortinet, IC Intracom, Motorola Solutions, SMC Networks, Ubiquiti Networks,
Western Digital, and Zoom Telephonics. Previously, in April of 2013, Innovative Wireless had filed 41 suits targeting hotels and restaurant chains over
wireless Internet services. The Company was sued on November 6, 2013 in the District of Delaware.
The three patents-in-suit (5,912,895 entitled “
Information network access apparatus and methods for communicating information packets via
telephone lines” ( the “‘895 Patent”); 6,327,264 entitled “
Information network access apparatus and methods for communicating information packets via
telephone lines” ( the “’264 Patent”); and 6,587,473 entitled “
Information network access apparatus and methods for communicating information
packets via telephone lines” ( the “‘473 Patent”) originally were part of a portfolio of Nortel Networks’
patents before they reached Innovative Wireless
in March 2013.
The Company filed its answer on January 13, 2014, asserting various affirmative defenses. It is too early 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 years ended December 31, 2013 and 2012. The WEEE Directive
was recast on July 24, 2012, published on August 13, 2012, and was 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 it
has met the applicable requirements of current WEEE Legislation and similar legislation in other jurisdictions, to the extent implementation
requirements has been published.
Additionally, the EU enacted the Restriction of Hazardous Substances Directive (“RoHS Legislation”),
the REACH Regulation, Packaging
Directive and the Battery Directive. EU RoHS Legislation, along with similar legislation in China, requires manufacturers to ensure certain substances,
including polybrominated biphenyls (“PBD”), polybrominated diphenyl ethers (“PBDE”),
mercury, cadmium, hexavalent chromium and lead (except
for allowed exempted materials and applications), are below specified maximum concentration values in certain products put on the market after July 1,
2006. The RoHS Directive was recast on July 21, 2011 and went into force on January 3, 2013. This did not have a material impact on the Company's
consolidated results of operations and financial position. The REACH Regulation requires manufacturers to ensure the published lists of substances of
very high concern in certain products are below specified maximum concentration values. The Battery Directive controls use of certain types of battery
technology in certain products and requires mandatory marking. The Company believes it has met the requirements of the RoHS Directive Legislation,
the REACH Regulation and the Battery Directive Legislation.
Additionally, the EU enacted the Energy Using Product (“EuP”)
Directive, which came into force in August 2007. The EuP Directive required
manufacturers of certain products to meet minimum energy efficiency performance requirements. These
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