SanDisk 1998 Annual Report Download - page 27

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SanDisk Corporation
22
rights. The Company may also need to license some or all of
its patent portfolio to be able to obtain cross-licenses to the
patents of others. The Company currently has patent cross-
license agreements with Hitachi, Intel, Samsung, Sharp, SST
and Toshiba. From time to time, the Company has also
entered into discussions with other companies regarding
potential cross-license agreements for the Company’s
patents. However, there can be no assurance that licenses
will be offered or that the terms of any offered licenses will
be acceptable to the Company. If the Company obtains
licenses from third parties, it may be required to pay license
fees or make royalty payments, which could have a material
adverse effect on the Company’s gross margins. The failure
to obtain a license from a third party for technology used by
the Company could cause the Company to incur substantial
liabilities and to suspend the manufacture of products or the
use by the Company’s foundries of processes requiring the
technology, or to expend substantial resources redesigning
its products to eliminate the infringement. There can be no
assurance that the Company would be successful in redesigning
its products or that such licenses would be available under
reasonable terms. Furthermore, any such development or
license negotiations could require substantial expenditures of
time and other resources by the Company.
As is common in the industry, the Company agrees to
indemnify certain of its suppliers and customers for alleged
patent infringement. The scope of such indemnity varies, but
may, in some instances, include indemnification for damages
and expenses, including attorneys’ fees. The Company may
from time to time be engaged in litigation as a result of such
indemnification obligations. Third party claims for patent
infringement are excluded from coverage under the Company’s
insurance policies. There can be no assurance that any future
obligation to indemnify the Company’s customers or suppli-
ers, will not have a material adverse effect on the Company’s
business, financial condition and results of operations. See
“Business—Patents and Licenses.”
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of 1998.