SanDisk 2002 Annual Report Download - page 46

4 4 S a nD isk C o rp o ra tio n
five additional defendants. The Am ended Com plaint alleges
that we, and the other defendants, have infringed certain
patents held by the Lem elson Foundation pertaining to bar
code scanning technology. By its com plaint, the Lem elson
Foundation requests that w e be enjoined from our allegedly
infringing activities and seeks unspecified dam ages. On
February 4, 2002, w e filed an answ er to the am ended com -
plaint, w herein w e alleged that we do not infringe the
asserted patents, and further contend that the patents are
not valid or enforceable.
On October 15, 2001, w e filed a com plaint for patent
infringem ent in the United States District Court for the
Northern District of California against M icron Technology,
Inc., or M icron. In the suit, captioned SanDisk Corp. v.
M icron Technology, Inc., Civil No. CV 01-3855 CW, the com-
plaint sought dam ages and an injunction against M icron for
m aking, selling, im porting or using flash m em ory cards that
infringe our U.S. Patent No. 6,149,316. On February 15,
2002, M icron answ ered the complaint, denied liability, and
counterclaim ed seeking a declaration that the patent in suit
w as not infringed, w as invalid, and w as unenforceable. On
M ay 31, 2002, based on allegations of infringem ent leveled
by M icron against us, w e filed a com plaint for declaratory
judgm ent, seeking a declaration that we did not and had
not infringed five patents (or, in the alternative, that the
patents are invalid). The patents in question are U.S. Patent
No. 4,468,308; U.S. Patent No. 5,286,344; U.S. Patent No.
5,320,981; U.S. Patent No. 6,015,760; and U.S. Patent No.
6,287,978 B1. The suit is captioned SanDisk Corp. v. M icron
Technology, Inc., Civil No. CV 02-2627 VRW. On June 4,
2002, M icron answ ered and counterclaim ed alleging that
w e did infringe the five listed patents. On October 29, 2002,
w e filed a motion for sum m ary adjudication against M icron
to elim inate som e of M icron’s claim s. On Decem ber 23,
2002, the parties reached a settlem ent and dismissed all
pending litigation betw een them . The term s of the settle-
m ent are confidential, how ever, the settlem ent did not have
a m aterial im pact on the Com pany’s results of operations
or financial position in 2002.
On October 31, 2001, w e filed a com plaint for patent
infringem ent in the United States District Court for the
Northern District of California against M emorex Products,
Inc., Pretec Electronics Corporation, Ritek Corporation and
Pow er Quotient International Co., Ltd. In the suit, captioned
SanDisk Corp. v. M em orex Products, Inc., et al., Civil No. CV
01-4063 VRW, w e seek dam ages and injunctions against
these companies from making, selling, im porting or using
flash m em ory cards that infringe our U.S. patent No.
5,602,987 or the ’987 Patent. Defendants have filed answ ers
denying the allegations. We filed a m otion for a preliminary
injunction in the suit to enjoin M em orex, Pretec and Ritek
from making, selling, im porting or using flash m em ory cards
that infringe our ’987 Patent prior to the trial on the m erits.
On M ay 17, 2002, the Court denied our m otion. Discovery
has com menced. A hearing on claim construction and
Ritek’s m otion for sum m ary judgm ent of non-infringement is
scheduled for M ay 2, 2003.
On Novem ber 30, 2001, w e filed a com plaint for patent
infringem ent in the United States District Court for the
Northern District of California against Power Quotient
International – USA Inc, or PQI-USA. In the suit, captioned
SanDisk Corp. v. Pow er Quotient International – USA Inc., Civil
No. C 01- 21111, w e sought dam ages and an injunction against
PQI-USA from m aking, selling, im porting or using flash m em -
ory cards that infringe our U.S. patent No. 5,602,987. The
PQI-USA com plaint and litigation are related to the October
31, 2001 litigation referred to above. On October 16, 2002,
Pow er Quotient International Co., Ltd. and Pow er Quotient
International- USA entered into a Consent Judgm ent of
Infringem ent and Validity and Injunction and settlem ent
agreem ent with us, in w hich both PQI com panies stipulated
that the Com pactFlash™ and PC ATA cards sold by them
infringe our ’987 patent and that the ’987 Patent is valid and
enforceable. In addition, both PQI com panies are “enjoined
from using in the United States, m aking in the United States…
selling in the United States… or im porting into the United
States for sale, Com pactFlash™ and PC ATA cards.” In addi-
tion, the PQI com panies w ill pay us an undisclosed am ount
for past dam ages and the parties agreed to dism iss all
claim s betw een SanDisk and the PQI com panies in both law -
suits described above w ithout prejudice. The Consent
Judgm ent of Infringem ent and Validity and Injunction is sub-
ject to court approval, w hich is currently pending.
On August 8, 2002, the Com pany filed an am ended com -
plaint to join M r. Flash USA and M ark C. Lee as defendants in
the PQI-USA m atter. On Decem ber 5, 2002, w e entered into
a settlement agreem ent with M r. Lee, doing business as M r.
Flash USA. On Decem ber 12, 2002, the parties filed a
Stipulated Dism issal W ithout Prejudice and Consent
Injunction, in w hich M r. Lee is “enjoined from directly or indi-
rectly m aking in the United States… selling in the United
States… or im porting into the United States for sale,
Com pactFlashTM and PC ATA cards that are m anufactured
by Pow er Quotient International Co., Ltd.” On January 28,
2003, the Court entered the Stipulated Dism issal Without
Prejudice and Consent Injunction.
On or about M arch 5, 2002, Samsung Electronics Co.,
Ltd., or Sam sung, filed a patent infringem ent law suit against
us in the United States District Court for the Eastern District
of Texas, Civil Action No. 9:02CV58. The law suit alleged that
w e infringed four Sam sung United States patents, Nos.
5,473,563; 5,514,889; 5,546,341 and 5,642,309, and sought
a prelim inary and perm anent injunction against unnamed
products of ours, as w ell as dam ages, attorneys’ fees and
costs of the law suit. On M arch 28, 2002, w e filed an answ er
and counterclaim s denying infringement and asserting the
Sam sung patents are invalid and/or unenforceable. Our
counterclaim s asserted that Sam sung breached a 1997
agreem ent betw een SanDisk and Sam sung. In August 2002,
w e settled all pending litigation w ith Samsung and w e
entered into a new patent cross license agreem ent and a
flash m em ory purchase agreem ent. On Novem ber 26, 2002,
the parties filed a Stipulated Dism issal W ithout Prejudice,
w hich w as entered by the Court on Decem ber 4, 2002.
Litigation is subject to inherent risks and uncertainties that
m ay cause actual results to differ m aterially from our expec-
tations. Factors that could cause litigation results to differ
include, but are not lim ited to, the discovery of previously
unknow n facts, changes in the law or in the interpretation of
law s, and uncertainties associated w ith the judicial decision-
m aking process.