SanDisk 2003 Annual Report Download - page 82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
invalidity in the United States District Court for the Northern District of California. In the suit, captioned
SanDisk Corporation v. InÑneon Technologies AG, a German corporation, and Does I to X, Civil No. C 03
02931 BZ, the Company is seeking a declaration that it had not infringed the ”601 patent and that the patent is
invalid. On October 6, 2003, InÑneon Ñled an answer to the Company's complaint and counterclaim for
alleged patent infringement. By its answer and counterclaim, InÑneon: (i) denied that the Company is entitled
to the declaration sought by the Company's complaint; (ii) requested that the Company be adjudged to have
infringed, actively induced and/or contributed to the infringement of the ”601 patent and another patent Ì
U.S. Patent No. 4,841,222, or the ”222 patent, willfully and deliberately; and (iii) sought damages, attorneys'
fees, and an injunction against the Company from making, using, selling, oÅering for sale, and/or importing
any product that infringes upon the rights secured by the ”601 and ”222 patents. Later on October 6, 2003,
InÑneon Ñled an amended answer and counterclaim, which includes the same substantive allegations of
infringement that are found in its original answer and counterclaim. On October 27, 2003, the Company Ñled a
reply to InÑneon's counterclaims, wherein it denied that it infringed the asserted patents, and denied that
InÑneon is entitled to any relief in the action. Discovery has commenced. On January 13, 2004, InÑneon
informed the Company that it desires to Ñle an amended counterclaim that would omit claims under the ”222
patent, leaving only the ”601 patent in the suit. InÑneon has requested that the Company consent to allow it to
Ñle the proposed amendment. The Company has informed InÑneon that the Company will consider its request
for consent.
On July 3, 2003, a purported shareholder class action lawsuit was Ñled on behalf of United States holders
of ordinary shares of Tower as of the close of business on April 1, 2002 in the United States District Court for
the Southern District of New York. The suit, captioned Philippe de Vries, Julia Frances Dunbar De Vries
Trust, et al., v. Tower Semiconductor Ltd., et al., Civil Case No. 03 CV 4999, was Ñled against Tower and
certain of its shareholders and directors, including the Company and Eli Harari, the Company's President and
CEO and a Tower board member, and asserts claims arising under Sections 14(a) and 20(a) of the Securities
Exchange Act of 1934, as amended, and Rule 14a-9 promulgated thereunder. The lawsuit alleges that Tower
and certain of its directors made false and misleading statements in a proxy solicitation to Tower shareholders
regarding a proposed amendment to a contract between Tower and certain of its shareholders, including us.
The plaintiÅs are seeking unspeciÑed damages and attorneys' and experts' fees and expenses.
Litigation is subject to inherent risks and uncertainties that may cause actual results to diÅer materially
from our expectations. Factors that could cause litigation results to diÅer include, but are not limited to, the
discovery of previously unknown facts, changes in the law or in the interpretation of laws, and uncertainties
associated with the judicial decision-making process.
In the event of an adverse result in any such litigation, the Company could be required to pay substantial
damages, cease the manufacture, use and sale of infringing products, expend signiÑcant resources to develop
non-infringing technology or obtain licenses to the infringing technology, or discontinue the use of certain
processes.
From time-to-time 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 indemniÑcation
for damages and expenses, including attorneys' fees. The Company may from time to time be engaged in
litigation as a result of such indemniÑcation 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 suppliers, will not have a material adverse eÅect on the
Company's business, Ñnancial condition and results of operations.
Litigation frequently involves substantial expenditures and can require signiÑcant management attention,
even if the Company ultimately prevails. In addition, the results of any litigation matters are inherently
uncertain. Accordingly, there can be no assurance that any of the foregoing matters, or any future litigation,
will not have a material adverse eÅect on the Company's business, Ñnancial condition and results of
operations.
78