SanDisk 2006 Annual Report Download - page 143

unenforceable. A hearing was held from August 1-8, 2005. On October 19, 2005, the Administrative Law Judge
issued an initial determination confirming the validity and enforceability of the Company’s ‘338 patent by rejecting
ST’s claims that the patent was invalidated by prior art. The initial determination, however, found that ST’s NAND
flash memory chips did not infringe the asserted claims of the ‘338 patent. On October 31, 2005, the Company filed
a petition with the ITC to review and reverse the finding of non-infringement. Also, on October 31, 2005, ST filed a
petition for review with the ITC to review and reverse the finding that the patent was valid and enforceable. On
December 6, 2005, the ITC issued its decision. The ITC declined to review the finding of non-infringement, and,
after reviewing the finding of validity, declined to take any position on the issue of validity. The Company is
appealing the ITC’s decision to the U.S. Court of Appeals for the Federal Circuit.
On February 4, 2005, STMicro filed two complaints for patent infringement against the Company in the United
States District Court for the Eastern District of Texas, captioned STMicroelectronics, Inc. v. SanDisk Corporation,
Civil Case No. 4:05CV44 (the “44 Action”), and STMicroelectronics, Inc. v. SanDisk Corporation, Civil Case
No. 4:05CV45 (the “45 Action”), respectively. The complaints seek damages and injunctions against certain
SanDisk products. On April 22, 2005, the Company filed counterclaims on two patents against STMicroelectronics
N.V. and STMicroelectronics, Inc. (collectively, “ST”) in the ‘45 Action. The counterclaims seek damages and
injunctive relief against ST’s flash memory products. In the ‘44 Action, the District Court granted SanDisk’s motion
for summary judgment of non-infringement on all accused products. On February 6, 2007, the District Court
dismissed the ‘44 Action with prejudice, ordered that ST take nothing from the Company, and that costs be taxed
against ST. ST has filed a motion to amend or correct the final judgment, but no ruling has issued. In the ‘45 Action,
the parties have filed motions for summary judgment regarding various aspects of the litigation; no ruling has
issued. The ‘45 Action is scheduled currently for jury selection and trial on April 16, 2007.
On October 14, 2005, STMicroelectronics, Inc. (“STMicro”) filed a complaint against the Company and the
Company’s CEO Eli Harari, in the Superior Court of the State of California for the County of Alameda, captioned
STMicroelectronics, Inc. v. Harari, Case No. HG 05237216 (the “Harari Matter”). The complaint alleges that
STMicro, as the successor to Wafer Scale Integration, Inc.’s (“WSI”) legal rights, has an ownership interest in
several SanDisk patents that issued from applications filed by Dr. Harari, a former WSI employee. The complaint
seeks the assignment or co-ownership of certain inventions and patents conceived of by Harari, including some of
the patents asserted by the Company in its litigations against STMicro, as well as damages in an unspecified
amount. On November 15, 2005, Harari and the Company removed the case to the U.S. District Court for the
Northern District of California, where it was assigned case number C05-04691. On December 13, 2005, STMicro
filed a motion to remand the case back to the Superior Court of Alameda County. The case was remanded to the
Superior Court of Alameda County on July 18, 2006, after briefing and oral argument on a motion by STMicro for
reconsideration of an earlier order denying STMicro’s request for remand. Due to the remand, the District Court did
not rule upon a summary judgment motion previously filed by the Company. In the Superior Court of Alameda
County, the Company filed a Motion to Transfer Venue to Santa Clara County on August 10, 2006, which was
denied on September 12, 2006. On October 6, 2006, the Company filed a Petition for Writ of Mandate with the First
District Court of Appeal which asks that the Superior Court’s September 12 Order be vacated, and the case
transferred to Santa Clara County. On October 20, 2006, the Court of Appeal requested briefing on the Company’s
petition for a writ of mandate and stayed the action during the pendency of the writ proceedings. On January 17,
2007, the Court of Appeal issued an alternative writ directing the Superior Court to issue a new order granting the
Company’s venue transfer motion or to show cause why a writ of mandate should not issue compelling such an
order. On January 23, 2007, the Superior Court of Alameda transferred the case to Santa Clara County as a result of
the writ proceeding at the Court of Appeal. A Case Management Conference is scheduled for April 26, 2007. The
Company also filed a special motion to strike ST’s unfair competition claim, which the Superior Court denied on
September 11, 2006. The Company has appealed the denial of that motion.
On December 6, 2005, the Company filed a complaint for patent infringement in the United States District
Court for the Northern District of California against STMicroelectronics, Inc. and STMicroelectronics, NV
(collectively, “ST”) (Case No. C0505021 JF). In the suit, the Company seeks damages and injunctions against
ST from making, selling, importing or using flash memory chips or products that infringe the Company’s U.S. Patent
F-44
Notes to Consolidated Financial Statements — (Continued)