SanDisk 2008 Annual Report Download - page 116

Notes To Consolidated Financial Statements
Alameda transferred the case to Santa Clara County as a result of the writ proceeding at the Court of Appeal. The
Company also filed a special motion to strike STMicro’s unfair competition claim, which the Superior Court
denied on September 11, 2006. The Company appealed the denial of that motion, and the proceedings at the
Superior Court were stayed during the pendency of the appeal. On August 7, 2007, the First District Court of
Appeal affirmed the Superior Court’s decision, and the Supreme Court subsequently denied the Company’s
petition for review. On February 7, 2008, the Company and Dr. Harari moved for judgment on the pleadings on
the ground that the federal courts have exclusive jurisdiction over the claims in the case. The Superior Court
denied this motion and litigation then proceeded at the Superior Court until May 7, 2008, when the Company and
Dr. Harari again removed the case to the U.S. District Court for the Northern District of California. The District
Court consolidated the case and the previously-removed action under case number C05-04691. STMicro filed a
motion to remand which was granted on August 26, 2008. The case was remanded to the Superior Court for the
County of Santa Clara, Case No. 1-07-CV-080123, and trial has been set for September 8, 2009. On January 30,
2009, the Company and Dr. Harari filed a motion for summary judgment on the grounds that STMicro’s claims
are time-barred. The motion for summary judgment is scheduled to be heard on April 27, 2009.
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 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 No. 5,991,517 (the “’517 patent”). As discussed above, the ’517 patent
will be litigated together with the ’338 patent in Civil Case No. C 04 04379JF.
On September 11, 2006, Mr. Rabbi, a shareholder of msystems Ltd. (“msystems”), a company subsequently
acquired by the Company in or about November 2006, filed a derivative action in Israel and a motion to permit
him to file the derivative action against msystems and four directors of msystems arguing that options were
allegedly allocated to officers and employees of msystems in violation of applicable law. Mr. Rabbi claimed that
the aforementioned actions allegedly caused damage to msystems. On January 25, 2007, SanDisk IL Ltd.
(“SDIL”), successor in interest to msystems, filed a motion to dismiss the motion to seek leave to file the
derivative action and the derivative action on the grounds, inter alia, that Mr. Rabbi ceased to be a shareholder of
msystems after the merger between msystems and the Company. On March 12, 2008, the court granted SDIL’s
motion and dismissed the motion to seek leave to file the derivative action and consequently, the derivative
action itself was dismissed. On May 15, 2008, Mr. Rabbi filed an appeal with the Supreme Court of Israel, the
hearing of which is set for March 19, 2009.
On February 16, 2007, Texas MP3 Technologies, Ltd. (“Texas MP3”) filed suit against the Company,
Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Apple Inc., Case No. 2:07-CV-52, in the
Eastern District of Texas, Marshall Division, alleging infringement of U.S. Patent 7,065,417 (the “’417 patent”).
On June 19, 2007, the Company filed an answer and counterclaim: (a) denying infringement; (b) seeking a
declaratory judgment that the ’417 patent is invalid, unenforceable and not infringed by the Company. On
July 31, 2007, Texas MP3 filed an amended complaint against the Company and the other parties named in the
original complaint, alleging infringement of the ’417 patent. On August 1, 2007, defendant Apple, Inc. filed a
motion to stay the litigation pending completion of an inter-partes reexamination of the ’417 patent by the U.S.
Patent and Trademark Office. That motion was denied. On August 10, 2007, the Company filed an answer to the
amended complaint and a counterclaim: (a) denying infringement; (b) seeking a declaratory judgment that the
’417 patent is invalid, unenforceable and not infringed by the Company. Texas MP3 and the Company have
reached a settlement, effective January 16, 2009. As a result of the settlement the Court dismissed all claims
against the Company with prejudice on January 23, 2009.
On or about May 11, 2007, the Company received written notice from Alcatel-Lucent, S.A. (“Lucent”),
alleging that the Company’s digital music players require a license to U.S. Patent No. 5,341,457 (the “’457
patent”) and U.S. Patent No. RE 39,080 (the “’080 patent”). On July 13, 2007, the Company filed a complaint for
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