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Notes To Consolidated Financial Statements
On October 24, 2007, the Company filed a complaint for patent infringement in the United States District
Court for the Western District of Wisconsin against the following defendants: Phison, Silicon Motion,
Synergistic, USBest, Skymedi, Zotek, Infotech, PQI, PNY, Kingston, Buffalo, Verbatim, Transcend, Imation,
A-DATA, Apacer, Behavior, and Dane-Elec. In this action, Case No. 07-C-0605-C, the Company asserts that the
defendants infringe U.S. Patent No. 6,149,316 (the “’316 patent”) and U.S. Patent No. 6,757,842 (the “’842
patent”). The Company seeks damages and injunctive relief. In light of above mentioned settlement agreements,
the Company dismissed its claims against Infotech and PNY. The Company also voluntarily dismissed its claims
against Acer and Synergistic without prejudice. On November 21, 2007, defendant Kingston filed a motion to
consolidate and stay this action. Several defendants joined in Kingston’s motion. On December 17, 2007, the
Company filed an opposition to Kingston’s motion. That same day, several defendants filed another motion to
stay this action. On January 7, 2008, the Company opposed the defendants’ second motion to stay. On
January 22, 2008, defendants Phison, Skymedi and Behavior filed motions to dismiss the Company’s complaint
for lack of personal jurisdiction. That same day, defendants Phison, Silicon Motion, USBest, Skymedi, PQI,
Kingston, Buffalo, Verbatim, Transcend, A-DATA, Apacer, and Dane-Elec answered the Company’s complaint
denying infringement and raising several affirmative defenses. These defenses included, among others, lack of
personal jurisdiction, improper venue, lack of standing, invalidity, unenforceability, express license, implied
license, patent exhaustion, waiver, latches, and estoppel. On January 24, 2008, Silicon Motion filed a motion to
dismiss the Company’s complaint for lack of personal jurisdiction. On January 25, 2008, Dane-Elec also filed a
motion to dismiss the Company’s complaint for lack of personal jurisdiction. On January 28, 2008, the Court
issued an order staying the case in its entirety with respect to all parties until the proceeding in the 619
Investigation become final. In its order, the Court also consolidated this action (Case Nos. 07-C-0605-C) with the
action discussed in the preceding paragraph (07-C-0607-C).
Between August 31, 2007 and December 14, 2007, the Company (along with a number of other manufacturers
of flash memory products) was sued in the Northern District of California, in eight purported class action
complaints. On February 7, 2008, all of the civil complaints were consolidated into two complaints, one on behalf of
direct purchasers and one on behalf of indirect purchasers, in the Northern District of California in a purported class
action captioned In re Flash Memory Antitrust Litigation, Civil Case No. C07-0086. Plaintiffs allege the Company
and a number of other manufacturers of flash memory products conspired to fix, raise, maintain, and stabilize the
price of NAND flash memory in violation of state and federal laws. The lawsuits purport to be on behalf of
purchasers of flash memory between January 1, 1999 through the present. The lawsuits seek an injunction,
damages, restitution, fees, costs, and disgorgement of profits. On April 8, 2008, the Company, along with
co-defendants, filed motions to dismiss the direct purchaser and indirect purchaser complaints. Also on April 8,
2008, the Company, along with co-defendants, filed a motion for a protective order to stay discovery. On April 22,
2008, direct and indirect purchaser plaintiffs filed oppositions to the motions to dismiss. The Company’s, along with
co-defendants’, reply to the oppositions was filed May 13, 2008. The Court took the motions to dismiss and the
motion for a protective order under submission on June 3, 2008, and has yet to issue its ruling.
On November 6, 2007, Gil Mosek, a former employee of SanDisk IL Ltd. (“SDIL”), filed a lawsuit against
SDIL, Dov Moran and Amir Ban in the Tel-Aviv District Court, claiming that he and Amir Ban, another former
employee of SDIL, reached an agreement according to which a jointly-held company should have been
established together with SDIL. According to Mr. Mosek, SDIL knew about the agreement, approved it and
breached it, while deciding not to establish the jointly-held company. On January 1, 2008, SDIL filed a statement
of defense. Simultaneously, SDIL filed a request to dismiss the lawsuit, claiming that Mr. Mosek signed a waiver
in favor of SDIL, according to which he has no claim against SDIL. On February 12, 2008, Mr. Mosek filed a
request to allow him to present certain documents, which contain confidential information of SDIL. On
February 26, 2008, SDIL opposed this request, claiming that SDIL’s documents are the sole property of SDIL
and Mr. Mosek has no right to hold and to use them. On March 6, 2008, the court decided that Mr. Mosek has to
pay a fee according to the estimated amount of the claim. On April 3, 2008, Mr. Mosek filed a request to amend
the claim by setting the claim on an amount of NIS 3,000,000. On April 9, 2008, SDIL filed its response to this
F-54