SanDisk 2008 Annual Report Download - page 28

laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. In the past,
we have been involved in significant and expensive disputes regarding our intellectual property rights and those
of others, including claims that we may be infringing third-parties’ patents, trademarks and other intellectual
property rights. We expect that we may be involved in similar disputes in the future.
We cannot assure you that:
• any of our existing patents will not be invalidated;
• patents will be issued for any of our pending applications;
• any claims allowed from existing or pending patents will have sufficient scope or strength;
• our patents will be issued in the primary countries where our products are sold in order to protect our
rights and potential commercial advantage; or
• any of our products or technologies do not infringe on the patents of other companies.
In addition, our competitors may be able to design their products around our patents and other proprietary
rights. We also have patent cross-license agreements with several of our leading competitors. Under these
agreements, we have enabled competitors to manufacture and sell products that incorporate technology covered
by our patents. While we obtain license and royalty revenue or other consideration for these licenses, if we
continue to license our patents to our competitors, competition may increase and may harm our business,
financial condition and results of operations.
There are both flash memory producers and flash memory card manufacturers who we believe may require a
license from us. Enforcement of our rights often requires litigation. If we bring a patent infringement action and
are not successful, our competitors would be able to use similar technology to compete with us. Moreover, the
defendant in such an action may successfully countersue us for infringement of their patents or assert a
counterclaim that our patents are invalid or unenforceable. If we do not prevail in the defense of patent
infringement claims, we could be required to pay substantial damages, cease the manufacture, use and sale of
infringing products, expend significant resources to develop non-infringing technology, discontinue the use of
specific processes, or obtain licenses to the infringing technology.
On October 24, 2007, we initiated two patent infringement actions in the United States District Court for the
Western District of Wisconsin and one action in the United States International Trade Commission against 25
companies that manufacture, sell and import USB flash drives, CompactFlash cards, multimedia cards,
MP3/media players and/or other removable flash storage products. There can be no assurance that we will be
successful in these actions, that the validity of the asserted patents will be preserved or that we will not face
counterclaims of the nature described above.
We are currently and may in the future be involved in litigation, including litigation regarding our
intellectual property rights or those of third parties, which may be costly, may divert the efforts of our key
personnel and could result in adverse court rulings, which could materially harm our business. We are involved
in a number of lawsuits, including among others, several cases involving our patents and the patents of third
parties. We are the plaintiff in some of these actions and the defendant in other of these actions. Some of the
actions seek injunctions against the sale of our products and/or substantial monetary damages, which if granted
or awarded, could have a material adverse effect on our business, financial condition and results of operations.
We and other companies have been sued in the United States District Court of the Northern District of
California in purported consumer class actions alleging a conspiracy to fix, raise, maintain or stabilize the pricing
of flash memory, and concealment thereof, in violation of state and federal laws. The lawsuits purport to be on
behalf of classes of purchasers of flash memory. The lawsuits seek restitution, injunction and damages, including
treble damages, in an unspecified amount.
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