SanDisk 2009 Annual Report Download - page 160

Notes To Consolidated Financial Statements
ALJ held an evidentiary hearing. On February 9, 2009, the ALJ extended the target date for conclusion of the
investigation to August 10, 2009. On April 10, 2009, the ALJ issued an Initial Determination, finding that (1) the
Respondents did not infringe either the ’424 patent or the ’011 patent, (2) claim 8 of the ’011 patent was obvious
and, thus, invalid over the prior art, and (3) the Company had a domestic industry in both the ’424 patent and the
’011 patent. The ALJ also denied the Respondents’ patent misuse and patent exhaustion defenses. On April 14,
2009, the ITC granted the Company’s request for an extension to file a petition for review. On May 4, 2009, the
Company and Respondents filed their respective petitions for review, which were granted in part pursuant to the
ITC’s August 24, 2009 Notice of Review. In that notice, the ITC advised that it would review the ALJ’s
non-infringement and validity findings with respect to the ’424 patent, but that it would not review any of the
ALJ’s findings concerning the ’011 patent. Accordingly, the ALJ’s findings regarding the ’011 patent became
final as of August 24, 2009. In October 2009, the Commission issued its Final Determination with respect to the
’424, in which it reversed certain claim construction findings that were adverse to SanDisk, but affirmed the
ALJ’s overall finding of no violation of Section 337 of the Tariff Act of 1930. The Company has determined not
to appeal the Commission’s Final Determination as it relates to either the ’011 patent or the ’424 patent. These
ITC proceedings are now concluded.
Patent Infringment Litigation Initiated by SanDisk. 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 Sales, Inc. (“Synergistic”), USBest, Skymedi,
Chipsbank, Infotech, Zotek, PQI, PNY, Kingston, Buffalo, Verbatim, Transcend, Imation, Add-On Computer
Peripherals, A-DATA, Apacer, Behavior, Corsair, Dane-Elec, EDGE, Interactive, LG, TSR and Welldone. In this
action, Case No. 07-C-0607-C (“the ’607 Action”), the Company asserts that the defendants infringe the ’808
patent, the ’424 patent, the ’893 patent, the ’332 patent and the ’011 patent. That same day, the Company filed a
second complaint for patent infringement in the same court 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 ’605 Action”),
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 both actions. In light of
settlement agreements, the Company dismissed its claims against Phison, Silicon Motion, Skymedi, Verbatim,
Corsair, Add-On Computer Peripherals, EDGE, Infotech, Interactive, PNY, TSR and Welldone. The Company’s
claims against Chipsbank, Acer, Behavior, Dane-Elec, LG, PQI, and Synergistic have been dismissed without
prejudice. The Court consolidated the ’605 and ’607 Actions and stayed these actions during the pendency of the
619 Investigation (described above). On November 13, 2009, the Court lifted the stay except as to the ’424
patent. On December 14, 2009, the Court advised the parties that the Court would try the consolidated actions in
February 2011 with summary judgment motions due six months before trial. On December 30, 2009, the
Company filed an opposition to USBest’s motion to dismiss for lack of personal jurisdiction. Several of the
remaining defendants have answered the Company’s complaints by denying infringement and raising several
affirmative defenses and related counterclaims. These defenses and related counterclaims include, among others,
lack of personal jurisdiction, improper venue, lack of standing, non-infringement, invalidity, unenforceability,
express license, implied license, patent exhaustion, waiver, laches, and estoppel.
Federal Civil Antitrust Class Actions. 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
and 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 from
January 1, 1999 through the present. The lawsuits seek an injunction, damages, restitution, fees, costs, and
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