SanDisk 2009 Annual Report Download - page 161

This is a TAB type table. Insert
conts here. Annual Report
Notes To Consolidated Financial Statements
disgorgement of profits. On May 20, 2009, the Court denied defendants’ motion to dismiss the consolidated
direct purchaser complaint and denied (with limited exceptions for certain state law claims) defendants’ motion
to dismiss the consolidated indirect purchaser complaint. Class certification discovery and briefing was
completed in September 2009, and the plaintiffs’ respective class certification motions have been taken under
submission.
Spansion Bankruptcy. Spansion, LLC (“Spansion”) and SanDisk IL Ltd. f/k/a M-Systems Flash Disk
Pioneers Ltd. (“SanDisk IL”) are parties to the SSP Driver Software License Agreement (the “SSP License”) and
the ORNAND Driver Software License Agreement (the “ORNAND License” and, collectively with the New
Collaboration Agreement, the “Agreements”). As set forth in the Agreements, Spansion was required to make
quarterly royalty and support fee payments for use of SanDisk IL’s patented technology. On March 1, 2009,
Spansion filed for protection under chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On May 22, 2009, SanDisk IL filed a
proof of claim asserting a prepetition unsecured claim against Spansion in the amount of $11,338,260.
Subsequently, the parties entered into Amendment to the New Collaboration Agreement (the “Amendment”)
dated as of January 31, 2010, pursuant to which Spansion (a) assumed the SSP License and New Collaboration
Agreement, (b) rejected the ORNAND License, (c) agreed to pay SanDisk IL $1,157,065 in order to cure
arrearages under the Agreements, and (d) agreed the allowance of a general unsecured, prepetition claim of
$6,166,123 in connection with the rejection of the ORNAND License (the “Proposed Prepetition Claim”),
comprised of $1,166,123 for prepetition arrearages and $5,000,000 for rejection damages. The Amendment will
not be effective unless and until approved by the Bankruptcy Court.
Patent Declaratory Judgment Litigation Initiated by SanDisk. On June 19, 2009, the Company filed a
complaint against LSI Corporation (“LSI”) in the Northern District of California seeking a declaration of
non-infringement, declaration of invalidity and/or unenforceability as to eight LSI patents relating to digital
audio and video technology, and seeking remedies under various California State laws for misrepresentations
made by LSI to the Company’s customers. The suit, Case No. C09 02737, was filed in response to threats made
by LSI against the Company and certain customers of the Company. LSI has counterclaimed for infringement of
the eight LSI patents in suit and has accused most of SanDisk’s digital audio and video players of infringement.
On September 18, 2009, the Court granted LSI’s motion to dismiss SanDisk’s state law claims. The Court has set
a date for the claim construction hearing for March 11, 2010 and a trial date of November 2, 2010.
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