SanDisk 2011 Annual Report Download - page 174

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16: Litigation
The flash memory industry is characterized by significant litigation seeking to enforce patent and other
intellectual property rights. The Company’s patent and other intellectual property rights are primarily responsible
for generating license and royalty revenue. The Company seeks to protect its intellectual property through
patents, copyrights, trademarks, trade secrets, confidentiality agreements and other methods, and has been and
likely will continue to enforce such rights as appropriate through litigation and related proceedings. The
Company expects that its competitors and others who hold intellectual property rights related to its industry will
pursue similar strategies. From time-to-time, it has been and may continue to be necessary to initiate or defend
litigation against third parties. These and other parties could bring suit against the Company. In each case listed
below where the Company is the defendant, the Company intends to vigorously defend the action. At this time,
the Company does not believe it is reasonably possible that losses related to the litigation described below have
occurred beyond the amounts, if any, which have been accrued. However, legal discovery and litigation is highly
unpredictable and future legal developments may cause current estimates to change in future periods.
Patent Infringement Litigation Initiated by SanDisk. On October 24, 2007, the Company filed a Complaint
for patent infringement in the U.S. District Court for the Western District of Wisconsin (the “District Court”)
against the following defendants: Phison Electronics Corp. (“Phison”); Silicon Motion Technology Corp., Silicon
Motion, Inc. (Taiwan), Silicon Motion, Inc. (California), and Silicon Motion International, Inc. (collectively,
“Silicon Motion”); Synergistic Sales, Inc. (“Synergistic”); USBest Technology, Inc. dba Afa Technologies, Inc.
(“USBest”); Skymedi Corp. (“Skymedi”); Chipsbank Microelectronics (HK) Co., Ltd., Chipsbank Technology
(Shenzhen) Co., Ltd., and Chipsbank Microelectronics Co., Ltd., (collectively, “Chipsbank”); Infotech Logistic
LLC (“Infotech”); Zotek Electronic Co., Ltd., dba Zodata Technology Ltd. (collectively, “Zotek”); Power
Quotient International Co., Ltd., and PQI Corp., (collectively, “PQI”); PNY Technologies, Inc. (“PNY”);
Kingston Technology Co., Inc., Kingston Technology Corp., Payton Technology Corp., and MemoSun, Inc.
(collectively, “Kingston”); Buffalo, Inc., Melco Holdings, Inc., and Buffalo Technology (USA), Inc.
(collectively, “Buffalo”); Verbatim Corp. (“Verbatim”); Transcend Information Inc. (Taiwan), Transcend
Information Inc. (California, U.S.A.), and Transcend Information Maryland, Inc., (collectively, “Transcend”);
Imation Corp., Imation Enterprises Corp., and Memorex Products, Inc. (collectively, “Imation”); Add-On
Computer Peripherals, Inc. and Add-On Computer Peripherals, LLC (collectively, “Add-On Computer
Peripherals”); Add-On Technology Co., A-Data Technology Co., Ltd., and A-Data Technology (USA) Co., Ltd.,
(collectively, “A-DATA”); Apacer Technology Inc. and Apacer Memory America, Inc. (collectively, “Apacer”);
Acer, Inc.; Behavior Tech Computer Corp. and Behavior Tech Computer (USA) Corp. (collectively,
“Behavior”); Corsair Memory, Inc. (“Corsair”); Dane-Elec Memory S.A., and Dane-Elec Corp. USA,
(collectively, “Dane-Elec”) EDGE Tech Corp. (“EDGE”); Interactive Media Corp, (“Interactive”); LG
Electronics, Inc., and LG Electronics U.S.A., Inc., (collectively, “LG”); TSR Silicon Resources Inc. (“TSR”);
and Welldone Co. (“Welldone”). In this action (the “607 Action”), the Company initially asserted that the
defendants infringed U.S. Patent Nos. 5,719,808 (the “808 patent”), 6,763,424 (the “424 patent”); 6,426,893 (the
“893 patent”); 6,947,332 (the “332 patent”); and 7,137,011 (the “011 patent”). The Company has since entered
into a stipulation dismissing the ’332 patent. The Company concurrently filed a second Complaint for patent
infringement in the same District Court against the following defendants: Phison, Silicon Motion, Synergistic,
USBest, Skymedi, Zotek, Infotech, PQI, PNY, Kingston, Buffalo, Verbatim, Transcend, A-DATA, Apacer,
Behavior, and Dane-Elec. In this action (“the ‘605 Action”), the Company asserted that the defendants infringed
U.S. Patent Nos. 6,149,316 (the “316 patent”) and 6,757,842 (the “842 patent”). The Company seeks damages
and injunctive relief in both actions. Settlement agreements have subsequently been reached with, and the
Company has dismissed its claims against, Imation, Phison, Silicon Motion, Skymedi, Verbatim, Corsair,
Add-On Computer Peripherals, EDGE, Infotech, Interactive, PNY, TSR and Welldone. In addition, the
Company’s claims against Chipsbank, Acer, Behavior, Dane-Elec, LG, PQI, USBest, Transcend, A-DATA,
Apacer, Buffalo and Synergistic have been dismissed without prejudice. In light of these settlements and
dismissals, Kingston is the only remaining defendant.
F-50