SanDisk 2011 Annual Report Download - page 175

This is a TAB type table. Insert
conts here. Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kingston 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
standing, unclean hands, non-infringement, invalidity, unenforceability for alleged patent misuse, express
license, implied license, patent exhaustion, waiver, laches and estoppel.
The District Court consolidated the ’605 and ’607 Actions and stayed these actions during the pendency of
related proceedings before the U.S. International Trade Commission, which are now closed. After lifting the stay,
the District Court set the trial to begin on February 28, 2011. On September 22, 2010, the District Court issued a
Markman Order construing certain terms from the remaining patents. In light of the District Court’s Markman
Order, the Company withdrew its allegations regarding the ’808 and ’893 patents. On February 15, 2011, the
District Court issued a Summary Judgment Order that found that certain Kingston products with a Phison
PS3006 controller contributorily infringed claims 20, 24, 28 and 30 of the ’424 Patent. In doing so, the District
Court found that there were no substantial non-infringing uses for these Kingston products. As part of the order,
the District Court also ruled that the majority of accused Kingston products (ones that did not contain the Phison
PS3006 controller) did not infringe the asserted claims of the ’424 patent. The Summary Judgment Order further
found that none of the accused Kingston products infringed the asserted claims of the ’842 and ’316 patents. The
Summary Judgment Order also found that the Company had standing to sue Kingston on the ’842 and ’316
patents and that the Company was not entitled to damages for Kingston’s sales prior to October 2007. The
Company disagrees with various aspects of the District Court’s rulings in the Summary Judgment Order. On
February 17, 2011, the Company and Kingston filed a stipulated dismissal with the District Court, stating that
rather than proceeding to trial against Kingston products containing the Phison PS3006 controller, which
represented a small amount of damages, the Company agreed to dismiss its claim against the Kingston PS3006
product and Kingston agreed to dismiss its invalidity and/or enforceability counterclaims against the Company’s
patents, thereby allowing either party to appeal. Under the terms of the stipulated dismissal, if granted by the
District Court, the Company and Kingston have the right to re-file the dismissed claims if (a) an appellate court
reverses, remands, or vacates, in whole or in part, the District Court’s September 22, 2010 Claim Construction
Order, or the District Court’s February 15, 2010 Summary Judgment, and (b) the case is returned to the District
Court for further proceedings. The stipulation for dismissal does not prejudice either the Company or Kingston’s
right to appeal this matter in whole or in part.
The District Court entered an amended final judgment dismissing these actions on March 29, 2011. The
Company filed a timely notice of appeal from that judgment on April 19, 2011, and the U.S. Court of Appeals for
the Federal Circuit docketed the Company’s appeal on April 25, 2011. The appeal is scheduled for oral argument
on March 7, 2012.
Patent Infringement Litigation Initiated by SanDisk. On May 4, 2010, the Company filed a Complaint for
patent infringement in the U.S. District Court for the Western District of Wisconsin (the “District Court”) against
Kingston and Imation. The Company has since dismissed its claims against Imation in light of a confidential
settlement agreement between the parties. In this action, the Company asserts U.S. Patent Nos. 7,397,713;
7,492,660; 7,657,702; 7,532,511; 7,646,666; 7,646,667; and 6,968,421. The Company seeks damages and
injunctive relief. Kingston has answered the Complaint denying infringement and raising several affirmative
defenses and related counterclaims. These defenses and related counterclaims include, among others,
non-infringement, invalidity, implied license, express license, unenforceability for alleged patent misuse, lack of
standing and bad faith litigation. Kingston also asserted antitrust counterclaims against the Company alleging
monopolization, attempted monopolization and agreement in restraint of trade, all under the Sherman Act.
Kingston also asserted state law unfair competition counterclaims. The Company has denied Kingston’s
counterclaims. The District Court issued a Markman Order construing certain claim terms of the patents on
March 16, 2011. On June 10, 2011, the Company filed a motion seeking a summary judgment in connection with
Kingston’s antitrust counterclaims and Kingston’s implied license defense. On June 10, 2011, Kingston filed a
motion seeking a summary judgment of non-infringement concerning all of the Company’s asserted patent
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