Seagate 2006 Annual Report Download - page 95

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
violations of the 10 alleged trade secrets by either defendant prior to December 7, 2005, the date of the hearing. At
Seagate’s request, the USPTO has determined that both patents in suit have substantial new issues of patentability
and have ordered reexamination of the patents. The court recently denied our motion to stay the case pending patent
reexamination. No trial date has been set. We believe the claims are without merit, and we intend to defend against
them vigorously.
Shao Tong, et al. v. Seagate International (Wuxi) Co., Ltd. In July 2002, we were sued in the People’s Court of
Nanjing City, China, by an individual, Shao Tong, and a private Chinese company, Nanjing Yisike Network Safety
Technique Co., Ltd. The complaint alleged that two of our personal storage disc drive products infringe Chinese
patent number ZL94111461.9, which prevents the corruption of systems data stored on disc drives. The suit, which
sought to stop us from manufacturing the two products and claimed immaterial monetary damages, was dismissed by
the court on procedural grounds on November 29, 2002. On December 3, 2002, the plaintiffs served us with notice
that they had refiled the lawsuit. The new complaint contains identical infringement claims against the same disc
drive products, claims immaterial monetary damages and attorney’s fees and requests injunctive relief and a recall of
the products from the Chinese market. Manufacture of the accused products ceased in May 2003. At a hearing on
March 10, 2003, the court referred the matter to an independent technical advisory board for a report on the
application of the patent claims to the two products. On June 10, 2003, we presented our non-
infringement case to the
technical panel. The panel issued a technical advisory report to the court finding no infringement. The court heard
oral arguments on the technical advisory report in September 2003, issued an order that our products do not infringe
the patent and rejected plaintiffs’ lawsuit. Plaintiffs filed an appeal with the Jiangsu High Court, and we filed our
opposition brief on January 21, 2004. The PRC Patent Reexamination Board declared patent ZL94111461.9 invalid
on March 28, 2004. The Jiangsu High Court stayed the appeal on the infringement case pending a final judgment on
patent invalidity. On June 22, 2004, Shao Tong filed a lawsuit in the Beijing Intermediate People’s Court against the
PRC PRB challenging its patent invalidity decision. On November 29, 2004, the court affirmed the decision of patent
invalidity. In December 2004, Shao Tong appealed the decision to the Beijing High People’s court, the highest
appellate court. On November 29, 2004, the court affirmed the decision of patent invalidity. In December 2004, Shao
Tong appealed the decision to the Beijing High People’s Court, the highest appellate court, and a hearing was held
June 22, 2005. The court scheduled a rehearing on December 8, 2005, and subsequently reversed the lower court and
PRB decisions due to a procedural error. The case was remanded to the PRB for further action to correct the
procedural error. A new PRB panel was appointed and the procedural error was corrected and the invalidity case
reargued at a hearing on May 9, 2006. In 2006, we filed a second invalidity proceeding with the PRB. On June 14,
2007, the PRB issued an order holding the patent invalid based on the first invalidity request. The second invalidity
request was stayed as a result of the ruling on the first request. We believe the claims are without merit, and we
intend to defend against them vigorously.
Papst Licensing, GmbH, Patent Litigation. As a result of the acquisition of Maxtor Corporation, we defended
patent infringement litigation against Maxtor Corporation and Quantum Corporation in Multidistrict Litigation
regarding a number of patents relating to motors and motors in disc drives. Papst subsequently added Seagate
Technology as a defendant, although we have a license to the patents in the suit.
On April 24, 2007, we reached an agreement with Papst by accepting a new unilateral proposal of the mediator
for the settlement of all outstanding claims alleged against Maxtor, Quantum and Seagate. Based on this, we adjusted
the accrual as of March 30, 2007, to reflect the amount that is payable by us to Papst in the agreed-upon settlement.
The settlement was completed effective August 6, 2007 and the lawsuits dismissed with prejudice on August 10,
2007.
Siemens, AG. On August 23, 2006, Siemens, AG, a German corporation, filed a complaint against Seagate
Technology in the U.S. District Court for the Central District of California alleging infringement of U.S. Patent
No. 5,686,838 (the
“’838 patent”) entitled “Magnetoresistive Sensor Having at Least a Layer System and a Plurality
of Measuring Contacts Disposed Thereon, and a Method of Producing the Sensor.” The suit alleges that Seagate
drives incorporating Giant Magnetic Resistance (GMR) sensors infringe the ’838 patent. The complaint seeks
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