Western Digital 2001 Annual Report Download - page 24

not believe that the outcome of this matter will have a material adverse eÅect on its consolidated Ñnancial
position, results of operations or liquidity.
In June 2000 Discovision Associates (""Discovision'') notiÑed the Company in writing that it believes
certain of the Company's hard disk drive products may infringe certain of Discovision's patents. Discovision
has oÅered to provide the Company with a license under its patent portfolio. The Company is in discussion
with Discovision regarding its claims. There is no litigation pending. The Company does not believe that the
outcome of this matter will have a material adverse eÅect on the Company's consolidated Ñnancial position,
results of operations or liquidity.
On June 9, 2000, a suit was brought against the Company in California Superior Court for the County of
Orange on behalf of a class of former employees of the Company who were terminated as a result of a
reduction in force in December 1999. The complaint asserted claims for unpaid wages, fraud, breach of
Ñduciary duty, breach of contract, and unfair business practices. The Company removed the suit to United
States District Court, Central District of California, on the ground that all of the claims were preempted by
the Employee Retirement Income Security Act of 1974. On January 26, 2001, the Company Ñled a motion to
dismiss plaintiÅs' complaint under Federal Rule of Civil Procedure 12(b). The Court granted the Company's
motion with leave to amend on April 2, 2001. PlaintiÅs Ñled an amended complaint on April 6, 2001, and the
Company Ñled a motion to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b) on
June 4, 2001. The Court granted the Company's motion and dismissed plaintiÅs' amended complaint with
prejudice on August 6, 2001. On September 5, 2001, the Court entered a stipulated order according to which
plaintiÅs agreed to waive their right to appeal the Court's order dismissing their claims in exchange for the
Company's agreeing to waive its right to costs and fees as the prevailing party under ERISA.
On May 22, 2001, Cambrian Consultants, Inc. (""Cambrian'') Ñled a complaint against the Company in
the United States District Court, Central District of California. The suit alleges infringement by the Company
of a Cambrian patent. On July 20, 2001, the Company Ñled an answer denying the allegations contained in
Cambrian's complaint and a counterclaim asserting that Cambrian's patent was invalid. The Court ordered
that a Markman hearing to construe the claims of Cambrian's patent be held on April 15, 2002 and set a
brieÑng schedule leading up to the hearing. Both parties are engaged in discovery and expect that such
discovery will continue for at least the next several months. Based on its initial investigation and the limited
discovery done to date, the Company does not believe that the outcome of this matter will have a material
adverse eÅect on its consolidated Ñnancial position, results of operation or liquidity.
On July 5, 2001, the Company (and its Malaysian subsidiary) Ñled suit against Cirrus Logic, Inc.
(""Cirrus'') in California Superior Court for the County of Orange for breach of contract and other claims
resulting from Cirrus' role as a strategic supplier of read channel chips for the Company's hard drives. The
Company also stopped making payments to Cirrus for past deliveries of chips and terminated all outstanding
purchase orders from Cirrus for such chips. The Company's complaint alleges that Cirrus' unlawful conduct
caused damages in excess of any amounts that may be owing on outstanding invoices or arising out of any
alleged breach of the outstanding purchase orders. On August 20, 2001, Cirrus Ñled an answer and cross-
complaint. Cirrus denied the allegations contained in the Company's complaint and asserted counterclaims
against the Company for, among other things, the amount of the outstanding invoices and the Company's
alleged breach of the outstanding purchase orders. The parties have begun discovery and expect that such
discovery will continue for the next several months. Based on its initial investigation and the limited discovery
done to date, the Company does not believe that the outcome of this matter will have a material adverse eÅect
on its consolidated Ñnancial position, results of operation or liquidity.
In the normal course of business, the Company receives and makes inquiries regarding possible
intellectual property matters, including alleged patent infringement. Where deemed advisable, the Company
may seek or extend licenses or negotiate settlements. Although patent holders often oÅer such licenses, no
assurance can be given that in a particular case a license will be oÅered or that the oÅered terms will be
acceptable to the Company. The Company does not believe that the ultimate resolution of these matters will
have a material adverse eÅect on its consolidated Ñnancial position, results of operations or liquidity.
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