From QCOM's latest 10-Q -
sec.gov
>>NOTE 9 - COMMITMENTS AND CONTINGENCIES Litigation
On March 5, 1997, the Company filed a complaint against Motorola, Inc.
("Motorola"). The complaint was filed in response to allegations by Motorola
that the Company's then, recently announced, Q Phone infringes design and
utility patents held by Motorola as well as trade dress and common law rights
relating to the appearance of certain Motorola wireless telephone products. The
complaint denies such allegations and seeks a judicial declaration that the
Company's products do not infringe any patents held by Motorola. On March 10,
1997, Motorola filed a complaint against the Company (the "Motorola Complaint"),
alleging claims based primarily on the above-alleged infringement. The Company's
motion to transfer the Motorola Complaint to the U.S. District Court for the
Southern District of California was granted on April 3, 1997. On April 24, 1997,
the court denied Motorola's motion for a preliminary injunction thereby
permitting the Company to continue to manufacture, market and sell the Q Phone.
On April 25, 1997, Motorola appealed the denial of its motion for a preliminary
injunction. On January 16, 1998 the U.S. Court of Appeals for the Federal
Circuit denied Motorola's appeal and affirmed the decision of the U.S. District
Court for the Southern District of California refusing Motorola's request to
enjoin QUALCOMM from manufacturing and selling the Q Phone. On June 4, 1997,
Motorola filed another lawsuit alleging infringement by QUALCOMM of four
patents. Three of the patents had already been alleged in previous litigation
between the parties. On August 18, 1997, Motorola filed another complaint
against the Company alleging infringement by the Company of seven additional
patents. All of the Motorola cases have been consolidated for pretrial
proceedings. On August 6, 1999, the court granted the Company's motion for
summary judgment that the Q Phone does not infringe two of Motorola's design
patents. On October 5, 1999, the U.S. District Court in San Diego granted the
Company's motions for summary judgment that the Q Phone does not infringe the
last two Motorola design patents remaining in the case. As a consequence of
these rulings and Motorola's decision to drop one utility patent from the case,
there are no design patents and a total of ten utility patents remaining in the
case. The cases have been set for a final pretrial conference in April 2000.
Although there can be no assurance that an unfavorable outcome of the dispute
would not have a material adverse effect on the Company's results of operations,
liquidity or financial position, the Company believes the claims are without
merit and will continue to vigorously defend the action.
On July 20, 1999, the Company filed a lawsuit against Motorola seeking a
judicial determination that the Company has the right to terminate all licenses
granted to Motorola under a 1990 Patent License Agreement, while retaining all
licenses granted by Motorola to the Company under the same agreement. The
Company's complaint was filed in the U.S. District Court for the Southern
District of California where the earlier actions between the Company and
Motorola described above have been pending for more than two years. The
complaint alleges that Motorola has committed breaches of the Patent License
Agreement that include pursuing a lawsuit against the Company for infringement
of patents that are in fact licensed to the Company under the agreement and a
failure to grant certain sublicenses to the Company in accordance with the terms
of the agreement. The Company's new
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filing also seeks a ruling that upon termination of the Patent License
Agreement, the patents formerly licensed to Motorola would be infringed by CDMA
handsets, integrated circuits and network infrastructure equipment made and sold
by Motorola. On August 5, 1999, the Company amended its complaint to allege that
Motorola's CDMA wireless phones infringe three patents of the Company. The
Company's new claims seek damages and an injunction against Motorola's sale of
infringing phones. Motorola has filed counterclaims alleging breach of the
Patent License Agreement and a DS-CDMA Technology License Agreement also signed
in 1990. On January 14, 2000, the court entered an order staying the 1999 case
pending resolution of the consolidated 1997 cases.
On or about June 5, 1997, Elisra Electronic Systems Ltd. ("Elisra") submitted
to the International Chamber of Commerce a Request for Arbitration of a dispute
with the Company based upon a Development and Supply Agreement ("DSA") entered
into between the parties effective November 15, 1995, alleging that the Company
wrongfully terminated the DSA, seeking monetary damages. The Company thereafter
submitted a Reply and Counterclaim, alleging that Elisra breached the DSA,
seeking monetary damages. Subsequently, the parties stipulated that the dispute
be heard before an arbitrator under the jurisdiction of the American Arbitration
Association, and to bifurcate the resolution of liability issues from damage
issues. To date, the arbitrator has heard testimony regarding the liability or
non-liability of the parties, and a briefing schedule has been set. Although
there can be no assurance that the resolution of these claims will not have a
material adverse effect on the Company's results of operations, liquidity or
financial position, the Company believes that the claims made by Elisra are
without merit and will vigorously defend against the claims.
On October 27, 1998, the Electronics and Telecommunications Research
Institute of Korea ("ETRI") submitted to the International Chamber of Commerce a
Request for Arbitration (the "Request") of a dispute with the Company arising
out of a Joint Development Agreement ("JDA") dated April 30, 1992, between ETRI
and the Company. In the Request, ETRI alleges that the Company has breached
certain provisions of the JDA and seeks monetary damages and an accounting. The
Company filed an answer and counterclaims denying the allegations, seeking a
declaration establishing the termination of the JDA and monetary damages and
injunctive relief against ETRI. In accordance with the JDA, the arbitration will
take place in San Diego. The arbitration hearing is scheduled to commence July
5, 2000. Although there can be no assurance that the resolution of these claims
will not have a material adverse effect on the Company's results of operations,
liquidity or financial position, the Company believes that the claims are
without merit and will vigorously defend the action.
On May 6, 1999, Thomas Sprague, a former employee of the Company, filed a
putative class action against the Company, ostensibly on behalf of himself and
those of the Company's former employees who were offered employment with
Ericsson in conjunction with the sale to Ericsson of certain of the Company's
infrastructure division assets and liabilities and who elected not to
participate in a Retention Bonus Plan being offered to such former employees.
The complaint was filed in California Superior Court in and for the County of
San Diego and purports to state eight causes of action arising primarily out of
alleged breaches of the terms of the Company's 1991 Stock Option Plan, as
amended from time to time. The putative class sought to include former employees
of the Company who, among other things, "have not or will not execute the Bonus
Retention Plan and accompanying full and complete release of QUALCOMM." The
complaint seeks an order accelerating all unvested stock options for the members
of the class. Of the 1,053 transitioning former employees who had unvested stock
options, 1,016 elected to participate in the Retention Bonus Plan offered by
QUALCOMM and Ericsson, which provides several benefits including cash
compensation based upon a portion of the value of their unvested options, and
includes a written release of claims against the Company. On July 30, 1999,
plaintiffs filed a First Amended Complaint incorporating the allegations set
forth in the original complaint, adding two new causes of action and expanding
the putative class to also include those former employees who chose to
participate in the Bonus Retention Plan. In October 1999, the court sustained
the Company's demurrer to the plaintiffs' cause of action for breach of
fiduciary duty. Counsel for the putative class filed a Second Amended Complaint,
including substantially the same allegations as the First Amended Complaint, on
November 1, 1999. Although there can be no assurance that an unfavorable outcome
of the dispute would not have a material adverse effect on the Company's results
of operations, liquidity or financial position, the Company believes the claims
are without merit and will vigorously defend the action.
On June 29, 1999, GTE Wireless, Incorporated ("GTE") filed an action in the
U.S. District Court for the Eastern District of Virginia asserting that wireless
telephones sold by the Company infringe a single patent allegedly owned by GTE.
On September 15, 1999, the court granted the company's motion to transfer the
action to the U.S. District Court for the Southern District of California.
Although there can be no assurance that an
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unfavorable outcome of the dispute would not have a material adverse effect on
the Company's results of operations, liquidity or financial position, the
Company believes the action is without merit and will vigorously defend the
action.
QUALCOMM has received notice from Ericsson that Ericsson intends to dispute
the determination of the purchase price under the Agreement, pursuant to which
Ericsson acquired certain assets related to the Company's terrestrial wireless
infrastructure business in May 1999. QUALCOMM has also received notice from
Ericsson that Ericsson intends to assert claims for indemnification under the
Agreement. QUALCOMM and Ericsson are having on-going discussions aimed at
potentially resolving these claims. In the event the parties are unable to
resolve these claims, they are subject to dispute resolution procedures set
forth in the Agreement. Although there can be no assurance that the resolution
of these claims will not have a material adverse effect on the Company's results
of operations, liquidity or financial position, the Company believes the claims
are without merit and will vigorously defend them.
The Company is engaged in other legal actions arising in the ordinary course
of its business and believes that the ultimate outcome of these actions will not
have a material adverse effect on its results of operations, liquidity or
financial position.<< |
