Litigation part of the 10K, (one footnote) follows,
complete 10K is 107 pages located at
freeedgar.com
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NOTE 14. 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 United States 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 United States 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 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
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QUALCOMM INCORPORATED
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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 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 dated April 30, 1992 ("JDA") 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. No schedule for the arbitration proceedings has been
established. 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 February 26, 1999, the Lemelson Medical, Education & Research
Foundation, Limited Partnership, ("Lemelson") filed an industry-wide action in
the United States District Court for the District of Arizona. The complaint
names a total of 88 parties, including the Company, as defendants and purports
to assert claims for infringement of 15 patents. The complaint alleges that
application specific integrated circuit ("ASIC") devices sold by the Company, or
the processes by which such devices are manufactured, infringe the asserted
patents. On October 1, 1999, the Company and Lemelson entered into a settlement
agreement resolving all claims made against the Company in the complaint which
will not have a material effect on the financial results of the Company.
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
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QUALCOMM INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 have indicated that they will be filing a Second
Amended Complaint, including additional class representatives, and substantially
the same allegations as the First Amended Complaint. 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
United States 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 United States District Court for the Southern
District of California. 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
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.
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