Michael,
"The decision was issued by J. Breyer on 3/28/00 by way of memorandum & order - this means a written decision."
If that ruling came out on 3/28 how does Lexar Media get away with filing S1A on 3/29 that fails to mention the decsion?
"Legal Proceedings
We are a party to SanDisk Corporation v. Lexar Media, Inc., an action filed
in March 1998 in the United States District Court for the Northern District of
California, Case No. C98-01115 CRB. The suit involves allegations by SanDisk
that our CompactFlash cards and PC Cards are infringing its U.S. Patent
No. 5,602,987. In its complaint, SanDisk alleges that it will seek preliminary
and permanent injunctions against infringement, damages for infringement,
increased damages for willful infringement up to treble
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damages, attorneys' fees and costs. SanDisk has alleged that all of our
controllers infringe their patent. Approximately 80% of our revenues in 1999
were from sales of our controllers and parts incorporating versions of our
controllers, and we expect this to be the case for the next several years.
To date, SanDisk has not sought a preliminary injunction. At our request,
the district court conducted an expedited claim construction proceeding.
SanDisk identified Claims 1, 10, 17, 23 and 35 of U.S. Patent No. 5,602,987 as
being at issue. On March 4, 1999, the Court issued a memorandum and order
regarding the construction of these claims of U.S. Patent No. 5,602,987. In
that memorandum and order, the district court adopted some of the claim
construction positions advanced by SanDisk and some of the claim construction
positions advanced by Lexar, and did not rule on some of the issues raised by
the parties. On September 20, 1999, SanDisk updated its disclosures to assert
solely Claims 1 and 10 of U.S. Patent No. 5,602,987, with a reservation of
rights with respect to the other claims originally asserted.
On July 29, 1999, SanDisk filed a motion for partial summary judgment that
the identified products contribute to the infringement of Claim 10 of U.S.
Patent No. 5,602,987. We believe that SanDisk's arguments are incorrect and,
accordingly, we filed an opposition to this motion on December 30, 1999. We
also filed our own motions that there is no infringement of this claim and that
it is invalid. These motions were heard by the District Court on March 17,
2000. At the hearing, the Court indicated that it will render a decision on the
motions but has not specified a date for a decision.
We believe that the SanDisk complaint is without merit and that we have
meritorious defenses. We intend to vigorously defend the SanDisk litigation. We
do not believe that our products infringe U.S. Patent No. 5,602,987. We further
believe that U.S. Patent No. 5,602,987 is invalid and/or unenforceable. We have
received a written opinion from our patent counsel regarding non-infringement
and invalidity of U.S. Patent No. 5,602,987. While we are vigorously contesting
these claims, we cannot predict the ultimate outcome of the lawsuit.
In the event that a permanent injunction were granted, we would be unable to
sell products incorporating those methods and parts found to infringe U.S.
Patent No. 5,602,987. We would need to either negotiate a license with SanDisk
or engage in a redesign of those products. A redesign of those products would
result in an interruption in sales that could extend for some time. Other than
our regular product development efforts, we are not currently engaged in any
development or redesign efforts in this regard, and there can be no assurance
that any such efforts would be successful. Accordingly, a permanent injunction
would result in a substantial reduction in our revenues and losses over an
extended period of time, and our business would suffer. In the event of an
adverse ruling, we also could be required to pay damages to SanDisk, which
could be subject to trebling were we found to have willfully infringed U.S.
Patent No. 5,602,987.
In connection with the SanDisk litigation, we have incurred and expect to
continue to incur substantial legal and other expenses. In addition, the
SanDisk litigation has diverted and is expected to continue to divert the
efforts and attention of our management and technical personnel. Patent
litigation is highly complex and can extend for a protracted period of time,
which can substantially increase the cost of litigation. Accordingly, the
expenses and diversion of resources associated with the SanDisk litigation
could seriously harm our business and financial condition and could affect our
ability to raise capital in the future. Further, if the SanDisk patent
litigation were to be resolved by a settlement, we might need to make
substantial payments to SanDisk or grant a license to SanDisk to utilize
portions of our technology, which could have a material adverse effect on our
business and financial condition.
In addition, new patent applications may be currently pending or be filed in
the future by SanDisk. All pending United States patent applications are
confidential until patents are issued, and thus it is impossible to ascertain
all possible patent infringement issues that may be raised.
We are also a party to Lexar Media, Inc. v. SanDisk Corporation, Case No.
C99-02463 CRB. On May 25, 1999, we filed a complaint in the United States
District Court for the Northern District of California alleging that SanDisk
has engaged in false advertising, unfair competition, trade libel and
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interference with our prospective business advantage. We sought a preliminary
injunction against the anticompetitive conduct of SanDisk and its use of false
and misleading advertising, which the District Court granted in September 1999.
SanDisk has retracted its false and misleading advertising. We are also seeking
damages incurred as a result of the false advertising and anticompetitive
conduct. On October 1, 1999, SanDisk answered our complaint and has filed four
counterclaims for false advertising. On November 19, 1999, we filed a motion to
dismiss two of the counterclaims of SanDisk. The motion was heard on December
3, 1999 and two of SanDisk's counterclaims were dismissed.
We were also involved in a patent interference proceeding, Patent
Interference No. 103,607, in which SanDisk and Western Digital Corporation are
real parties in interest. The interference involved conflicting claims between
us and SanDisk and Western Digital relating to rights claimed in Claims 1 and
10 of our U.S. Patent No. 5,388,083. Our U.S. Patent No. 5,388,083 relates to
our wear-leveling technology, a technique that extends the life of flash memory
cells. On October 26, 1999, the Board of Patent Appeals and Interferences
determined that the prior claims of SanDisk and Western Digital are
unpatentable. SanDisk and Western Digital have indicated that they are not
going to pursue an appeal of this decision."
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