Intel 2002 Annual Report Download - page 61

In April 2002, Intel and Intergraph announced that they entered into a settlement agreement, pursuant to which they agreed to settle the
Alabama lawsuit and dismiss it with prejudice. Pursuant to the settlement agreement, Intel made a cash payment of $300 million to Intergraph
and in return received a license under all Intergraph patents and patent applications filed before April 4, 2012, excluding the patents at issue in
the Texas case. Intel has also obtained ownership of 15 Intergraph patents and a general release covering all matters in controversy in the
Alabama case. Intel recorded $155 million of the $300 million payment as a charge to cost of sales in the first quarter of 2002. The remaining
$145 million represents the value of the license received and has been capitalized as an intangible asset (see "Note 16: Identified Intangible
Assets").
In October 2002, the Texas court ruled that Intel infringed both patents at issue in that case, and the Texas court has declined to reconsider
its decision. Pursuant to the settlement agreement, Intel paid Intergraph a further $150 million. Intel plans to appeal the trial court's decision ,
and
if Intel prevails on appeal, no further payments will be due to Intergraph under the settlement agreement. However, if Intergraph prevails on
either patent, the settlement agreement provides that Intel must pay Intergraph an additional $100 million and will
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receive a license for the patents at issue in the case. The $150 million payment to Intergraph has been capitalized as an intangible asset, and the
additional $100 million payment, if required, is also expected to be capitalized.
In May 2000, various plaintiffs filed a class-action lawsuit in the United States District Court for the Northern District of California,
alleging violations of the Securities Exchange Act of 1934 and SEC Rule 14d-10 in connection with Intel's acquisition of DSP
Communications, Inc. The complaint alleged that Intel and CWC (Intel's wholly owned subsidiary at the time) agreed to pay certain DSP
executives additional consideration of $15.6 million not offered or paid to other stockholders. The alleged purpose of this payment to the insiders
was to obtain DSP insiders' endorsement of Intel's tender offer in violation of the anti-discrimination provision of Section 14(d)(7) and Rule 14d-
10. The plaintiffs seek unspecified damages for the class, and unspecified costs and expenses. In July 2002, the District Court granted Intel's
motion for summary judgment, but in October 2002, the District Court vacated the summary judgment. In February 2003, the parties reached a
tentative settlement agreement pending court review and approval. The settlement is not expected to have a material impact on the company's
results of operations or financial condition.
In September 2001, VIA Technologies, Inc. and Centaur Technology, Inc. sued Intel in the United States District Court for the Western
District of Texas, alleging that the Intel® Pentium® 4 processor infringes a VIA microprocessor-related patent. In October 2001, Intel filed
counterclaims against VIA, asserting that VIA's C3* microprocessors infringe Intel patents. In January 2002, VIA amended its complaint to
allege that Intel's Pentium® II, Pentium® III , Celeron® and Pentium 4 processors infringe another patent. In August 2002, Intel added an
additional claim that VIA's C3 microprocessors infringe an additional Intel patent, and VIA added an additional claim that Intel's Pentium III
and
Pentium 4 processors infringe another VIA patent. The trial is set for April 7, 2003. VIA seeks an injunction to prohibit Intel from selling the
above-mentioned Intel microprocessors, as well as damages in an unspecified amount covering past sales of such Intel products. Intel seeks an
injunction against VIA to prohibit VIA from selling the above-mentioned VIA microprocessors, as well as damages in an unspecified amount
covering past sales of such VIA products. Intel disputes the plaintiffs' claims and intends to defend the lawsuit vigorously.
In September, October and November 2001, various plaintiffs filed five class-action lawsuits against Intel alleging violations of the
Securities Exchange Act of 1934. The five complaints were consolidated in an amended complaint filed in the U.S. District Court for the
Northern District of California. The amended complaint alleges that purchasers of Intel stock between July 19, 2000 and September 29, 2000
were misled by false and misleading statements by Intel and certain of its officers and directors concerning the company's business and financial
condition. In October 2002, the U.S. District Court granted Intel's motion to dismiss the amended complaint without prejudice, and the plaintiffs
filed a second amended complaint in November 2002. In addition, various plaintiffs filed stockholder derivative complaints in California
Superior Court and Delaware Chancery Court against the company's directors and certain officers, alleging that they mismanaged the company
and otherwise breached their fiduciary obligations to the company. In May 2002, the California Superior Court sustained Intel's demurrer to the
California complaint and granted plaintiffs leave to file an amended complaint, which they then filed. The company filed a demurrer to the
amended complaint, which the court sustained without prejudice to the plaintiffs filing a third amended complaint, which the plaintiffs have
filed. All complaints seek unspecified damages. The company disputes all plaintiffs' claims in all actions and intends to defend the lawsuits
vigorously.
In June 2002, various plaintiffs filed a lawsuit in the Third Judicial Circuit Court, Madison County, Illinois, against Intel, Hewlett-Packard
Co., HPDirect, Inc. and Gateway Inc., alleging that the defendants' advertisements and statements misled the public by suppressing and
concealing the alleged material fact that systems that use the Intel Pentium 4 processor are less powerful and slower than systems using the Intel
Pentium III processor and a competitor's processors. The plaintiffs claim that their lawsuit should be treated as a nationwide class action. The
plaintiffs seek unspecified damages, and attorney's fees and costs. The company disputes the plaintiffs' claims and intends to defend the lawsuit
vigorously.
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The company is currently a party to various claims and legal proceedings, including those noted above. If management believes that a loss