Intel 2009 Annual Report Download - page 118

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Lehman Matter
In November 2009, representatives of Lehman Brothers Holdings Inc. advised Intel informally that the Lehman bankruptcy
estate was considering a claim against Intel arising from a 2008 forward-share purchase contract. The transaction at issue was
between Intel and Lehman Brothers OTC Derivatives Inc. (together with its affiliate Lehman Brothers Holdings Inc.,
“Lehman”), which entered into a $1.0 billion forward-purchase agreement to purchase shares of Intel common stock. Under
the terms of the agreement, Intel provided a $1.0 billion pre-payment to Lehman, in exchange for which Lehman was required
to purchase $1.0 billion in shares of Intel common stock, calculated at a volume weighted average price from August 26, 2008
to September 26, 2008. Intel received an equivalent $1.0 billion of cash collateral from Lehman. Lehman was obligated to
deliver approximately 50 million shares of Intel common stock to Intel on September 29, 2008. Lehman failed to deliver any
shares of Intel common stock, and Intel foreclosed on the $1.0 billion collateral. No specific information has been provided by
Lehman regarding the nature or scope of the potential claims, other than the assertion that Lehman contends that it suffered
damages in a range between $130 million and $380 million. In February 2010, Lehman served a subpoena on Intel in
connection with this transaction, but Lehman has not initiated any action against Intel to date. We believe that Intel acted
appropriately under its agreement with Lehman, in light of Lehman’s bankruptcy filing, and we intend to defend any claim to
the contrary.
Saxon Innovations, LLC v. Intel Corporation
In August 2008, Saxon Innovations, LLC filed an action for patent infringement against six personal computer OEMs (Apple
Inc., Gateway, Inc., Acer Inc., Hewlett-Packard Company, Dell Inc., and ASUSTeK Computer Inc.) in the U.S. District Court
for the Eastern District of Texas. The asserted patents are U.S. Patent No. 5,592,555, entitled “Wireless Communications
Privacy Method and System”; U.S. Patent No. 5,502,689, entitled “Clock Generator Capable of Shut-Down Mode and Clock
Generation Method”; U.S. Patent No. 5,530,597, entitled “Apparatus and Method for Disabling Interrupt Masks in Processors
or the Like”; U.S. Patent No. 5,247,621, entitled “System and Method for Processor Bus Use”;
and U.S. Patent No. 5,235,635,
entitled “Keypad Monitor with Keypad Activity-Based Activation.” The complaint sought unspecified damages and a
permanent injunction. In September 2008, Intel filed an unopposed motion to intervene in the case. In response, Saxon
Innovations filed a counterclaim against Intel, accusing Intel of infringing the patents listed above, and asserting two
additional patents against Intel: U.S. Patent No. 5,422,832, entitled “Variable Thermal Sensor,” and U.S. Patent No.
5,829,031, entitled “Microprocessor Configured to Detect a Group of Instructions and to Perform a Specific Function upon
Detection.” In January 2010, we entered into a settlement agreement with Saxon Innovations pursuant to which, among other
things, we made a payment to Saxon Innovations in exchange for a license to certain patents. The settlement agreement did not
significantly impact our results of operations or cash flows.
Frank T. Shum v. Intel Corporation, Jean
-Marc Verdiell, and LightLogic, Inc.
Intel acquired LightLogic, Inc. in May 2001. Frank Shum has sued Intel, LightLogic, and LightLogic’s founder, Jean-Marc
Verdiell, claiming that much of LightLogic’s intellectual property is based on alleged inventions that Shum conceived while
he and Verdiell were partners at Radiance Design, Inc. Shum has alleged claims for fraud, breach of fiduciary duty, fraudulent
concealment, and breach of contract. Shum also seeks alleged correction of inventorship of seven patents acquired by Intel as
part of the LightLogic acquisition. In January 2005, the U.S. District Court for the Northern District of California denied
Shum’s inventorship claim, and thereafter granted Intel’s motion for summary judgment on Shum’s remaining claims. In
August 2007, the United States Court of Appeals for the Federal Circuit vacated the District Court’s rulings and remanded the
case for further proceedings. In October 2008, the District Court granted Intel’s motion for summary judgment on Shum’s
claims for breach of fiduciary duty and fraudulent concealment, but denied Intel’s motion on Shum’
s remaining claims. A jury
trial on Shum’s remaining claims took place in November and December 2008. In pre-trial proceedings and at trial, Shum
requested monetary damages against the defendants in amounts ranging from $31 million to $931 million, and his final request
to the jury was for as much as $175 million. Following deliberations, the jury was unable to reach a verdict on most of the
claims. With respect to Shum’s claim that he is the proper inventor on certain LightLogic patents now assigned to Intel, the
jury agreed with Shum on some of those claims. But the jury was unable to reach a verdict on the breach of contract, fraud, or
unjust enrichment claims. In April 2009, the court granted defendants’ motions for judgment as a matter of law. Shum has
appealed that ruling to the United States Court of Appeals for the Federal Circuit.
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