| Commitments and Contingencies | Note 8. Commitments and Contingencies Purchase Obligations The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. As of April 3, 2022, the Company had approximately $79.6 million, as compared to $94.8 million as of December 31, 2021, in short-term non-cancelable purchase commitments with suppliers or where the suppliers had procured unique materials and components upon receipts of the Company’s purchase orders. The Company continues to experience an elongation of the time from order placement to production primarily due to component shortages and supply chain disruption brought about by the COVID-19 pandemic. In response, as of April 3, 2022, a further $863.5 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements. Consequently, the Company may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order if the purchase order is cancelled. Expenses incurred in respect of cancelled purchase orders has historically not been significant relative to the original order value. For those orders not governed by master purchase agreements, the commitments are governed by the commercial terms on the Company’s purchase orders subject to acknowledgment from its suppliers. The Company establishes a loss liability for all products it does not expect to sell or orders it anticipates cancelling for which it has committed purchases from suppliers. Such loss liability is included in Other accrued liabilities on the Company's unaudited condensed consolidated balance sheets. Losses incurred in relation to purchase commitments, including unique materials and components, amounted to $1.4 million and $0.4 million for the three months ended April 3, 2022, and March 28, 2021, respectively. Non-Trade Commitments As of April 3, 2022, the Company had non-cancellable purchase commitments of $15.8 million pertaining to non-trade activities. Warranty Obligations Changes in the Company's warranty obligations, which is included in Other accrued liabilities on the unaudited condensed consolidated balance sheets, were as follows:
Three Months Ended
(In thousands)
April 3, 2022
March 28, 2021
Balance as of beginning of the period
$
6,861
$
9,240
Provision for warranty liability made
1,423
963
Settlements made
(1,505
)
(2,027
)
Balance as of the end of the period
$
6,779
$
8,176
Litigation and Other Legal Matters The Company is involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount, or if a range, the Company accrues the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within litigation reserves, net. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. In relation to such matters, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its financial position within the next twelve months, or the outcome of these matters is currently not determinable. There are many uncertainties associated with any litigation, and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's estimates, which could result in the need to adjust the liability and record additional expenses. Agenzia Entrate Provincial Revenue Office 1 of Milan v. NETGEAR International, Inc. In November 2012, the Italian tax police began a comprehensive tax audit of NETGEAR International, Inc.’s Italian Branch. The scope of the audit initially was from 2004 through 2011 and was subsequently expanded to include 2012. The tax audit encompassed Corporate Income Tax (IRES), Regional Business Tax (IRAP) and Value-Added Tax (VAT). In December 2013, December 2014, August 2015, and December 2015 an assessment was issued by Inland Revenue Agency, Provincial Head Office No. 1 of Milan-Auditing Department (Milan Tax Office) for the 2004 tax year, the 2005 through 2007 tax years, the 2008 through 2010 tax years, and the 2011 through 2012 tax years, respectively. In May 2014, the Company filed with the Provincial Tax Court of Milan an appeal brief, including a Request for Hearing in Open Court and Request for Suspension of the Tax Assessment for the 2004 year. The hearing was held and decision was issued on December 19, 2014. The Tax Court decided in favor of the Company and nullified the assessment by the Inland Revenue Agency for 2004. The Inland Revenue Agency appealed the decision of the Tax Court on June 12, 2015. The Company filed its counter appeal with respect to the 2004 year during September 2015. On February 26, 2016, the Regional Tax Court conducted the appeals hearing for the 2004 year, ruling in favor of the Company. On June 13, 2016, the Inland Revenue Agency appealed the decision to the Supreme Court. The Company filed a counter appeal on July 23, 2016 and is awaiting scheduling of the hearing. In June 2015, the Company filed with the Provincial Tax Court of Milan an appeal brief including a Request for Hearing in Open Court and Request for Suspension of the Tax Assessment for the 2005 through 2006 tax years. The hearing for suspension was held and the Request for Suspension of payment was granted. The hearing for the validity of the tax assessment for 2005 and 2006 was held in December 2015 with the Provincial Tax Court issuing its decision in favor of the Company. The Inland Revenue Agency filed its appeal with the Regional Tax Court. The Company filed its counter brief on September 30, 2016 and the hearing was held on March 22, 2017. A decision favorable to the Company was issued by the Court on July 5, 2017. The Italian Tax Authority has appealed the decision to the Supreme Court and the Company has responded with a counter appeal brief on December 3, 2017 and awaits scheduling of the hearing. The hearing for the validity of the tax assessment for 2007 was held on March 10, 2016 with the Provincial Tax Court who issued its decision in favor of the Company on April 7, 2016. The Inland Revenue Agency has filed its appeal to the Regional Tax Court and the Company has submitted its counter brief. The hearing was held on November 17, 2017 and the Company received a positive decision on December 11, 2017. On June 11, 2018, the Italian government filed its appeal brief with the Supreme Court, and the Company filed its counter brief on July 12, 2018 and awaits scheduling of the hearing. With respect to 2008 through 2010, the Company filed its appeal briefs with the Provincial Tax Court in October 2015 and the hearing for the validity of the tax assessments was held on April 21, 2016. A decision favorable to the Company was issued on May 12, 2016. The Inland Revenue Agency has filed its appeal to the Regional Tax Court. The Company filed its counter brief on February 5, 2017. The hearing was held on May 21, 2018, and the Company received a favorable decision on June 12, 2018. On October 14, 2019, Milan Tax Office filed an appeal with the Supreme Court. The Company filed its counter brief with the Supreme Court on November 22, 2019 and awaits scheduling of the hearing. With respect to 2011 through 2012, the Company has filed its appeal brief on February 26, 2016 with the Provincial Tax Court to contest the relevant tax assessments. The hearing for suspension was held and the Request for Suspension of payment was granted. On October 13, 2016, the Company filed its final brief with the Provincial Tax Court. The hearing was held on October 24, 2016 and a decision favorable to the Company was issued by the Court. The Inland Revenue Agency appealed the decision before the Regional Tax Court. The Regional Tax Court heard the case on February 26, 2019 for both years and issued a decision favorable to the Company on March 11, 2019. On October 14, 2019, Milan Tax Office filed an appeal with the Supreme Court. The Company filed its counter brief with the Supreme Court on November 22, 2019 and awaits scheduling of the hearing. With regard to all tax years, the Company at this time is not able to reasonably estimate any financial impact to the Company resulting from this litigation matter. Vivato v. NETGEAR, Inc. On April 19, 2017, the Company was sued by XR Communications (d/b/a) Vivato (“Vivato”) in the United States District Court, Central District of California. Based on its complaint, Vivato purports to be a research and development and product company in the WiFi area, but it appears that Vivato is not currently a manufacturer of commercial products. The three (3) patents that Vivato asserts against the Company are U.S. Patent Nos. 7,062,296, 7,729,728, and 6,611,231. The ’296 and ’728 patents are entitled “Forced Beam Switching in Wireless Communication Systems Having Smart Antennas.” The ’231 patent is entitled “Wireless Packet Switched Communication Systems and Networks Using Adaptively Steered Antenna Arrays.” Vivato also has recently asserted the same patents in the Central District of California against D-Link, Ruckus, and Aruba, among others. According to the complaint, the accused products include WiFi access points and routers supporting MU-MIMO, including without limitation access points and routers utilizing the IEEE 802.11ac-2013 standard. The accused technology is standards-based, and more specifically, based on the transmit beamforming technology in the 802.11ac WiFi standard. The Company answered an amended complaint on July 7, 2017. In its answer, the Company objected to venue and recited that objection as a specific affirmative defense, so as to expressly reserve the same. The Company also raised several other affirmative defenses in its answer. On August 28, 2017, the Company submitted its initial disclosures to the plaintiff. The initial scheduling conference was on October 2, 2017, and the Court set five day jury trial for March 19, 2019 for the leading Vivato/D-Link case, meaning the Company's trial date will be at some point after March 19, 2019. On March 20, 2018, the Company and other defendants in the various Vivato cases moved the Court to stay the case pending various IPRs filed on all of the patents in suit. Every asserted claim of all three patents-in-suit is now subject to challenge in IPRs that are pending before the U.S. Patent and Trial Appeal Board (“PTAB”). In particular, the Company, Belkin, and Ruckus are filing one set of IPRs on the three patents in suit; Cisco is filing another set of independent IPRs on the three patents in suit; and Aruba is filing yet another set of independent IPRs on the three patents in suit. On April 11, 2018, the Court granted the motion to stay pending filing of the IPRs. On May 3, 2018, the Company and other defendants filed their IPRs. The PTAB instituted the IPRs for the ’296 and ’728 patents, but not the ’231 patent from the Ruckus and Belkin set of petitions. However, the Cisco IPR for the ’231 patent was instituted. Vivato has proposed amendments to its claims and the parties have completed briefing the matter before the PTAB. In July and August of 2019, the Company and other defendants had two oral arguments before the PTAB regarding the ’296 and ’728 patents. The PTAB denied institution of petition for the’231 patent. On October 10, 2019, the PTAB issued a Final Written Decision invalidating all of the original claims at issue in the ’296 patent and denied Vivato’s motion to amend (the claims). In November 2019, the PTAB issued a Final Written Decision invalidating all of the challenged claims in the ’728 patent. In the meantime, the PTAB’s Final Written Decision in the Cisco IPR of the’231 patent found the claims to be valid and Cisco is appealing the finding. On November 25, 2020, the Federal Circuit affirmed the denial of Cisco’s IPR regarding the ’231 patent. Only the ’231 patent remained from the pending case filed in 2017 described above (“XR I”). The asserted claims in the ’231 patent have been held invalid by the Court in the Northern District of California in the case against Ruckus. Based on the ND Cal decision, the Company filed a collateral estoppel motion for summary judgment on the patent which has been granted, so the ’231 patent has been dropped from this case. On June 16, 2021, XR Communications filed a new suit (“XR II”) against the Company in the Central District of California (CDCA) alleging that the Company’s 802.11ax compliant products infringe XR’s U.S. Patents 7,729,728 (the ’728 Patent), 10,594,376 (the ’376 Patent), and 8,289,939 (the ’939 Patent). The Court held a claim construction hearing on January 18, 2022. The Company is currently conducting discovery in XR II. On March 28, 2022, the Company attended a hearing before the Court to address the Special Master’s mixed findings related to the validity of the three patents in the case. The Company is waiting for the Court’s decision. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from this litigation matter. Hera Wireless v. NETGEAR, Inc. On July 14, 2017, the Company was sued by Sisvel (via Hera Wireless) in the District of Delaware on three related patents allegedly covering the 802.11n standard. Similar complaints were filed against Amazon, ARRIS, Belkin, Buffalo, and Roku. On December 12, 2017, the Company answered the complaint and asserted various affirmative defenses, including invalidity and noninfringement. A proposed joint Scheduling Order was submitted to the Court on January 24, 2018 with trial proposed for March of 2020. On February 27, 2018, Hera Wireless identified the accused products and the asserted claims, alleging that any 802.11n compliant product infringes, and identified only the Company's Orbi and WND930 products with particularity. Hera Wireless’ infringement contentions were submitted on April 28, 2018. Discovery is ongoing. On June 28, 2018, the Company and other defendants submitted invalidity contentions. The Company along with other defendants jointly filed IPRs challenging three of the patents in suit on July 18, 2018. On September 14, 2018, the Company and other defendants jointly filed a second set of IPRs with the USPTO challenging the remaining six patents asserted in the Amended Complaint. All of the instituted IPRs have been decided in defendants’ favor, thereby canceling all claims for 8 of the 9 asserted patents. Hera initially appealed all of the adverse decisions to the Federal Circuit and has since withdrawn 7 of the appeals and filed reissue applications. While the Company awaits the decision on the remaining IPR filed in parallel by Intel, the district court case remains stayed. The Parties settled this case without material financial impact to the Company. John Pham v. Arlo Technologies, Inc., NETGEAR Inc., et al., and other related actions On January 9, 2019 and January 10, 2019, February 1, 2019 and February 8, 2019, the Company was sued in four separate securities class action suits in Superior Court of California, County of Santa Clara, along with Arlo Technologies, individuals, and underwriters involved in the spin-off of Arlo. Two more similar state actions have been filed against Arlo Technologies Inc. et al. In total, six putative class action complaints were filed in California state court in Santa Clara County. The Company is named as a defendant in five of the six lawsuits. The complaints generally allege that Arlo’s IPO materials contained false and misleading statements, hiding problems with Arlo’s Ultra product. These claims are styled as violations of Sections 11, 12(a), and 15 of the Securities Act of 1933. On January 22, 2019, the Company and Arlo et al. were sued in the US District Court for the Northern District of California. Based on similar facts as those in the state court actions, the federal case alleged that the Defendants violated Sections 11 and 15 of the Securities Act of 1933 and sought remedies thereunder. On August 6, 2019, all the defendants, including NETGEAR, filed a motion to dismiss the federal court action. Plaintiffs filed their opposition brief on September 6, 2019 and defendants filed a reply on October 4, 2019. The state court action remained stayed pending the outcome of the federal action. On November 18, 2019, the parties participated in mediation, but did not settle the case. On December 5, 2019, the court held a hearing on the defendants’ motion to dismiss, and on December 19, 2019, granted that motion as to all counts, with leave to amend. On February 14, 2020, the Court granted the Parties’ stipulation to stay proceedings to permit filing of a motion for preliminary approval for classwide settlement. On March 11, 2021, the federal court in Northern District of California issued the approval order for the settlement, thereby concluding the federal matter. Three individuals who filed suit in state court requested exclusion from the settlement. On June 4, 2021, the three individuals– Pham, Perros, and Patel– renewed their state class action case in the Superior Court of California, County of Santa Clara with an amended Complaint. In response, the Company, Arlo and other co-defendants have jointly filed a motion to dismiss and a demurrer to the state court action on June 21, 2021 and July 7, 2021, respectively. On September 17, 2021, the Court granted Arlo and the Company’s motion to dismiss the case from state court. On November 16, 2021, Plaintiffs filed a Notice of Appeal. The parties have agreed to an extension of Plaintiffs’ opening brief to June 30, 2022. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from this litigation matter. Aegis 11 S.A. v. NETGEAR Inc. On June 21, 2019, Aegis 11 S.A. (“Aegis”) sued the Company and several other defendants for patent infringement in the District of Delaware. Aegis asserted that NETGEAR’s WiFi routers infringe three patents related to the 802.11 standard: U.S. Patent No. 6,839,553, U.S. Patent No. 9,584,200, and U.S. Patent No. 9,848,443. In lieu of filing its Answer on October 15, 2019, the Company filed a partial motion to dismiss against one of the asserted claims based on unpatentable subject matter. On September 9, 2020, the Court granted the Defendants’ partial motion to dismiss one of the three patents filed in the case, U.S. Pat. 6,839,553 (the ’553 Patent). The dismissal was granted without prejudice. The Company filed its Answer on September 23, 2020. On October 20, 2020, Aegis filed an Amended Complaint with additional facts related to the ’553 Patent, and added a fourth patent, Pat. 9,350,434 (the ’434 patent). In response, the Company renewed its partial motion to dismiss the Amended Complaint. On August 30, 2021, the Court granted the Company’s renewed motion to dismiss the ’553 Patent from the Amended Complaint. The Company filed an Answer for the remaining counts involving the other three patents on September 27, 2021. The Parties settled this case without material financial impact to the Company. Altair Logix LLC v NETGEAR Inc. On July 28, 2020, Altair Logix LLC (“Altair”) sued the Company in the District of Delaware. Altair’s Complaint asserts that the Company's Meural frame infringes U.S. Pat. 6,289,434 (the “434” Patent) titled “Apparatus and Method of Implementing Systems on Silicon Using Dynamic-Adaptive Run-Time Reconfigurable Circuits for Processing Multiple, Independent Data and Control Streams of Varying Rates.” The Company filed its Answer on January 12, 2021. On August 13, 2021, the Company also filed a motion to invalidate the patent based on 35 U.S.C. s.101, which has been denied. The claim construction hearing was scheduled for February 23, 2022. Plaintiff voluntarily dismissed this case with prejudice. Q3 Networking LLC v. NETGEAR Inc. On September 21 and September 22, 2020, Q3 Networking LLC (“Q3”) filed Complaints against the Company, Commscope (with Ruckus and Arris) and Hewlett Packard Enterprises (with Aruba Networks) (together “Defendants” or “Respondents”) at the District Court of Delaware and the International Trade Commission (“ITC”), respectively. Both actions allege that the Company's routers and access points infringe four patents: U.S. Pats. 7,457,627 (the ’627 Patent), 7,609,677 (the ’677 Patent), 7,895,305 (the ’305 Patent), and 8,797,853 (the ’853 Patent) relating to different aspects of networking technology (e.g., 802.11and QoS). The ITC case was instituted on October 23, 2020. On November 10, 2020, NETGEAR filed, and the Court granted, a Motion to Stay the Delaware action while the ITC case is pending. On April 5 and April 6, 2021, the Company and co-respondents filed IPRs against the ’627 Patent and ’853 Patent, respectively. Q3 also has a pending case against the Company in China asserting Chinese Patent ZL01809893.2, the Chinese patent corresponding to the ’853 Patent, before the Jinan People’s Intermediate Court. The Jinan Court has stayed the infringement case pending the result of the invalidity challenge filed by the Company before the China National Intellectual Property Administration (“CNIPA”). On September 30, 2021, the CNIPA invalidated Q3’s Chinese patent. Trial was held at the ITC from July 28 through July 30, 2021. On December 7, 2021, the ITC issued an Initial Determination (“ID”) finding no violation or infringement of any of the patents by the Company but maintained the patents’ validity. Q3 petitioned for the Commission to review the ID, and on May 3, 2022, the Commission affirmed the ID in its Final Determination. This concludes the ITC investigation. Q3 has 60 days to appeal the case to the Federal Circuit. The district court case remains stayed. The Company has a pending IPR against the ’627 Patent before the Patent Trial and Appeal Board. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from this litigation matter. Beijing Tianxing Ebel Information Consulting Co., Ltd v. NETGEAR Inc. On or around October 19, 2020, Beijing Tianxing Ebel Information Consulting Co., Ltd (“Tianxing”) filed two Complaints against the Company in the Beijing Intellectual Property Court (“Beijing IP Court”). Tianxing’s Complaints assert that the Company's ReadyNAS RR2304 infringes each of Chinese Patent Nos. ZL200410096563.1 and ZL201010144680.6. The patents are titled “Method for Treating Medium Access Control Address in Main and Spare Conversion” and “Network Access Method, System, Network Authentication Method, Equipment and Terminal,” respectively. In December 2020, NETGEAR Beijing was served with the third suit by Beijing Tianxing. This Complaint asserts that the Company's ReadyNAS RR2304 infringes Chinese Patent No. ZL200510103486.2, titled “System and Method for Processing Link Fault of Wideband Access Apparatus.” The Company filed jurisdictional objections in all cases, but the Court has denied them. The infringement cases are now back in the substantive trial stage and the Company is preparing its defense. As of June 11, 2021, the Company had completed all submissions for the invalidity challenges against the three patents at the CNIPA. Oral arguments for two of the patents were held on October 21, 2021, October 29, 2021, and November 28, 2021. The CNIPA has invalidated Patent No. and the corresponding infringement case has been dismissed. The CNIPA maintained the validity of Patent No. . The Beijing IP Court held a hearing for the infringement case for ZL200510103486.2 ZL201010144680.6 The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters. Network-1 Technologies v. NETGEAR Inc On December 15, 2020, Network-1 filed a breach of contract suit against the Company in New York State Court for failure to pay royalties for its Power over Ethernet (“PoE”) products under the parties’ Settlement and Licensing Agreement (“Agreement”). The Company disagrees with Network-1’s position on the Agreement. The parties did not reach an agreement in mediation. The Company filed a motion to compel arbitration pursuant to the Agreement and the hearing on the Company’s motion took place on October 14, 2021, where the Court denied the Company’s motion because a settlement demand had not yet been filed. As of November 3, 2021, the Company has filed an arbitration demand and renewed its motion to compel arbitration with the Court. The Company is awaiting the Court’s ruling on its renewed motion to compel arbitration. In the meantime, Network-1 has filed objections to the arbitrator’s jurisdiction over this case and the Company has responded. On April 1, 2022, the Court denied the Company’s renewed motion to dismiss or stay the case pending arbitration. The Company filed its counterclaims on April 22, 2022 and proceeded with discovery. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters. WSOU v. NETGEAR Inc. On January 13, 2021, WSOU Investments, LLC (“WSOU”) filed three complaints against the Company in the US District Court for the Western District of Texas. WSOU alleges that the Company’s routers and switches infringe three patents related to wireless communication technologies. The patents asserted are US Patent Nos.: 7,512,096 (the “ʼ096 Patent”), 9,338,171 (the “ʼ171 Patent”) and 7,551,630 (the “ʼ630 Patent”). On April 15, 2021, the Company filed motions to dismiss for improper venue or to transfer in lieu of answering in all three cases. On July 30, 2021, WSOU voluntarily dismissed the three cases from the US District Court for the Western District of Texas in response to the Company’s motions to dismiss. WSOU refiled the three cases in the US Delaware Court for the District of Delaware on or around August 2, 2021. On September 24, 2021, the Company answered the two cases involving the ’630 and ’096 Patents, and filed a motion to dismiss based on 35 U.S.C. s.101 On February 9, 2022 and February 22, 2022, the Company filed IPR petitions to invalidate the ’096 Patent and ’630 Patent, respectively, before the Patent Trial and Appeal Board (PTAB). The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters. Shenzhen Yuanyu and Gaoping Yaoyi v. NETGEAR Beijing On or around March 19, 2021, the Company’s Beijing entity was served in seven patent infringement suits filed by Shenzhen Yuanyu Investment Co., Ltd. and Gaoping Yaoyi Trading Co., Ltd., at the Jinan Intermediate People’s Court. Shenzhen Yuanyu asserted Chinese patents ZL201010616817.3, ZL200610168028.1, ZL200410057124.X, ZL200710074176.1 in four separate suits. Gaoping Yaoyi asserted Chinese patents ZL200410080537.X, ZL200810126154.X, and 200710086745.4 in three separate suits. All cases allege the Company’s Nighthawk XR300 and XR500 infringe the patent. As of June 28, 2021, the Company had completed all submissions for the invalidity challenges against the seven patents at the CNIPA. As of March 2022, the CNIPA has issued all seven decisions. One patent was invalidated (ZL200710086745.4), one was partially invalidated (ZL200710074176.1), and the validity of the other five patents (ZL200410057124.X, ZL201010616817.3, ZL200410080537.X, ZL200810126154.X, ZL200610168028.1) was maintained. The Company appealed the latter six patents to the Beijing IP Court. The Jinan Court dismissed the infringement suit for the invalidated patent (ZL200710086745.4), and the remaining six cases are stayed pending the appeals. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters. Beijing Yiwen v. NETGEAR Beijing On or around April 1, 2021, the Company’s Beijing entity was served in two patent infringement cases filed by Beijing Yiwen Impression Advertisement Co., Ltd. Beijing Yiwen sued NETGEAR Beijing at the Beijing IP Court alleging the Company’s GS748T infringes Chinese patents ZL200510103486.2 and ZL200510120823.9. The Company filed jurisdictional challenges in both of the infringement cases and is awaiting the Court’s ruling. As of June 11, 2021, the Company completed all submissions for the invalidity challenges against both patents at the CNIPA. The CNIPA maintained the validity for ZL200510103486.2 and ZL200510120823.9. The infringement hearing for case 934 is scheduled for May 20, 2022. Plaintiff voluntarily withdrew the infringement case for ZL200510120823.9 and the Court granted the withdrawal around April 19, 2022. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters. Shangdong Chengzi Medical Technology v. NETGEAR Beijing On or around June 8, 2021, the Company’s Beijing entity was served in two China patent infringement cases. Plaintiff Shangdong Chengzi sued NETGEAR Beijing at the Beijing IP Court alleging the Company’s Orbi RBR20 and XR500 infringe Chinese patent ZL200810007497.4, titled “A method and device for pre-alarming exception.” The Company filed jurisdictional challenges in both cases and is awaiting the Court’s ruling. On August 12, 2021, the Company filed a petition to invalidate the patent before the CNIPA and a hearing has been scheduled for February 25, 2022. Around April 8, 2022, the CNIPA partially invalidated the patent, subject to Plaintiff’s amendment(s). The Court has scheduled a hearing for the infringement cases for May 17, 2022. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters. Gaoping Yaoyi Trading Co. v. NETGEAR Beijing On or around June 9, 2021, the Company was served in two China patent infringement cases. Plaintiff Gaoping Yaoyi, sued NETGEAR Beijing at the Liuzhou Intermediate People’s Court alleging the Company’s XR300 infringes Chinese patent ZL200710162875.1 and ZL201110389019.6, titled “Data stream information transmission method, communication system and equipment” and “Network access management method and network access device,” respectively. The Company filed jurisdictional challenges in both infringement cases and is awaiting the Court’s ruling. The CNIPA held an oral hearing for the invalidity case for patent ZL200710162875.1 on December 30, 2021 and the Company is awaiting the decision. On March 22, 2022, the Company attended a preliminary hearing in the infringement case for Patent ZL200710162875.1 to address procedural issues. No hearing has been scheduled for the infringement case for Patent ZL201110389019.6 yet. The Company at this time is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters. TrackThings LLC v. NETGEAR On June 21, 2021, TrackThings, a non-practicing entity, sued the Company in the Southern District of New York (SDNY). TrackThings asserts that the Company’s Orbi and Nighthawk mesh products infringe three patents related to mesh technology: U.S. Patent No. 9,642,017 (the ’017 Patent), titled “Apparatus and Method for Improving the Integrity and Performance of an Ad-Hoc Wireless Network,” U.S. Patent No. 9,332,442 (the ’442 Patent) titled “Apparatus and Method of a Configurable Network,” and U.S. Patent No. 10,107,893 (the ’893 Patent) titled “Apparatus and Method to Automatically Set a Master-Slave Monitoring System.” On October 1, 2021, the Court held a pre-motion conference to discuss the Company’s plan to file a motion to dismiss the case from the Southern District of New York, or in t |
