Commitments And Contingencies | 6 Months Ended |
Jun. 30, 2014 |
Commitments And Contingencies [Abstract] | ' |
Commitments And Contingencies | ' |
10. Commitments and Contingencies |
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Internet Machines Litigation |
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To date, Internet Machines LLC ("Internet Machines") has filed three separate lawsuits against PLX. The first suit was filed on February 2, 2010, which has been served on PLX, entitled Internet Machines LLC v. Alienware Corporation, et al., in the United States District Court for the Eastern District of Texas, Tyler Division (the “First Suit”). This First Suit alleges infringement by PLX and the other defendants in the lawsuit of two patents held by Internet Machines. The complaint in the lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On May 14, 2010, the Company filed its answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. On December 6, 2010, the Court held a case-management conference and subsequently entered a scheduling order in this matter, and set the trial for February 2012. |
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On February 21, 2012, through February 29, 2012, the claims and defenses asserted in the First Suit were tried to a seven-member jury in the United States District Court for the Eastern District of Texas, Tyler Division. On February 29, 2012, the jury returned its verdict, finding the patents-in-suit valid and infringed and awarded money damages against PLX in the amount of $1.0 million. On June 19, 2013, the Court issued its ruling on the post-verdict motions filed by the parties and entered an appealable judgment, affirming the jury’s findings of validity and infringement. The judgment entered by the Court further affirmed the monetary award found by the jury. On July 17, 2013, the Company filed a notice of appeal with the Court and on October 7, 2013 it filed the appeal brief, appealing the judgment to the United States Court of Appeals for the Federal Circuit. The Company intends to continue to vigorously seek reversal of the jury’s verdict and the Court’s judgment on appeal. |
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Internet Machines' second lawsuit, which has also been served on PLX, was filed on October 17, 2010, again in the United States District Court for the Eastern District of Texas, Tyler Division (the “Second Suit”). This Second Suit, entitled Internet Machines LLC v. ASUS Computer International, et al., alleges infringement by PLX of another patent held by Internet Machines. The complaint also asserts infringement claims against a separate group of defendants not named in the first Internet Machines lawsuit, and accuses those defendants of infringing the two patents asserted against PLX in the First Suit, as well as the additional patent listed in this Second Suit. The complaint in the lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On December 28, 2010, the Company filed its answer to the live complaint in the second lawsuit and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. |
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On May 17, 2011, Internet Machines filed a third lawsuit entitled Internet Machines LLC v. Avnet, Inc., et al., again in the United States District Court for the Eastern District of Texas, Tyler Division (the “Third Suit”). The third lawsuit has been served on PLX and alleges that PLX infringes a fourth patent held by Internet Machines. This lawsuit also accuses a new group of defendants of infringing each of Internet Machines' patents at issue in the First and Second Suits, as well as the fourth patent asserted against PLX in this Third Suit. The complaint in the Third Suit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On September 27, 2011, the Company filed its answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. |
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On January 20, 2012, the Court entered an order consolidating the Second and Third Suits into one action. The Court further ordered that the schedule entered in the Third Suit would govern the consolidated action. As a result, the consolidated action was originally set for trial in February 2013. |
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On March 25, 2011, a related entity, Internet Machines MC LLC, filed a lawsuit against PLX, entitled Internet Machines MC LLC v. PLX Technology, Inc., et al., in the United States District Court for the Eastern District of Texas, Marshall Division. Internet Machines MC LLC, however, did not serve the initial complaint on PLX. Instead, on August 26, 2011, Internet Machines MC LLC filed a first amended complaint, which has now been served on PLX, alleging infringement by PLX and the other defendants in the lawsuit of one patent held by Internet Machines MC LLC. The complaint in this lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines MC LLC's patents. On November 11, 2011, the Company filed its answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. On March 5, 2012, the Court held an initial case-management conference in this matter. The Court entered a scheduling order in this matter, and trial was originally set for July 2013. |
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On September 4, 2012, the Court entered an order staying the Second and Third Suits and the lawsuit brought by Internet Machines MC LLC discussed in the preceding paragraph. Pursuant to the Court’s order, those lawsuits are stayed until a final non-appealable judgment is entered in the First Suit, again styled Internet Machines LLC v. Alienware Corp., et al., Cause No. 6:10-CV-023, in the United States District Court for the Eastern District of Texas. While it is not possible to determine the ultimate outcome of these suits, the Company believes that it has meritorious defenses with respect to the claims asserted against it and intends to vigorously defend its position, but it is unable to estimate a range of possible loss, if any. |
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As a result of the jury’s February 29, 2012 verdict on the First Suit, the Company accrued $1.0 million as of December 31, 2011. Based on the June 19, 2013 Court’s ruling, the Company accrued an additional $0.9 million. As noted above, the Company has filed an appeal of the jury’s verdict and the Court’s judgment issued in the First Suit. The Company will continue to accrue royalties, under the Court’s direction, until the appeal is finalized. A change in the ruling as a result of that appeal could change the estimated liability in the period in which the outcome of the appeal is known. |
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Litigation Relating to the Merger Transaction with Avago |
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Since the announcement of the Merger Agreement on June 23, 2014, nine putative class action lawsuits have been filed by shareholders against the Company, its directors and/or Avago challenging the transactions contemplated by the Merger Agreement. See Note 1 under the caption “Pending Transaction” for more information on the Merger Agreement. |
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Four lawsuits were filed in the Superior Court for the State of California, County of Santa Clara, captioned Cox v. PLX Technology Inc. et al.; Ellis v. PLX Technology Inc. et al.; Golden v. PLX Technology, Inc. et al.; and Abdallah v. PLX Technology, Inc. et al. (the “California Actions”). On July 17, 2014, the parties lodged stipulated requests to consolidate the California actions under the caption In re PLX Technology, Inc. S’holder Litig. and appoint lead plaintiff and counsel. That same day, the parties lodged a stipulated request to stay the California Actions pending resolution of related actions filed in the Delaware Court of Chancery, described below. Those stipulations await court approval. |
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Five lawsuits were filed in the Delaware Court of Chancery, captioned Varghese v. PLX Technology, Inc. et al.; Feinstein v. PLX Technology, Inc. et al.; Price v. PLX Technology et al.; Cox v. Avago Technologies Wireless (U.S.A), Inc. et al.; and Cohn v. Salameh et al. (the “Delaware Actions”). On July 21, 2014, the court granted a stipulated order consolidating the Delaware Actions under the caption In re PLX Technology, Inc. Stockholders Litigation, Consol. appointing lead plaintiffs and lead counsel, and designating the complaint filed in Cox as the operative complaint for the consolidated action. |
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The complaints allege, among other things, that the Company’s directors breached their fiduciary duties to the Company’s stockholders by seeking to sell the Company for an inadequate price, pursuant to an unfair process, and by agreeing to preclusive deal protections in the Merger Agreement. Plaintiffs also allege that the Company, Potomac Capital Partners II, L.P., Parent and the Purchaser aided and abetted the alleged fiduciary breaches. Plaintiffs finally allege that the 14D-9 recommendation statement filed by the Company contains false and misleading statements and/or omits material information necessary to inform the shareholder vote. The complaints seek, among other things, equitable relief to enjoin the consummation of the proposed transaction contemplated by the Merger Agreement, and attorneys’ fees and costs. |
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Other Litigation |
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From time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. Any claims or proceedings against the Company, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require the Company to enter into royalty or licensing agreements which, if required, may not be available on terms favorable to the Company or at all. If management believes that a loss arising from these matters is probable and can be reasonably estimated, the Company will record a reserve for the loss. |
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Long Term Contracts |
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The Company entered into a license agreement with a third party IP provider, effective April 30, 2014, to license its PCI Express Gen 4 IP. The license allows the Company to develop three products within four years of its acceptance of the final deliverable. The license fee of $5.5 million is payable in installments based on specific milestones and is subject to royalty payments. |
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