Specifications

Table of Contents
NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guarantees and Indemnifications
The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or
occurrences, subject to certain limits, while the officer or director is or was serving at the Company’
s request in such capacity. The term of the
indemnification period is for the officer’s or director’
s lifetime. The maximum amount of potential future indemnification is unlimited; however, the
Company has a Director and Officer Insurance Policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a
result of its insurance policy coverage, the Company believes the fair value of these indemnification agreements is minimal. Accordingly, the
Company has no liabilities recorded for these agreements as of December 31, 2012 .
In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers for any expenses or liability
resulting from claimed infringements of patents, trademarks or copyrights of third parties. The terms of these indemnification agreements are
generally perpetual any time after execution of the agreement. The maximum amount of potential future indemnification is unlimited. The Company
believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no
liabilities recorded for these agreements as of
December 31, 2012 .
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 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 12 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.
OptimumPath, L.L.C. v. NETGEAR
In January 2008, a lawsuit was filed against the Company by OptimumPath, L.L.C (“OptimumPath”), a patent-
holding company existing under
the laws of the State of South Carolina, in the U.S. District Court, District of South Carolina. OptimumPath claimed that certain of the Company's
wireless networking products infringe on OptimumPath's U.S. Patent No. 7,035,281 ("the '281 Patent"). OptimumPath also sued six
other technology
companies alleging similar claims of patent infringement. The Company filed its answer to the lawsuit in the second quarter of 2008. Several
defendants, including the Company, jointly filed a request for inter partes reexamination of the OptimumPath patent with the United States Patent
and Trademark Office (the “USPTO”) on October 13, 2008. On January 12, 2009, a reexamination was ordered with respect to claims 1-3 and 8-
10
of the patent, but denied with respect to claims 4-7 and 11-
32 of the patent. On February 4, 2009, the defendants jointly filed a petition to challenge
the denial of reexamination of claims 4-7 and 11-32. On March 26, 2009, the USPTO confirmed the patentability of claims 1-3 and 8-
10 without
amendment. Shortly thereafter, in March 2009, the District Court granted defendants' motion to transfer the case to the U.S. District Court, Northern
District of California. In July 2009, the defendants' petition to challenge the denial of reexamination of claims 4-7 and 11-
32 was denied by the
USPTO. Since the petition and prosecution were closed, the USPTO issued a Right of Appeal Notice on July 31, 2009, and the defendants chose to
appeal the confirmation of claims 1-3 and 8-10 by filing a notice of appeal on August 31, 2009. The Company and OptimumPath attended a Court-
ordered mediation on September 22, 2009 but were unable to settle the litigation. The Company and other defendants filed a combined claim
construction/summary judgment brief on December 23, 2010. OptimumPath responded on January 20, 2011, and the defendants replied on February
3, 2011. The oral arguments on claim construction and the summary judgment motion were made on February 17, 2011. An oral hearing was held on
March 9, 2011 in the USPTO and a decision by the USPTO was issued on March 30, 2011 confirming the patentability of claims 1-3 and 8-
10. On
April 12, 2011, the District Court granted defendants' motion for summary judgment on OptimumPath's claim for literal infringement and defendants'
motion to preclude OptimumPath's infringement claims based on the doctrine of equivalents. The Court also found that the accused devices did not
infringe under the doctrine of equivalents. The Court also granted defendants' motion for summary judgment that asserted claims 1, 2, 6, and 9
through 13 of the '281 Patent were invalidated by various prior art. The pretrial conference and trial dates were vacated. OptimumPath filed its notice
of appeal to the Federal Circuit of the District Court's rulings on May 18, 2011. On May 23, 2011, the District Court entered the defendants' joint
request for costs in the amount of $103,000
, which have not yet been collected or recognized. On June 29, 2011, the Federal Circuit docketed the
appeal. In addition, the defendants appealed the USPTO's ruling confirming the patentability of claims 1-3 and 8-
10 to the Federal Circuit by filing a
Reexamination Notice of Appeal to the Federal Circuit on October 18, 2011. The parties argued
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