cisco-annual-report-2021

It is not possible to determine the maximum potential amount for claims made under the indemnification obligations discussed
in this section (e) due to uncertainties in the litigation process, coordination with and contributions by other parties and the
defendants in these cases, and the unique facts and circumstances involved in each particular case and agreement. We are
unable to reasonably estimate the ultimate outcome of the cases discussed below in this section (e), but we do not believe that
any potential indemnity liability would be material, and historically, indemnity payments made by us have not had a material
effect on our Consolidated Financial Statements.
We were asked to indemnify certain of our service provider customers that were subject to patent infringement claims asserted
by ChanBond, LLC (“ChanBond”) in federal court in Delaware on September 21, 2015. All of the service provider customer
defendants entered into an agreement to resolve ChanBond’s claims. We resolved the service providers’ indemnity claims,
effective July 7, 2021, for an amount that did not have a material effect on our Consolidated Financial Statements.
Verizon Communications Inc. requested that we indemnify it and seven of its subsidiaries (collectively, “Verizon”) for a subset of
the patent infringement claims asserted by Huawei Technologies Co. Ltd. (“Huawei”) in lawsuits filed against Verizon on February
5, 2020, in the United States District Court for the Eastern District of Texas (“E.D. Tex”) and the United States District Court for the
Western District of Texas (“W.D. Tex”). Huawei and Verizon reached a confidential settlement agreement and Huawei dismissed
both the E.D. Tex and W.D. Tex cases. Verizon indicated that they no longer are seeking indemnity contribution from us.
We have been asked by seven of our customers to indemnify them in connection with patent infringement claims asserted
against them by Estech Systems, Inc. (“Estech”) in the E.D. Tex and W.D. Tex courts between April 24, 2020 and August 25,
2020. Estech alleges that the customer defendants infringe three patents generally related to IP telephony by using collaboration
technology from us and other providers. Estech is seeking monetary damages from the customer defendants. The first E.D. Tex
case against one of the customer defendants is scheduled for trial on October 4, 2021, and the W.D. Tex cases are set for trial on
December 7, 2021 and April 1, 2022. We believe the customer defendants have strong defenses and do not believe our indemnity
obligations, if any, would have a material effect on our Consolidated Financial Statements.
In addition, we have entered into indemnification agreements with our officers and directors, and our Amended and Restated
Bylaws contain similar indemnification obligations to our agents.
(f)
Legal Proceedings
Brazil Brazilian authorities have investigated our Brazilian subsidiary and certain of its former employees, as well as a Brazilian
importer of our products, and its affiliates and employees, relating to alleged evasion of import taxes and alleged improper
transactions involving the subsidiary and the importer. Brazilian tax authorities have assessed claims against our Brazilian
subsidiary based on a theory of joint liability with the Brazilian importer for import taxes, interest, and penalties. In addition to
claims asserted by the Brazilian federal tax authorities in prior fiscal years, tax authorities from the Brazilian state of Sao Paulo
have asserted similar claims on the same legal basis in prior fiscal years.
The asserted claims by Brazilian federal tax authorities are for calendar years 2003 through 2007, and the asserted claims by the
tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007. The total asserted claims by Brazilian state
and federal tax authorities aggregate to $155 million for the alleged evasion of import and other taxes, $771 million for interest,
and $384 million for various penalties, all determined using an exchange rate as of July 31, 2021.
We have completed a thorough review of the matters and believe the asserted claims against our Brazilian subsidiary are without
merit, and we are defending the claims vigorously. While we believe there is no legal basis for the alleged liability, due to the
complexities and uncertainty surrounding the judicial process in Brazil and the nature of the claims asserting joint liability with
the importer, we are unable to determine the likelihood of an unfavorable outcome against our Brazilian subsidiary and are
unable to reasonably estimate a range of loss, if any. We do not expect a final judicial determination for several years.
China We are investigating allegations of a self-enrichment scheme involving now-former employees in China. Some of those
employees are also alleged to have made or directed payments from the funds they received to various third parties, including
employees of state-owned enterprises. We voluntarily disclosed this investigation to the Department of Justice (“DOJ”) and
Securities and Exchange Commission (“SEC”). We take such allegations very seriously and we are providing results of our
investigation to the DOJ and SEC. While the outcome of our investigation is currently not determinable, we do not expect that
it will have a material adverse effect on our Consolidated Financial Statements.
SRI International On September 4, 2013, SRI International, Inc. (“SRI”) asserted patent infringement claims against us in the
U.S. District Court for the District of Delaware (“D. Del.”), accusing our products and services in the area of network intrusion
detection of infringing two patents. SRI sought monetary damages of at least a reasonable royalty and enhanced damages. On
May 12, 2016, a jury returned a verdict finding willful infringement. The jury awarded SRI damages of $24 million. On May 25,
2017, the district court awarded SRI enhanced damages and attorneys’ fees, entered judgment in the new amount of $57 million,
and ordered an ongoing royalty of 3.5% through the expiration of the patents in 2018. We appealed to the United States Court
of Appeals for the Federal Circuit (“Federal Circuit”), and on July 12, 2019, the Federal Circuit vacated the enhanced damages
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