Symantec 1996 Annual Report Download - page 41

$3.0 million which was immediately expensed.
During fiscal 1994, Symantec reached an agreement with the
plaintiffs and Sy m a n t e c ’s insurance carriers to settle two securities
class action lawsuits and a related deriva t i ve lawsuit brought by
stockholders of Symantec. The combined settlement amount of
the cases was $19.0 million, approximately $12.5 million of
which was paid by Sy m a n t e c’s insurance carriers. Sy m a n t e c
re c o r ded a charge of $6.5 million re p r esenting Sy m a n t e c’s por-
tion of the class action settlement.
Note 11. Litigation
On March 18, 1996, a class action complaint was filed by the
law firm of Milberg Weiss Bershad Hynes & Lerach in Superior
Court of the State of California, County of Santa Clara against
the Company and several of its current and former officers and
directors. The complaint alleges that Symantec insiders inflated
the stock price and then sold stock based on inside information
that sales we re not going to meet analysts’ expectations. T h e
complaint seeks damages in an unspecified amount. Symantec
believes the complaint has no merit and will vigorously defend
i t s e l f. The Company has accrued certain estimated legal fees
and expenses related to this matter; howe ve r, actual amounts
may differ materially from those estimated amounts.
On December 30, 1994, So f t w a re Engineering Carmel
( “ C a r m e l”) filed a lawsuit in the U . S . District Court for the
District of Oregon against Central Point, a wholly owned sub-
s i d i a ry of the Company. Carmel developed and maintains the
a n t i - v i rus program distributed by Central Point. The complaint
alleges that Central Point breached its contract with Carmel by
not fulfilling an implied obligation under the contract to use its
best efforts or alternative l y, its reasonable efforts, to market the
a n t i - v i rus program developed by Carmel. The complaint also
alleges that Central Point violated the non-competition prov i s i o n
in its agreement by selling a competing anti-virus pro g r a m ,
a p p a rently based on Sy m a n t e c ’s sale of its own anti-virus pro d u c t .
The complaint seeks damages in the amount of $6.75 million
and a release of Carmel from its obligation not to sell competing
p roducts. A trial date has been set for July 1996. Sy m a n t e c
b e l i e ves the complaint has no merit.
On September 3, 1992, Borland International, Inc. (“Borland” )
filed a lawsuit in the Superior Court for Santa Cruz County,
California against Symantec, Go r don E. Eubanks, Jr. (Sy m a n t e c ’s
President and Chief Exe c u t i ve Officer) and Eugene Wang (a for-
mer Exe c u t i ve Vice President of Symantec who is a former
e m p l oyee of Borland). The complaint, as amended, alleges mis-
a p p ropriation of trade secrets, unfair competition, including
b reach of contract, interf e rence with pro s p e c t i ve economic
a d vantage and unjust enrichment. Borland alleged that prior to
joining Symantec, Mr. Wang transmitted to Mr. Eubanks confi-
dential information concerning Borland’s product and
m a rketing plans. Borland claims damages in an unspecified
amount. Symantec has denied the allegations of Borland’s com-
plaint and contends that Borland has suffered no damages fro m
the alleged actions. Borland obtained a temporary re s t r a i n i n g
o rder and a pre l i m i n a ry injunction prohibiting the defendants
f r om using, disseminating or destroying any Borland pro p r i e t a ry
information or trade secrets. Symantec filed a cross complaint
against Borland alleging that Borland had committed abuse of
p rocess and defamation in publishing statements that Sy m a n t e c
had acted in contempt of a temporary restraining ord e r. T h e
case is not being actively prosecuted at this time pending the
outcome of the criminal proceedings, discussed below. Sy m a n t e c
b e l i e ves that Borland’s claims have no merit.
On September 2, 1992, the Scotts Va l l e y, California police
d e p a r tment, operating with search warrants for Borland pro p r i-
e t a ry and trade secret information, searched Sy m a n t e c’s offices
and the homes of Messrs. Eubanks and Wang and re m o ved docu-
ments and other materials. On Fe b ru a ry 26, 1993, criminal
indictments we r e filed against Messrs. Eubanks and Wang for
allegedly violating various California Penal Code Sections re l a t i n g
to the misappropriation of trade secrets and unauthorized access
to a computer system. On August 23, 1993, the Court re c u s e d
the District At t o r n e y’s Office from prosecution of the action. On
October 5, 1993, the State Attorney General and the Di s t r i c t
At t o r n e y’s Office filed a Notice of Appeal of the Ord e r, and that
appeal was argued on Ju l y 11, 1995. On September 8, 1995, the
C o u r t of Appeals re versed the recusal ord e r. A petition for re v i e w
of this decision by the California Su p reme Court was granted on
December 14, 1995. Symantec believes the criminal charges
against Messrs. Eubanks and Wang have no merit.
On June 11, 1992, Dynamic Mi c ro p r ocessor Associates, In c .
( “D M A”), a former wholly-owned subsidiary of Symantec which
has since been merged into Symantec, commenced an action
against E K D Computer Sales & Supplies Corporation (“E K D” ) ,
a former licensee of D M A and Thomas Green, a principal of
E K D, for copyright infringement, violations of the Lanham Ac t ,
t r a d e m a rk infringement, misappropriation, deceptive acts and
practices, unfair competition and breach of contract. On
Ju l y 14, 1992, the Suffolk County, New Yo rk sheriff’s depart-
ment conducted a search of E K D’s premises and seized and
impounded thousands of infringing articles. On Ju l y 21, 1992,
the Court issued a pre l i m i n a r y injunction against EKD and Mr.
Green, enjoining them from manufacturing, marketing, distrib-
uting, copying or purporting to license D M A’s pcA N YW H E R E
I I I or using D M A’s mark s .
On July 20, 1992 and in a subsequent amendment, EKD and
Mr. Green answered Symantec’s complaint denying all liability
and asserting counterclaims against Symantec and Lee
Rautenberg, a former principal of DMA. In May 1993, EKD a n d
M r. Green we re granted permission to file a Second Amended
A n s wer and Counterclaims that dropped eve ry previously raised
claim and instead alleged that DMA obtained the temporary
restraining order and pre l i m i n a ry injunction in bad faith and
that DMA, Symantec and Mr. Rautenberg breached cert a i n
license agreements and violated certain federal and New Yo rk
State antitrust laws. In February 1995, DMA was granted leave