Symantec 1999 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 of the 1999 Symantec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

SYMANTEC CORPORATION
Notes to Consolidated Financial Statements, Continued
72
were consolidated and a consolidated amended complaint was filed in late October 1998. The complaint originally
purported to assert claims for breach of implied warranty, fraud, unfair business practices and violation of California’s
Consumer Legal Remedies Act, among others, arising from the alleged inability of earlier versions of Norton
AntiVirus to function properly after the year 2000; all but the unfair business practice claims have been dismissed
following Symantec’s demurrer. The complaint seeks unspecified damages and injunctive relief. Symantec believes
that these actions have no merit and intends to defend itself vigorously.
In July 1998, the Ontario Court of Justice (General Division) ruled that Symantec should pay a total of approximately
$6.8 million for damages and legal costs to Triolet Systems, Inc. and Brian Duncombe in a decade-old copyright
action, for damages arising from the grant of a preliminary injunction against the defendant. The damages were
awarded following the court’s ruling that evidence presented later in the case showed the injunction was not
warranted. Symantec inherited the case through its 1995 acquisition of Delrina Corporation, which was the plaintiff
in this lawsuit. Symantec has appealed the decision. Symantec recorded a charge of $5.8 million in June 1998
representing the unaccrued portion of the judgment plus costs.
In March 1997, a class action complaint was filed against Quarterdeck in San Diego County Superior Court. The case
was later transferred to and is currently pending in Los Angeles County Superior Court. The complaint, purportedly
on behalf of a class of purchasers of Quarterdeck’s MagnaRAM2 product, seeks damages and injunctive relief under
the Consumers Legal Remedies Act and Business and Professions Code sections beginning with 17200 and 17500.
Symantec believes these claims to be without merit and intends to defend itself vigorously.
In October 1997, a complaint was filed in the United States District Court for the District of Utah on behalf of
PowerQuest Corporation against Quarterdeck. The complaint alleges that Quarterdeck’s partitioning software
(included in Partition-It and Partition-It Extra Strength) violates a patent held by PowerQuest. In January 1998,
PowerQuest obtained a second patent relating to partitioning and has amended its complaint to allege infringement of
that patent as well. The plaintiff seeks an injunction against distribution of Partition-It and Partition-It Extra Strength
and monetary damages. Symantec believes this action has no merit and intends to defend the lawsuit vigorously.
On July 30, 1998, a class action complaint was filed against Quarterdeck in the Supreme Court of the State of New
York, County of New York, on behalf of a purported class of purchasers of Procomm Plus version 4.0 for Windows
product (the “Product”). The complaint purported to assert claims for breach of warranty and violation of New
York’s Consumer Protection From Deceptive Acts and Practices Act arising from the Product’s inability to process
dates containing the year 2000. The complaint was dismissed and the court entered judgment in Quarterdeck’s favor
in April 1999.
Over the past few years, it has become common for software companies, including Symantec, to receive claims of
patent infringement. Symantec is currently evaluating claims of patent infringement asserted by several parties, with
respect to certain of the Company’s products. While the Company believes that it has valid defenses to these claims,
the outcome of any related litigation or negotiation could have a material adverse impact on the Company’s future
results of operations or cash flows.
Symantec is involved in a number of other judicial and administrative proceedings incidental to its business. The
Company intends to defend all of the aforementioned pending lawsuits vigorously and although adverse decisions (or
settlements) may occur in one or more of the cases, the final resolution of these lawsuits, individually or in the
aggregate, is not expected to have a material adverse affect on the financial condition of the Company, although it is
not possible to estimate the possible loss or losses from each of these cases. Depending, however, on the amount and
timing of an unfavorable resolution of these lawsuits, it is possible that the Company’s future results of operations or
cash flows could be materially adversely affected in a particular period. The Company has accrued certain estimated
legal fees and expenses related to certain of these matters; however, actual amounts may differ materially from those
estimated amounts.
The legal expenses accrued by the Company are deemed probable because the lawsuits have been filed, management
has determined its plans of action with regards to the cases and accordingly knows that it will incur legal expenses
related to the particular lawsuit. Utilizing the assumptions noted in the accounting policy, management is able to
estimate a minimum amount of legal fees to be incurred in these lawsuits.