Symantec 2000 Annual Report Download - page 52

NOTE 15. LITIGATION
On March 18, 1996, a class action complaint was filed by the law
firm of Milberg, Weiss, Bershad, Hynes & Lerach in the Superior
Court of the State of California, County of Santa Clara, against us
and several of our current and former officers and directors. The
complaint alleged that our insiders inflated our stock price and
then sold stock based on inside information that our sales were
not going to meet analysts’ expectations. The complaint sought
damages of an unspecified amount. The complaint had been
refiled twice in State Court, most recently on January 13, 1997, fol-
lowing our demurrers directed to previous complaints. On
January 7, 1997, the same plaintiffs filed a complaint in the United
States District Court, Northern District of California, based on the
same facts as the state court complaint, for violation of the Secu-
rities Exchange Act of 1934. The district court dismissed that
complaint and plaintiffs served an amended complaint in April
1998. Our motion to dismiss the new federal complaint was
granted in part, substantially narrowing the complaint. In July
1999, we reached an agreement in principle to settle these cases
on terms that would have no material financial impact on us. In
October 1999, the Federal Court approved the settlement, and in
December 1999, the state court action was dismissed.
On April 23, 1997, we filed a lawsuit against McAfee Associates, Inc.,
which pursuant to a merger has become Network Associates, Inc.
(“Network Associates”), in the United States District Court, North-
ern District of California, for copyright infringement and unfair
competition. On October 6, 1997, the court found that we had
demonstrated a likelihood of success on the merits of certain
copyright claims and issued a preliminary injunction (i) prohibit-
ing Network Associates from infringing our rights in specified
materials by marketing, selling, transferring or directly or indi-
rectly copying into any new Network Associates product or new
version of an existing product that has our code, (ii) requiring Net-
work Associates to notify distributors who were still selling
versions of PC Medic 97 that had our code to tell customers that
they should upgrade to versions that did not contain our code and
(iii) requiring Network Associates to provide us and the court with a
sample of the notice to be used. On October 17, 1997, we amended
our complaint to include additional claims for copyright infringe-
ment and misappropriation of trade secrets, based on additional
evidence found in the discovery process. On April 1, 1998, we
amended our complaint to add claims for misappropriation of
trade secrets, Racketeer Influenced and Corrupt Organizations Act
(“RICO”) and related claims based on additional evidence uncov-
ered in the litigation. Following motions by Network Associates,
the court dismissed our unfair competition and trade secret claims
regarding the copyrighted code and its RICO and interference
claims. On October 22, 1998, the court consolidated this case with
the case against Network Associates and the case brought by
CyberMedia, both of which are described below. In December 1999,
we agreed to a settlement resolving this and the consolidated
cases discussed below. During the December 1999 quarter, we
accrued approximately $3million related to fees and settlement
costs. This amount has been reflected in research and develop-
ment expenses in the Consolidated Statements of Income.
On September 4, 1998, we filed a lawsuit against Network Asso-
ciates in the United States District Court, Northern District of
California, for copyright infringement, trade secret misappropri-
ation and unfair competition. This case was also settled as part
of the above mentioned case.
On February 4, 1998, CyberMedia, Inc. (“CyberMedia”), which in
September 1998 was acquired by Network Associates, filed a law-
suit in the United States District Court, Northern District of
California, against us, ZebraSoft Inc. and others, alleging that our
Norton Uninstall Deluxe infringed CyberMedia’s copyright and
asserting related state law claims. This case was resolved as part
of the settlement with Network Associates described above.
On September 15, 1997, Hilgraeve Corporation (“Hilgraeve”) filed
a lawsuit in the United States District Court, Eastern District of
Michigan, against us, alleging that unspecified Symantec prod-
ucts infringe a patent owned by Hilgraeve. The lawsuit requested
damages, injunctive relief, costs and attorney fees. In March 2000,
the court granted our summary judgment motions and dismissed
the case. The plaintiff has appealed the dismissal and we have
cross-appealed.
On February 19, 1998, a class action complaint was filed by the law
firm of Milberg, Weiss, Bershad, Hynes & Lerach in Santa Clara
County Superior Court, on behalf of a class of purchasers of pre-
version 4.0Norton AntiVirus products. A similar complaint was filed
in the same court on March 6, 1998, by an Oregon law firm. Those
actions 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 busi-
ness 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 dis-
missed following our demurrer. The complaint seeks unspecified
damages and injunctive relief. We believe that these claims have
no merit and we intend to defend the actions vigorously.
In July 1998, the Ontario Court of Justice (General Division) ruled
that we should pay a total of approximately $6.8million for dam-
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