Symantec 2000 Annual Report Download - page 53

ages 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 dam-
ages were awarded following the court’s ruling that evidence
presented later in the case showed the injunction was not war-
ranted. We inherited this case through our acquisition of Delrina
Corporation, which was the plaintiff in this lawsuit. We have
appealed the decision, however, we recorded a charge of approx-
imately $5.8million in the June 1998 quarter, representing the
unaccrued portion of the judgment plus costs. As of March 31,
2000, we believe that we have adequately accrued for both the
judgment and all legal costs.
In March 1997, a class action complaint was filed against Quar-
terdeck in San Diego County Superior Court. The case was later
transferred to Los Angeles County Superior Court. The complaint,
purportedly on behalf of a class of purchasers of Quarterdeck’s
MagnaRAM2 product, sought damages and injunctive relief under
the Consumers Legal Remedies Act and Business and Profes-
sions Code sections beginning with 17200 and 17500. In November
1999, we resolved this case with no material financial impact on
the Company.
In October 1997, a complaint was filed in the United States Dis-
trict Court for the District of Utah on behalf of PowerQuest
Corporation (“PowerQuest”) against Quarterdeck. The complaint
alleges that Quarterdeck’s partitioning software (included in Par-
tition-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. We believe this claim has no
merit and we intend to defend the action vigorously.
On July 30, 1998, a class action complaint was filed against Quar-
terdeck in the Supreme Court of the State of New York, County of
New York, on behalf of a purported class of purchasers of Pro-
comm Plus version 4.0for Windows product (“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.
This judgment was affirmed on appeal in December 1999.
On December 23, 1999, Altiris Inc. (“Altiris”) filed a lawsuit in the
United States District Court, District of Utah, against us, alleging that
unspecified Symantec products including Norton Ghost Enterprise
Edition, infringed a patent owned by Altiris. The lawsuit requests
damages, injunctive relief, costs and attorney fees. We believe this
claim has no merit and we intend to defend the action vigorously.
Over the past few years, it has become common for software com-
panies, including us, to receive claims of patent infringement. We
are currently evaluating claims of patent infringement asserted by
several parties, with respect to certain of our products. While we
believe that we have valid defenses to these claims, the outcome
of any related litigation or negotiation could have a material
adverse impact on our future results of operations or cash flows.
We are also involved in a number of other judicial and administra-
tive proceedings incidental to our business. We intend 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 our
financial condition, although it is not possible to estimate the pos-
sible 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 our future results of operations or cash
flows could be materially adversely affected in a particular period.
We have 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 us are deemed probable because
the lawsuits have been filed, management has determined its
plans of action with regard 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, man-
agement is able to estimate a minimum amount of legal fees to be
incurred in these lawsuits.
The total amount of legal expenses accrued as of the respective
year-ends and the amounts expensed for the years ended are
reflected below:
Balance as of March 31, 1998 $2.5million
Balance as of March 31, 1999 $7. 2 million
Balance as of March 31, 2000 $8.7million
Amount expensed in fiscal 1998 $4.9million
Amount expensed in fiscal 1999 $10.1million
Amount expensed in fiscal 2000 $7.3million
NOTE 16. ADOPTION OF STOCKHOLDER RIGHTS PLAN
On August 11, 1998, the Board adopted a stockholder rights plan
designed to ensure orderly consideration of any future unso-
licited acquisition attempt to ensure fair value of the Company for
its stockholders.
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