Yahoo 2003 Annual Report Download - page 77

Contingencies. From time to time, third parties assert patent On May 24, 2001, Arista Records, Inc., Bad Boy Records,
infringement claims against Yahoo! in the form of letters, BMG Music d/b/a The RCA Records Label, Capitol
lawsuits, and other forms of communication. Currently, Records, Inc., Virgin Records America, Inc., Sony Music
the Company or its acquired subsidiaries, are engaged in Entertainment Inc., UMG Recordings, Inc., Interscope
several lawsuits regarding patent issues and have been Records, Motown Record Company, L.P., and Zomba
notified of a number of other potential patent disputes. Recording Corporation filed a lawsuit alleging copyright
infringement against LAUNCH Media, Inc.
In addition, from time to time the Company is subject to (‘‘LAUNCH’’) in the United States District Court for the
other legal proceedings and claims in the ordinary course Southern District of New York. After the lawsuit was
of business, including claims of alleged infringement of commenced, Yahoo! entered into an agreement to acquire
trademarks, copyrights and other intellectual property LAUNCH. In June 2001, LAUNCH settled the
rights, and a variety of claims arising in connection with LAUNCH litigation as to UMG Recordings, Inc. Yahoo!’s
its email, message boards, auction sites, shopping services, acquisition of LAUNCH closed in August 2001, and
and other communications and community features, such since that time LAUNCH has been a wholly owned sub-
as claims alleging defamation or invasion of privacy. sidiary of Yahoo!. The plaintiffs allege, among other
things, that the consumer-influenced portion of
The Company does not believe, based on current knowl- LAUNCH’s LAUNCHcast service is ‘‘interactive’’ within
edge, that any of the foregoing legal proceedings or claims the meaning of Section 114 of the Copyright Act and
are likely to have a material adverse effect on its financial therefore does not qualify for the compulsory license pro-
position, results of operations or cash flows. However, the vided for by the Copyright Act. The Complaint seeks
Company may incur substantial expenses in defending declaratory and injunctive relief and damages for the
against third party claims. In the event of a determination alleged infringement. Yahoo! and LAUNCH do not
adverse to Yahoo!, the Company may incur substantial believe that LAUNCH has infringed any rights of plain-
monetary liability, and be required to change its business tiffs and intend to vigorously contest the lawsuit. The
practices. Either of these could have a material adverse lawsuit is still in the preliminary, discovery phase and the
effect on the Company’s financial position, results of oper- Company does not believe it is feasible to predict or
ations or cash flows. determine the outcome or resolution of the LAUNCH
litigation. The range of possible resolutions of the
In October 2000, 800-JR-Cigar, Inc. filed a complaint in LAUNCH litigation could include judgments against the
the United States District Court for the District of New Company or settlements that could require substantial
Jersey against Overture, a wholly-owned subsidiary of the payments by the Company, which could have a material
Company acquired in October 2003. In October 2002, adverse impact on the Company’s financial position,
Robert Novak, doing business as PetsWarehouse and results of operations or cash flows. An estimate of the
PetsWarehouse.com, filed a complaint in the United States potential loss, if any, or range of loss that could arise from
District Court for the Eastern District of New York the LAUNCH litigation cannot be made at this time. In
against Overture. In August 2003, Accor filed a complaint January 2003, LAUNCH settled the LAUNCH litigation
in the Nanterre District Court in France against Overture as to Sony Music Entertainment, Inc. In October 2003,
and Overture S.A.R.L., Overture’s wholly-owned subsidi- LAUNCH settled the litigation as to Capitol
ary in France. The plaintiffs in each of these cases claim, Records, Inc. and Virgin Records America, Inc. Accord-
among other things, that they have trademark rights in ingly, BMG Music d/b/a/ The RCA Records Label is the
certain search terms and that Overture violates these rights sole remaining plaintiff in this proceeding as of
by allowing its advertisers to bid on these search terms. October 2003.
The complaints seek injunctive relief and damages. Over-
ture has also been named as a defendant in several other On July 12, 2001, the first of several purported securities
trade name infringement actions filed in Los Angeles, Cal- class action lawsuits was filed in the United States District
ifornia in which plaintiffs made similar claims. The Com- Court, Southern District of New York against certain
pany and Overture believe that Overture has meritorious underwriters involved in Overture’s initial public offering,
defenses to liability and damages in each of these lawsuits Overture, and certain of Overture’s current and former
and are contesting them vigorously. officers and directors. The Court consolidated the cases
against Overture into case number 01 Civ. 6339. Plaintiffs
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