Yahoo 2004 Annual Report Download - page 32

settled the LAUNCH litigation as to Sony Music Entertainment, Inc. In October 2003, LAUNCH settled the litigation
as to Capitol Records, Inc. and Virgin Records America, Inc. Accordingly, BMG Music d/b/a/ The RCA Records Label is
the sole remaining plaintiff in this proceeding. On March 16, 2004, plaintiffs filed motions for partial summary
judgment on the issues of willful infringement and whether the consumer-influenced portion of Launch’s LAUNCHcast
service is ‘‘interactive’’ within the meaning of Section 114 of the Copyright Act and therefore does not qualify for the
compulsory license provided for by the Copyright Act. LAUNCH filed its opposition to the motions for partial summary
judgment on April 30, 2004, and a hearing on the motions was held on June 18, 2004. The Court has not yet ruled on
the motions for summary judgment. We do not believe it is feasible to predict or determine the outcome or resolution of
the remaining LAUNCH litigation at this time. The range of possible resolutions of such LAUNCH litigation could
include judgments against LAUNCH or settlements that could require substantial payments by LAUNCH.
On July 12, 2001, the first of several purported securities class action lawsuits was filed in the United States District
Court for the Southern District of New York against certain underwriters involved in Overture’s initial public offering,
Overture, and certain of Overture’s current and former officers and directors. The Court consolidated the cases against
Overture. Plaintiffs allege, among other things, violations of the Securities Act of 1933 and the Securities Exchange Act
of 1934 involving undisclosed compensation to the underwriters, and improper practices by the underwriters, and seek
unspecified damages. Similar complaints were filed in the same court against numerous public companies that conducted
initial public offerings of their common stock since the mid-1990s. All of these lawsuits were consolidated for pretrial
purposes before Judge Shira Scheindlin. On April 19, 2002, plaintiffs filed an amended complaint, alleging Rule 10b-5
claims of fraud. On July 15, 2002, the issuers filed a motion to dismiss for failure to comply with applicable pleading
standards. On October 8, 2002, the Court entered an Order of Dismissal as to all of the individual defendants in the
Overture IPO litigation, without prejudice. On February 19, 2003, the Court denied the motion to dismiss the
Rule 10b-5 claims against certain defendants, including Overture. Settlement discussions relating to this case on behalf of
the named defendants have occurred over the last year, resulting in a final settlement memorandum of understanding
with the plaintiff and Overture’s insurance carriers. This settlement proposal includes the settlement of, and release of
claims against, the issuer defendants, including Overture. The settlement is subject to a number of conditions, including
approval of the court. If the settlement does not occur, and litigation against Overture continues, the Company and
Overture believe that Overture has meritorious defenses to liability and damages and intend to defend the case vigorously.
On or about February 4, 2004, a shareholder derivative action was filed in the Court of Chancery of the State of
Delaware in and for New Castle County, against us (as nominal defendant) and certain of our current and former
officers and directors (the ‘‘Derivative Defendants’’). Two similar shareholder derivative actions were filed in the Califor-
nia Superior Court for the County of San Mateo on February 13, 2004. The complaints generally allege breaches of
fiduciary duties by the Derivative Defendants related to the alleged purchase of shares in initial public offerings or the
alleged acquiescence in such conduct. The complaints seek unspecified monetary damages and other relief purportedly on
behalf of Yahoo! from the Derivative Defendants. In April 2004, Yahoo! filed a motion to dismiss the Delaware action
for failure to plead demand futility. On August 2, 2004, the Delaware Court of Chancery granted the motion to dismiss.
On October 18, 2004, the plaintiffs appealed the granting of the motion to dismiss. On January 21, 2005, the Supreme
Court of the State of Delaware affirmed the opinion of the Delaware Court of Chancery granting the motion to dismiss.
We understand the Derivative Defendants deny any impropriety and intend to defend the remaining lawsuits vigorously.
We do not believe, based on current knowledge, that any of the foregoing legal proceedings or claims are likely to have a
material adverse effect on our financial position, results of operations or cash flows. However, we may incur substantial
expenses in defending against third party claims. In the event of a determination adverse toYahoo! or our subsidiaries, we
may incur substantial monetary liability, and be required to change our business practices. Either of these could have a
material adverse effect on our financial position, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of 2004.
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