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judgment. The Company does 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 on behalf of the named defend-
ants have occurred over the last year, resulting in a final settlement memorandum of understanding with the plaintiffs
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 the Company (as nominal defendant) and certain of the Company’s
current and former officers and directors (the ‘‘Derivative Defendants’’). Two similar shareholder derivative actions were
filed in the California 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 the Company from the Derivative Defendants. The Company understands the Derivative
Defendants deny any impropriety and intend to defend the lawsuits vigorously. The Company does not believe that the
ultimate costs to resolve these matters will have a material adverse effect on its financial condition, results of operations
or cash flows. In April 2004, the Company 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.
The Company does not believe, based on current knowledge, that any of the foregoing legal proceedings or claims are
likely to have a material adverse effect on its financial position, results of operations or cash flows. However, the
Company may incur substantial expenses in defending against third party claims. In the event of a determination adverse
to the Company or its subsidiaries, the Company may incur substantial monetary liability, and be required to change its
business practices. Either of these could have a material adverse effect on the Company’s financial position, results of
operations or cash flows.
Note 14 LITIGATION SETTLEMENT
In April 2002, the Company’s wholly owned subsidiary, Overture, filed a lawsuit against Google Inc. (‘‘Google’’) in the
United States District Court for the Northern District of California. The lawsuit asserted that Google infringed Over-
ture’s U.S. Patent No. 6,269,361 (‘‘the 361 patent’’). The 361 patent protects various features and innovations relating to
bid-for-performance products and Overture’s pay-for-performance (sponsored) search technologies.
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