Yahoo 2007 Annual Report Download - page 102

Other Commitments. In the ordinary course of business, the Company may provide indemnifications of varying
scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters,
including, but not limited to, losses arising out of the Company’s breach of agreements, services to be provided by
the Company, or from intellectual property infringement claims made by third parties. In addition, the Company
has entered into indemnification agreements with its directors and certain of its officers that will require the
Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or
service as directors or officers. The Company has also agreed to indemnify certain former officers, directors, and
employees of acquired companies in connection with the acquisition of such companies. The Company maintains
director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its
directors and officers, and former directors and officers of acquired companies, in certain circumstances. It is not
possible to determine the aggregate maximum potential loss under these indemnification agreements due to the
limited history of prior indemnification claims and the unique facts and circumstances involved in each particular
agreement. Such indemnification agreements may not be subject to maximum loss clauses. Historically, the
Company has not incurred material costs as a result of obligations under these agreements and it has not accrued any
liabilities related to such indemnification obligations in its consolidated financial statements.
During the year ended December 31, 2006, the Company reversed an earn-out accrual related to a prior acquisition,
which resulted in a $10 million reduction to operating expenses in the consolidated statements of income.
As of December 31, 2007, the Company did not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. As such, the Company is not exposed to any financing, liquidity, market, or credit risk that could
arise if the Company had engaged in such relationships. In addition, the Company identified no variable interests
currently held in entities for which it is the primary beneficiary.
Contingencies. From time to time, third parties assert patent infringement claims against Yahoo!. Currently, the
Company is engaged in several lawsuits regarding patent issues and has been notified of a number of other potential
patent disputes. In addition, from time to time the Company is subject to other legal proceedings and claims in the
ordinary course of business, including claims of alleged infringement of trademarks, copyrights, trade secrets and
other intellectual property rights, claims related to employment matters, and a variety of other claims, including
claims alleging defamation or invasion of privacy, arising in connection with the Company’s e-mail, message
boards, auction sites, shopping services, and other communications and community features.
On May 24, 2001, Arista Records, Inc., Bad Boy Records, BMG Music d/b/a The RCA Records Label, Capitol
Records, Inc., Virgin Records America, Inc., Sony Music Entertainment, Inc., UMG Recordings, Inc., Interscope
Records, Motown Record Company, L.P., and Zomba Recording Corporation filed a lawsuit alleging copyright
infringement against LAUNCH Media, Inc. (“LAUNCH”) in the United States District Court for the Southern
District of New York. The plaintiffs alleged, among other things, that 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. The Complaint sought
declaratory and injunctive relief and damages for the alleged infringement. After the lawsuit was commenced,
Yahoo! entered into an agreement to acquire LAUNCH, which closed in August 2001, and since that time LAUNCH
has been a wholly owned subsidiary of Yahoo!. Because LAUNCH settled the LAUNCH litigation as to all other
plaintiffs, BMG Music d/b/a/ The RCA Records Label was the sole remaining plaintiff in this proceeding. On
April 27, 2007, after a two week jury trial, the jury returned a unanimous verdict in favor of LAUNCH finding no
liability. The plaintiff has filed a notice of appeal to the United States Court of Appeals for the Second Circuit.
On July 12, 2001, the first of several purported securities class action lawsuits was filed in the United States District
Court, Southern District of New York against certain underwriters involved in Overture Services Inc.’s (“Overture”)
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
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Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)