Yahoo 2007 Annual Report Download - page 33

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
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 an omnibus 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. In June 2004, a stipulation of settlement and release of claims against the
issuer defendants, including Overture, was submitted to the Court for approval. On August 31, 2005, the Court
preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes
in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings.
Since class certification, which was a condition of the settlement, was not met, the parties stipulated to terminate the
settlement. On June 25, 2007, the Court entered an order terminating the proposed settlement based upon this
stipulation. Plaintiffs have filed amended master allegations and amended complaints in the six test cases. It is
uncertain whether there will be any future settlement. If a settlement is not reached, and litigation against Overture
continues, we intend to defend the case vigorously.
On May 11, 2007, the first of two purported securities class action lawsuits was filed against Yahoo! Inc. and certain
of its officers, members of the Board of Directors and former officers. The first lawsuit was filed in the United
States District Court, Central District of California by plaintiff Ellen Rosenthal Brodsky and the second lawsuit was
filed in the United States District Court, Central District of California by plaintiff Manfred Hacker. The two cases
were consolidated in the United States District Court for the Central District of California, and a consolidated
complaint was filed on December 21, 2007. In the consolidated amended complaint, the plaintiffs allege, among
other things, violation of the Securities Exchange Act of 1934 sections 10(b), 20(a) and 20(A), as well as
Rule 10b-5. The plaintiffs generally claim that Yahoo! issued false, deceptive or misleading statements concerning
its advertising business, financial results, and sales and growth potential between April 8, 2004 and July 18, 2006.
The consolidated amended complaint seeks unspecified compensatory damages, injunctive relief, costs and
attorneys’ fees. We believe this case is without merit and intend to defend it vigorously.
On May 15, 2007, the first of two shareholder derivative actions was filed in the Superior Court of Santa Clara
County by plaintiff Greg Brockwell against certain officers and members of the Board of Directors of Yahoo! Inc.
purportedly on behalf of Yahoo! Inc. The second derivative action was filed in the United States District Court for
the Central District of California on June 14, 2007 by plaintiff Jill Watkins. The derivative actions, which include
allegations of substantially identical facts to the purported securities class action, attempt to state various claims
under federal and California law for trading by defendants on alleged material non-public information, and
allegations of breaches of fiduciary duties relating to financial reporting, misappropriation of information, abuse of
control and waste of corporate assets. The federal derivative action includes an additional claim for alleged
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