Yahoo 2012 Annual Report Download - page 108

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 might 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 the
Company’s consolidated financial statements.
As of December 31, 2012, 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.
See Note 18—“Search Agreement with Microsoft Corporation” for a description of the Company’s Search
Agreement and License Agreement with Microsoft.
Legal Contingencies.
Intellectual Property Matters. From time to time, third parties assert patent infringement claims against the
Company. Currently, the Company is engaged in lawsuits regarding patent issues and has been notified 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, invasion of privacy, or similar claims arising in connection with
the Company’s e-mail, message boards, photo and video sites, auction sites, shopping services, and other
communications and community features.
Stockholder and Securities Matters. On June 14, 2007, a stockholder derivative action was filed in the United
States District Court for the Central District of California by Jill Watkins against members of the Board and
selected officers. The complaint filed by the plaintiff alleged breaches of fiduciary duties and corporate waste,
similar to the allegations in a former class action relating to stock price declines during the period April 2004 to
July 2006, and alleged violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). On July 16, 2009, the plaintiff Watkins voluntarily dismissed the action against all defendants
without prejudice. On July 17, 2009, plaintiff Miguel Leyte-Vidal, who had substituted in as plaintiff prior to the
dismissal of the federal Watkins action, re-filed a stockholder derivative action in Santa Clara County Superior
Court against members of the Board and selected officers. The Santa Clara County Superior Court derivative
action purports to assert causes of action on behalf of the Company for violation of specified provisions of the
California Corporations Code, for breaches of fiduciary duty regarding financial accounting and insider selling
and for unjust enrichment. On September 19, 2011, the Court sustained Yahoo!’s demurrer to plaintiff’s third
amended complaint without leave to amend. Plaintiff has appealed.
Since May 31, 2011, several related stockholder derivative suits were filed in the Santa Clara County Superior
Court (“California Derivative Litigation”) and the United States District Court for the Northern District of
California (“Federal Derivative Litigation”) purportedly on behalf of the Company against certain officers and
directors of the Company and third parties. The California Derivative Litigation was filed by plaintiffs Cinotto,
Lassoff, Zucker, and Koo, and consolidated under the caption In re Yahoo! Inc. Derivative Shareholder
Litigation on June 24, 2011 and September 12, 2011. The Federal Derivative Litigation was filed by plaintiffs
Salzman, Tawila, and Iron Workers Mid-South Pension Fund and consolidated under the caption In re Yahoo!
Inc. Shareholder Derivative Litigation on October 3, 2011. The plaintiffs allege breaches of fiduciary duties,
corporate waste, mismanagement, abuse of control, unjust enrichment, misappropriation of corporate assets, or
contribution and seek damages, equitable relief, disgorgement and corporate governance changes in connection
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