eBay 1999 Annual Report Download - page 71

prior to the completion of the auction. The Company is responsible for the shortfall, if any, between the
guaranteed minimum proceeds and the actual net proceeds upon the completion of the auction. Losses, if any,
are recognized at the conclusion of the auction.
At December 31, 1999, B&B had entered into an agreement with another auction service to sell certain
memorabilia owned by a third party. The memorabilia’s consignor was guaranteed minimum net proceeds of
$2.0 million, half of which was guaranteed by each party.
Other contingencies
On March 23, 1999, the Company was sued by Network Engineering Software, Inc. (‘‘NES’’) in the U.S.
District Court for the Northern District of California for alleged willful and deliberate violation of a patent. The
suit sought unspecified monetary damages as well as an injunction against the Company’s operations. It also
sought treble damages and attorneys’ fees and costs. The Company has entered into a settlement agreement and
license with NES, and this suit has been dismissed with prejudice.
On September 1, 1999, the Company was served with a lawsuit filed by Randall Stoner, on behalf of the
general public, in San Francisco Superior Court (No. 305666). The lawsuit alleges that the Company violated
Section 17200 of the California Business & Professions Code, a statute that relates to unfair competition, based
upon the listing of ‘‘bootleg’’ or ‘‘pirate’’ recordings by the site’s users, allegedly in violation of California penal
statutes relating to the sale of unauthorized audio recordings. The lawsuit seeks declaratory and injunctive relief,
restitution and legal fees. Discovery has commenced. The Company believes that it has meritorious defenses to
this lawsuit and intends to defend itself vigorously. Management believes that the ultimate resolution of these
disputes will not have a material adverse impact on the Company’s financial position or results of operations.
On December 10, 1999, the Company sued Bidder’s Edge, Inc. in the United States District court for the
Northern District of California alleging trespass, unfair competition, violation of the computer fraud and abuse
act, misappropriation, false advertising, trademark dilution, injury to business reputation, interference with
prospective economic advantage, and unjust enrichment. On February 7, 2000, Bidder’s Edge denied these claims
and counterclaimed against the Company alleging that the Company violated the antitrust laws by monopolizing
or attempting to monopolize a market, competing unfairly, and interfering with their contract with eBay
magazine. Bidder’s Edge is seeking treble damages, an injunction and its fees and costs. Expedited discovery in
this case has commenced. The Company intends to prosecute its claims and defend itself against Bidder’s Edge
counterclaims vigorously. Management believes that the ultimate resolution of these disputes will not have a
material adverse impact on the Company’s financial position or results of operations.
Other third parties have from time to time claimed and may claim in the future that the Company has
infringed their past, current or future technologies. The Company expects that participants in its markets
increasingly will be subject to infringement claims as the number of services and competitors in our industry
segment grows. Any claim like this, whether meritorious or not, could be time consuming, result in costly
litigation, cause service upgrade delays or require us to enter into royalty or licensing agreements. These royalty
or licensing agreements might not be available on acceptable terms or at all. Management believes that the
ultimate resolution of these disputes will not have a material adverse impact on the Company’s financial position
or results of operations.
From time to time, the Company is involved in disputes which have arisen in the ordinary course of
business. Management believes that the ultimate resolution of these disputes will not have a material adverse
impact on the Company’s financial position or results of operations.
eBAY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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