eBay 2006 Annual Report Download - page 101

Download and view the complete annual report

Please find page 101 of the 2006 eBay annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

sufficient to make them non-infringing, we would likely be forced to pay significant additional damages and
licensing fees and/or modify our business practices in an adverse manner.
In June 2006, Net2Phone, Inc. filed a lawsuit in the U.S. District Court for the District of New Jersey
(No. 06-2469) alleging that eBay Inc., Skype Technologies S.A., and Skype Inc. infringed five patents owned by
Net2Phone relating to point-to-point Internet protocol. The suit seeks an injunction against continuing infringe-
ment, unspecified damages, including treble damages for willful infringement, and interest, costs, and fees. We
have filed an answer and counterclaims asserting that the patents are invalid, unenforceable, and not infringed. The
parties are in the process of conducting discovery, and we expect a trial date to be scheduled for 2008. We believe
that we have meritorious defenses and intend to defend ourselves vigorously.
In August 2006, Peer Communications Corporation filed a lawsuit in the U.S. District Court for the Eastern
District of Texas (No. 6-06CV-370) alleging that eBay Inc., Skype Technologies S.A., and Skype Inc. infringed two
patents owned by Peer Communications relating to uniform network access. The suit seeks an injunction against
continuing infringement, unspecified damages, and interest, costs, and fees. The parties are in the process of
conducting discovery, and a trial date has been scheduled for October 2008. We believe that we have meritorious
defenses and intend to defend ourselves vigorously.
In September 2006, Mangosoft Intellectual Property, Inc. filed a lawsuit in the U.S. District Court for the
Eastern District of Texas (No. 2-06CV-390) alleging that eBay Inc., Skype Technologies S.A., and Skype Software
S.a.r.l. infringed a patent owned by Mangosoft relating to dynamic directory services. The suit seeks an injunction
against continuing infringement, unspecified damages, and interest, costs, and fees. We have filed an answer and
counterclaims asserting that the patents are invalid, unenforceable, and not infringed. We expect to receive the
court’s scheduling order shortly. We believe that we have meritorious defenses and intend to defend ourselves
vigorously.
Other third parties have from time to time claimed, and others may claim in the future, that we have infringed
their intellectual property rights. We are subject to additional patent disputes, and expect that we will increasingly
be subject to patent infringement claims as our services expand in scope and complexity. In particular, we expect
that we may face additional patent infringement claims involving various aspects of our Payments and Commu-
nications businesses. We have in the past been forced to litigate such claims. We may also become more vulnerable
to third-party claims as laws such as the Digital Millennium Copyright Act, the Lanham Act and the Commu-
nications Decency Act are interpreted by the courts, and as we expand geographically into jurisdictions where the
underlying laws with respect to the potential liability of online intermediaries like ourselves are either unclear or
less favorable. We believe that additional lawsuits alleging that we have violated copyright or trademark laws will
be filed against us, especially in Europe. Intellectual property claims, whether meritorious or not, are time
consuming and costly to resolve, could require expensive changes in our methods of doing business, or could
require us to enter into costly royalty or licensing agreements.
From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of
business. The number and significance of these disputes and inquiries are increasing as our business expands and
our company grows larger. Any claims or regulatory actions against us, whether meritorious or not, could be time
consuming, result in costly litigation, require significant amounts of management time, and result in the diversion of
significant operational resources.
Indemnification Provisions
In the ordinary course of business we have included limited indemnification provisions in certain of our
agreements with parties with whom we have commercial relations, including our standard marketing, promotions
and application-programming-interface license agreements. Under these contracts, we generally indemnify, hold
harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in
connection with claims by any third party with respect to domain names, trademarks, logos and other branding
elements to the extent that such marks are applicable to our performance under the subject agreement. In a limited
97
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)