Amazon.com 2004 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2004 Amazon.com 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 104

  • 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

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
damages or statutory damages where applicable, attorneys’ fees, costs, and disbursements, disgorgement of all
sums obtained by allegedly wrongful acts, interest, and declaratory relief. We dispute the allegations of
wrongdoing in this complaint, and intend to vigorously defend ourselves in this matter.
Beginning in March 2003, we were served with complaints filed in several different states, including Illinois
and Nevada, by a private litigant purportedly on behalf of the state governments under various state False Claims
Acts. The complaints allege that we (along with other companies with which we have commercial agreements)
wrongfully failed to collect and remit sales and use taxes for sales of personal property to customers in those
states and knowingly created records and statements falsely stating we were not required to collect or remit such
taxes. The complaints seek injunctive relief, unpaid taxes, interest, attorneys’ fees, civil penalties of up to
$10,000 per violation, and treble or punitive damages under the various state False Claims Acts. It is possible
that we have been or will be named in similar cases in other states as well. We do not believe that we are liable
under existing laws and regulations for any failure to collect sales or other taxes relating to Internet sales and
intend to vigorously defend ourselves in these matters.
On July 17, 2003, Pinpoint, Inc. filed a complaint for patent infringement in the United States District Court
for the Northern District of Illinois against us and several other companies with which we have commercial
agreements. The complaint was dismissed without prejudice in December 2004. The complaint alleges that our
personalization technology infringes patents obtained by Pinpoint and seeks injunctive relief, monetary damages
in an amount no less than a reasonable royalty, treble damages for alleged willful infringement, prejudgment
interest, and attorneys’ fees against all defendants. We dispute the allegations of wrongdoing in this complaint
and intend to vigorously defend ourselves in this matter. See “Note 15—Subsequent Events (Unaudited).”
On January 12, 2004, Soverain Software LLC filed a complaint against us for patent infringement in the
United States District Court for the Eastern District of Texas. The complaint alleges that our website technology
infringes several patents obtained by Soverain purporting to cover “Internet Server Access Control and
Monitoring Systems” (U.S. Patent No. 5,708,780) and “Network Sales Systems” (U.S. Patent Nos. 5,715,314 and
5,909,492) and seeks injunctive relief, monetary damages in an amount no less than a reasonable royalty, treble
damages for alleged willful infringement, prejudgment interest, and attorneys’ fees. On October 6, 2004,
Soverain filed an amended complaint alleging that we infringe two additional patents purporting to cover
“Digital Active Advertising” (U.S. Patent No. 6,195,649) and an “Open Network Payment System for Providing
Real-Time Authorization of Payment and Purchase Transactions” (U.S. Patent No. 6,205,437). The patents
asserted in the amended complaint have since been severed from those asserted in the original complaint, and
accordingly a separate complaint has been filed for those patents. We dispute the allegations of wrongdoing in
these complaints and intend to vigorously defend ourselves in this matter.
On January 22, 2004, IPXL Holdings, LLC brought an action against us for patent infringement in the
United States District Court for the Eastern District of Virginia. The complaint alleges that aspects of our online
ordering technology, including 1-Click®ordering, infringe a patent obtained by IPXL purporting to cover an
“Electronic Fund Transfer or Transaction System” (U.S. Patent No. 6,149,055) and seeks injunctive relief,
monetary damages in an amount no less than a reasonable royalty, prejudgment interest, and attorneys’ fees. On
August 25, 2004, the Court entered a judgment in Amazon.com’s favor on the grounds that the patent claims
asserted by the plaintiff were invalid and that Amazon.com’s technology did not infringe those claims in any
event. The Court also awarded Amazon.com its attorneys’ fees and costs. Plaintiff is appealing that judgment.
In April 2004, we learned that the French authorities are investigating our DVD sales practices in France,
and we are cooperating.
73