Amazon.com 2004 Annual Report Download - page 82

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On May 21, 2004, Toysrus.com LLC filed a complaint against us for breach of contract in the Superior
Court of New Jersey. The complaint alleges that we breached our commercial agreement with Toysrus.com LLC
by selling, and by permitting other third parties to sell, products that Toysrus.com LLC alleges it has an exclusive
right to sell on our website. The complaint seeks injunctive relief, declaratory judgment and either monetary
damages of an unspecified amount or rescission of the commercial agreement and return of specific amounts paid
under the agreement totaling $200 million. We dispute the allegations of wrongdoing in this complaint and have
brought counterclaims alleging breach of contract and seeking damages and declaratory relief. We intend to
vigorously defend ourselves in this matter.
On September 14, 2004, BTG International Inc. filed a complaint against us for patent infringement in the
United States District Court for the District of Delaware. The complaint alleges that our website technology,
including our Associates program, infringes two patents obtained by BTG purporting to cover methods and
apparatuses for “Attaching Navigational History Information to Universal Resource Locator Links on a World
Wide Web Page” (U.S. Patent No. 5,712,979) and for “Tracking the Navigation Path of a User on the World
Wide Web” (U.S. Patent No. 5,717,860) and seeks injunctive relief, monetary damages in an amount no less than
areasonable royalty, treble damages for alleged willful infringement, prejudgment interest, costs, and attorneys’
fees. We dispute the allegations of wrongdoing in this complaint and intend to vigorously defend ourselves in
this matter.
On October 29, 2004 Cendant Publishing, Inc. filed a complaint against us for patent infringement in the
United States District Court for the District of Delaware. The complaint alleges that our website technology,
including our recommendations features, infringes a patent obtained by Cendant purporting to cover a “System
and Method for Providing Recommendation of Goods or Services Based on Recorded Purchasing History” (U.S.
Patent No. 6,782,370) and seeks injunctive relief, monetary damages in an amount no less than a reasonable
royalty, prejudgment interest, costs, and attorneys’ fees. We dispute the allegations of wrongdoing in this
complaint and intend to vigorously defend ourselves in this matter. See “Note 15—Subsequent Events
(Unaudited).”
Depending on the amount and the timing, an unfavorable resolution of some or all of these matters could
materially affect our business, results of operations, financial position, or cash flows in a particular period.
Inventory Suppliers
During 2004, no vendor accounted for 10% or more of our inventory purchases. We do not have long-term
contracts or arrangements with most of our vendors to guarantee the availability of merchandise, particular
payment terms, or the extension of credit limits.
Note 6—STOCKHOLDERS’ DEFICIT
Preferred Stock
We have authorized 500 million shares of $0.01 par value Preferred Stock. No preferred stock shares were
outstanding during 2004, 2003, or 2002.
Stock Award Plans
Employees vest in restricted stock unit awards and stock options ratably over the corresponding service
term, generally three to six years. Outstanding stock options generally have a term of 10 years from the date of
grant.
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