Blackberry 2008 Annual Report Download - page 79

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RIM shareholders. Pursuant to the terms of the settlement, in
exchange for a full release, RIM agreed to certain corporate
governance measures that are consistent with previously
announced measures, and to pay $1.1 million on account of
the shareholder’s legal costs which has been recorded in
these consolidated financial statements as at December 1,
2007. In addition, as part of the settlement and consistent with
their earlier voluntary agreement (described in RIM’s March
5, 2007 press release) to contribute CAD $5.0 million each
to defray the costs incurred by RIM in connection with the
management-initiated voluntary review of RIM’s historical stock
option granting practices, RIM’s co-CEO’s, Jim Balsillie and
Mike Lazaridis, paid RIM a further CAD $2.5 million each in the
third quarter of fiscal 2008 to defray the review costs incurred
by RIM. These amounts were recorded net of income taxes
as an increase to paid-in capital. On November 5, 2007, the
Ontario Superior Court of Justice granted an order approving
the settlement and issuing a representation order that binds
all RIM shareholders to the terms of the agreement, except
for those who have opted out. Approximately one hundred
shareholders opted out of the settlement. Based on those
who disclosed the number of shares held by them indicated
that, combined, the opt-out shareholders hold approximately
27,400 shares (approximately 0.005% of all outstanding shares).
However, certain opt-out shareholders did not disclose the
number of shares held by them. On December 10, 2007, the
Ontario Superior Court of Justice issued an order extending
the opt-out deadline to January 22, 2008 for customers of
Goldman Sachs Exchange & Clearing L.P., who did not receive
notice of the settlement in the initial mailing. As a result of that
extension, additional shareholders holding 47,080 shares as at
the record date opted out.
From time to time, the Company is involved in other claims
in the normal course of business. The following additional
patent suits were filed against the Company since the end of
fiscal 2008:
Aloft Media LLC. - On March 6, 2008, Aloft Media LLC filed a
complaint against the Company in the Eastern District of Texas
Marshall Division alleging infringement of United States Patent
No. 7,330,715. This patent generally relates to transferring
contact information using a cell phone.
FlashPoint Technology Inc. - On March 7, 2008, FlashPoint
Technology Inc. filed a patent infringement lawsuit against
Research In Motion LTD and Research In Motion Corporation
in the District of Delaware. The patents-in-suit include U.S.
Patent Nos. 6,118,480, 6,177,956, 6,222,538, 6,223,190, 6,249,316,
6,486,914 and 6,504,575. These patents are generally directed
to digital camera and imaging technologies.
Additional lawsuits, including purported class actions
and derivative actions, may be filed based upon allegations
substantially similar to those described in the Amended Notice
of Application or otherwise relating to the Company’s historical
stock option granting practices. Management assesses such
claims and where considered likely to result in a material
exposure and, where the amount of the claim is quantifiable,
provisions for loss are made based on management’s
assessment of the likely outcome. The Company does not
provide for claims that are considered unlikely to result
in a significant loss, claims for which the outcome is not
determinable or claims where the amount of the loss cannot be
reasonably estimated. Any settlements or awards under such
claims are provided for when reasonably determinable.
(c) Other
In fiscal 2007, the Company restated its consolidated balance
sheet as of March 4, 2006 and its consolidated statements
of operations, consolidated statements of cash flows, and
consolidated statements of shareholders’ equity for the
fiscal years ended March 4, 2006 and February 26, 2005, and
the related note disclosure (the “Restatement”), to reflect
additional non-cash stock compensation expense relating
to certain historical stock-based awards. The Restatement
did not result in a change in the Company’s previously
reported revenues, total cash and cash equivalents or net
cash provided by operating activities. The Restatement was
the result of a voluntary internal review (the “Review”) by the
Company of its historical stock option granting practices.
The Review identified three significant types of accounting
errors: the misapplication of U.S. GAAP as it relates to a “net
settlement” feature contained in the Company’s stock option
plan (the “Stock Option Plan”) until February 27, 2002, the
misapplication of U.S. GAAP in the accounting for certain share
awards granted prior to the adoption of the Stock Option Plan,
and the misapplication of U.S. GAAP in the determination of
an accounting measurement date for options granted after
February 27, 2002. The Review determined that the Company
failed to maintain adequate internal and accounting controls
with respect to the issuance of options in compliance with the
Stock Option Plan, both in terms of how options were granted
and documented, and the measurement date used to account
for certain awards.
Each of the Securities and Exchange Commission, the
Ontario Securities Commission and the office of the United
States Attorney for the Southern District of New York has
commenced investigations in connection with the Company’s
stock option granting practices. The Company continues