IBM 2003 Annual Report Download - page 103

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O
contingencies and commitments
CONTINGENCIES
The company is involved in a variety of claims, suits, investi-
gations and proceedings that arise from time to time in the
ordinary course of its business, including actions with respect
to contracts, IP, product liability, employment, securities and
environmental matters. The following is a discussion of some
of the more significant legal matters involving the company.
On July 31, 2003, the U.S. District Court for the Southern
District of Illinois, in Cooper et al. vs. The IBM Personal
Pension Plan and IBM Corporation, held that IBM’s pension
plan violated the age discrimination provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
The plaintiffs filed a claim for remedial relief. IBM filed its
own brief on remedies, arguing that the remedies requested
by the plaintiffs were unsupportable factually and as a matter
of law and estimating that remedies under plaintiffs’ theories
could amount to at least $6.5 billion, as of the date of the trial
District Court’s decision on liability. The company intends
to appeal the District Court’s rulings when the remedies
phase concludes. The company believes it is likely to be
successful on appeal with respect to the claims that have
been decided by the District Court. Given IBM’s belief in
the merit of its defenses and the wide range of possible
remedies, no provision has been recorded under SFAS No. 5,
“A ccounting for Contingencies” at this time. The company
will review whether a provision is appropriate under SFAS
No. 5 upon conclusion of the remedies phase.
The company is a defendant and/or third-party defendant
in a number of cases in which claims have been brought by
current and former employees, independent contractors,
estate representatives, offspring and relatives of employees
seeking damages for wrongful death and personal injuries
allegedly caused by exposure to chemicals in various of the
company’s facilities from 1964 to the present. As of year end,
the cases of two former employee plaintiffs were being tried
in state court in Santa Clara County, California. The company
expects another trial, in state court in Westchester County,
New York, in 2004.
The company is a defendant in an action brought by
Compuware in the District Court for the Eastern District of
Michigan in 2002, asserting causes of action for copyright
infringement, trade secret misappropriation, Sherman Act
and Lanham Act violations, breach of contract, tortious
interference and unfair competition under various state
statutes. IBM has asserted counterclaims for copyright
infringement, unfair competition, and patent infringement.
In March 2003, Compuware moved for Preliminary
Injunction on all but its antitrust claims and in December
2003, the Court denied that motion. Trial is scheduled for
September 2004.
The company is a defendant in an action filed on March 6,
2003 in state court in Salt Lake City, Utah by the SCO
Group. The company removed the case to Federal Court in
Utah. Plaintiff is successor in interest to some of AT&T’s
UNIX IP rights, and alleges misappropriation of trade
secrets, unfair competition, interference with contract and
Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
101
NET CHANGE IN UNREALIZED GAINS/(LOSSES) ON MARKETABLE SECURITIES (NET OF TAX)
(dollars in millions)
AT DECEMBER 31: 2003 2002
Net unrealized gains/(losses) arising during the period $«4 $«(13)
Less: Net (losses)/gains included in net income for the period (3) *3*
Net change in unrealized gains/(losses) on marketable securities $«7 $«(16)
*Includes writedowns of $7 million and $36 million in 2003 and 2002, respectively.
The following table shows the company’s investments’ gross unrealized losses and fair value, aggregated by investment cate-
gory and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2003.
(dollars in millions)
LESS THAN 12 MONTHS 12 MONTHS OR MORE TOTAL
UNREALIZED UNREALIZED UNREALIZED
DESCRIPTION OF SECURITIES FAIR VALUE LOSSES FAIR VALUE LOSSES FAIR VALUE LOSSES
U.S. Treasury obligations and direct obligations
of U. S. government agencies $«— $«— $«— $«— $«— $«—
Foreign government bonds ——23 223 2
Corporate bonds ——————
Subtotal, debt securities ——23 223 2
Common Stock ——————
Total temporarily impaired securities $«— $«— $«23 $«««2 $«23 $«««2