Lexmark 2008 Annual Report Download - page 25

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Act, the Lanham Act and state laws. On October 13, 2006, SCC filed a Motion for Reconsideration of the
District Court’s Order dismissing SCC’s claims, or in the alternative, to amend its pleadings, which the
District Court denied on June 1, 2007. On October 13, 2006, the District Court issued an order to stay the
action brought against David Abraham and Clarity until a final judgment or settlement are entered into in
the consolidated 02 and 04 actions. On June 20, 2007, the District Court Judge ruled that SCC directly
infringed one of Lexmark’s patents-in-suit. On June 22, 2007, the jury returned a verdict that SCC did not
induce infringement of Lexmark’s patents-in-suit. As to SCC’s defense that the Company has committed
patent misuse, in an advisory, non-binding capacity, the jury did find some Company conduct constituted
misuse. In the jury’s advisory, non-binding findings, the jury also found that the relevant market was the
cartridge market rather than the printer market and that the Company had unreasonably restrained
competition in that market. On October 3, 2008, the District Court Judge issued a memorandum opinion
denying various motions made by the Company that sought to reverse the jury’s finding that SCC did not
induce infringement of Lexmark’s patents-in-suit. The District Court Judge did, however, grant the
Company’s motion that SCC’s equitable defenses, including patent misuse, were moot. As a result,
the jury’s advisory findings on misuse, including the jury’s finding that the relevant market was the cartridge
market rather than the printer market and that the Company had unreasonably restrained competition in
that market, were not adopted by the District Court. A final judgment for the 02 action and the 04 action has
not yet been entered by the District Court.
The Company is also party to various litigation and other legal matters, including claims of intellectual
property infringement and various purported consumer class action lawsuits alleging, among other things,
various product defects and false and deceptive advertising claims, that are being handled in the ordinary
course of business. In addition, various governmental authorities have from time to time initiated inquiries
and investigations, some of which are ongoing, concerning the activities of participants in the markets for
printers and supplies. The Company intends to continue to cooperate fully with those governmental
authorities in these matters.
Although it is not reasonably possible to estimate whether a loss will occur as a result of these legal
matters, or if a loss should occur, the amount of such loss, the Company does not believe that any legal
matters to which it is a party is likely to have a material adverse effect on the Company’s financial position,
results of operations and cash flows. However, there can be no assurance that any pending legal matters
or any legal matters that may arise in the future would not have a material adverse effect on the Company’s
financial position, results of operations or cash flows.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
19