Microsoft 2011 Annual Report Download - page 70

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In March 2007, i4i Limited Partnership (“i4i”) sued Microsoft in U.S. District Court in Texas claiming that certain
custom XML technology in Word 2003 and 2007 infringed i4i’s patent. In May 2009, a jury returned a verdict
against us, finding damages of $200 million and that we willfully infringed the patent. In August 2009, the court
denied our post-trial motions and awarded enhanced damages of $40 million and prejudgment interest of
$37 million. The court also issued a permanent injunction prohibiting additional distribution of the allegedly
infringing technology. We appealed and the appellate court stayed the injunction pending our appeal. In
December 2009, the court of appeals rejected our appeal and affirmed the trial court’s judgment and injunction,
except that the court of appeals modified the effective date of the injunction to January 11, 2010. We appealed to
the U.S. Supreme Court, and in June 2011 the court affirmed the judgment of the court of appeals.
In October 2010, we filed suit against Motorola with the International Trade Commission (“ITC”) and in U.S.
District Court in Washington for infringement of nine Microsoft patents by Motorola’s Android-based devices.
Since then, Microsoft and Motorola have filed additional actions against each other in the ITC and federal courts
in Washington, Wisconsin, Florida, and California. Microsoft asserts Motorola’s Android-based devices violate 23
of its patents, and Motorola asserts various Microsoft products (including Windows, Windows Phone 7, Windows
Mobile 6.5, Xbox, Bing Maps, Hotmail, Messenger, and Exchange Server) violate 21 Motorola patents. Microsoft
also claims Motorola has breached its contractual commitments to the Institute of Electrical and Electronics
Engineers (“IEEE”) and International Telecommunications Union (“ITU”) to license identified patents related to
wireless and video coding technologies under reasonable and non-discriminatory (“RAND”) terms and conditions.
Motorola asserts that Microsoft breached contractual commitments to the SD Card Association to license two
patents under RAND terms and conditions, and asserts federal antitrust and state unfair business practice
claims. Trial in our ITC case is set for August 2011, trial in Motorola’s ITC case is set for October 2011, and trial of
both parties’ patent infringement claims in Florida also is set for October 2011.
In addition to these cases, there are approximately 55 other patent infringement cases pending against Microsoft.
Other
We also are subject to a variety of other claims and suits that arise from time to time in the ordinary course of our
business. Although management currently believes that resolving claims against us, individually or in aggregate,
will not have a material adverse impact on our financial statements, these matters are subject to inherent
uncertainties and management’s view of these matters may change in the future.
As of June 30, 2011, we had accrued aggregate liabilities of $693 million in other current liabilities and $276
million in other long-term liabilities for all of the contingent matters described in this note. While we intend to
vigorously defend these matters, there exists the possibility of adverse outcomes that we estimate could reach
approximately $800 million in aggregate beyond recorded amounts. Were unfavorable final outcomes to occur,
there exists the possibility of a material adverse impact on our financial statements for the period in which the
effects become reasonably estimable.
NOTE 18 — STOCKHOLDERS’ EQUITY
Shares Outstanding
Shares of common stock outstanding were as follows:
(In millions)
Y
ear Ended June 30, 2011 2010 2009
Balance, beginning of year 8,668 8,908 9,151
Issued 155 140 75
Repurchased (447) (380) (318)
Balance, end of year 8,376 8,668 8,908
Share Repurchases
On September 22, 2008, we announced the completion of the two repurchase programs approved by our Board
of Directors during the first quarter of fiscal year 2007 to buy back up to $40.0 billion of Microsoft common stock.
On September 22, 2008, we also announced that our Board of Directors approved a new share repurchase