NetFlix 2007 Annual Report Download - page 68

NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
dismiss the consolidated case. On June 14, 2007, the court entered an order granting Netflix’s motion to dismiss
but allowing plaintiffs leave to file an amended complaint. After conducting some discovery, the plaintiffs did
not amend their complaint and the parties requested that the case be dismissed. On October 22, 2007, the court
granted the request that the case be dismissed.
On April 9, 2007, SBJ Holdings 1, LLC filed a complaint for patent infringement against the Company in
the United States District Court for the Eastern District of Texas, captioned SBJ Holdings 1, LLC v. Netflix, Inc.,
Amazon.com, Inc. BarnesandNoble.com, LLC, and Borders Group, Inc., Civil Action No. 2:07-cv-120-TJW. The
complaint alleges that the Company infringed U.S. Patent No. 6,330,592 B1 entitled “Method, Memory, Product,
and Code for Displaying Pre-Customized Content Associated with Visitor Data”, issued on December 11, 2001.
The complaint seeks unspecified compensatory and enhanced damages, interest and fees, and seeks to
permanently enjoin the defendants from infringing the patent in the future.
On August 23, 2007, Constellation IP, LLC filed a complaint for patent infringement against the Company
in the United States District Court for the Eastern District of Texas, captioned Constellation IP, LLC v. The
Allstate Corporation, et al., Civil Action No. 5:07-cv-00134. The complaint alleges that the Company infringed
U.S. Patent No. 6,453,302 entitled “Computer Generated Presentation System”, issued on September 17, 2002.
The complaint seeks unspecified compensatory and enhanced damages, interest and fees, and seeks to
permanently enjoin the defendants from infringing the patent in the future. On November 30, 2007, the Company
entered into a settlement agreement with the plaintiff. On December 6, 2007 the plaintiff filed a motion to
dismiss the Company from the litigation. On January 9, 2008, the court entered an Order dismissing all claims
against the Company with prejudice.
On October 16, 2007, Refined Recommendation Corporation filed a complaint for patent infringement
against the Company in the United States District Court for the Eastern District of New Jersey, captioned Refined
Recommendation Corporation v. Netflix, Inc., Civil Action No. 2:07-cv-04981-DMC-MF. The complaint alleges
that the Company infringed U.S. Patent No. 6,606,102 entitled “Optimizing Interest Potential”, issued on
August 12, 2003. The complaint seeks unspecified compensatory and enhanced damages, interest and fees, and
seeks to permanently enjoin the defendants from infringing the patent in the future. On February 15, 2008, the
case was transferred to the Northern District of California.
On December 28, 2007, Parallel Networks, LLC filed a complaint for patent infringement against the
Company in the United States District Court for the Eastern District of Texas, captioned Parallel Networks, LLC
v. Netflix, Inc., et. al, Civil Action No 2:07-cv-562-LED. The complaint alleges that the Company infringed U.S.
Patent Nos. 5,894,554 and 6,415,335 B1 entitled “System For Managing Dynamic Web Page Generation
Requests by Intercepting Request at Web Server and Routing to Page Server Thereby Releasing Web Server to
Process Other Requests” and “System and Method for Managing Dynamic Web Page Generation Requests”,
issued on April 13, 1999 and July 2, 2002, respectively. The complaint seeks unspecified compensatory and
enhanced damages, interest and fees, and seeks to permanently enjoin the defendants from infringing the patent
in the future.
6. Guarantees—Intellectual Property Indemnification Obligations
In the ordinary course of business, the Company has entered into contractual arrangements under which it
has agreed to provide indemnification of varying scope and terms to business partners and other parties with
respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such
agreements and out of intellectual property infringement claims made by third parties. In these circumstances,
payment by the Company is conditional on the other party making a claim pursuant to the procedures specified in
the particular contract, which procedures typically allow the Company to challenge the other party’s claims.
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