Overstock.com 2005 Annual Report Download - page 98

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Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
12. COMMITMENTS AND CONTINGENCIES (Continued)
Legal Proceedings
From time to time, we receive claims of and become subject to consumer protection, employment, intellectual property and other
commercial litigation related to the conduct of our business. Such litigation could be costly and time consuming and could divert our
management and key personnel from our business operations. The uncertainty of litigation increases these risks. In connection with
such litigation, we may be subject to significant damages or equitable remedies relating to the operation of our business and the sale of
products on our websites. Any such litigation may materially harm our business, prospects, results of operations, financial condition or
cash flows. However, we do not currently believe that any of our outstanding litigation will have a material impact on our financial
statements.
In October 2003, Tiffany (NJ) Inc. and Tiffany and Company filed a complaint against us in the United States District Court for
the Southern District of New York alleging that we have distributed counterfeit and otherwise unauthorized Tiffany product in
violation of federal copyright and trademark law and related state laws. The complaint seeks statutory and other damages in an
unspecified amount and injunctive relief. In January and February 2005, Tiffany (NJ) Inc. and Tiffany and Company filed five
additional complaints against us in the United States District Court for the Southern District of New York alleging that we have
distributed counterfeit and otherwise unauthorized Tiffany product in violation of federal copyright and trademark law and related
state laws. These complaints also seek statutory and other damages in an unspecified amount and injunctive relief. Although we have
filed answers to these complaints and we believe we have defenses to the allegations and intend to pursue them vigorously, we do not
have sufficient information to assess the validity of the claims or the amount of potential damages alleged in these suits.
In September 2004, we received a letter from BTG International Inc. claiming that certain of our business practices and online
marketing information technology systems infringe patents owned by BTG. On September 14, 2004, without engaging in any
meaningful discussion or negotiation with us, BTG filed a complaint in the United States District Court of Delaware alleging that
certain of our business practices and online marketing information technology systems infringe a single patent owned by BTG. On
October 21, 2004, we filed an answer denying the material allegations in BTG's claims. We have recently reached an agreement in
principle which will settle and dismiss the case. We are currently working on a definitive settlement agreement with BTG.
In December 2003, we received a letter from Furnace Brook claiming that certain of our business practices and our on-line
ordering system infringe a patent owned by Furnace Brook. After diligent efforts to show that we do not infringe these patents and
Furnace Brook's continual assertions that it would vigorously protect its intellectual property rights if we did not agree to enter into
licensing arrangements with respect to the asserted patents, on August 12, 2005, we filed a complaint in the United States District
Court of Utah, Central Division, seeking declaratory judgment that we do not infringe any valid claim of the Furnace Brook patent.
Furnace Brook filed a motion to dismiss our complaint for lack of personal jurisdiction over Furnace Brook in Utah. On October 31,
2005, the United States District Court of Utah, Central Division, issued a decision to dismiss our complaint for lack of personal
jurisdiction over Furnace Brook. On December 14, 2005, we filed an appeal of the Utah decision with the United States Court of
Appeals for the Federal Circuit. On August 18, 2005, shortly after we filed the complaint in Utah, Furnace Brook filed a complaint in
the United States District Court for the Southern District of New York, alleging that certain of our business practices and our on-line
ordering system infringe a single patent owned by Furnace Brook. On September 9, 2005 we filed an answer denying the material
allegations in Furnance
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