Rayovac 2004 Annual Report Download - page 25

ITEM 3. LEGAL PROCEEDINGS
Litigation
We are subject to litigation from time to time in the ordinary course of business. The amount of any liability
with respect to any litigation to which we are now subject cannot currently be determined. Other than the matters
set forth below, we are not party to any pending legal proceedings which, in the opinion of management, are
material or may be material to our business or financial condition.
In March 2004, we agreed to a settlement of all claims brought against Rayovac Corporation and several of
its current and former officers and directors generally alleging that the defendants made various false and
misleading statements, which had the alleged effect of artificially inflating the price of Rayovac stock during the
period from April 26, 2001 until September 19, 2001. These suits were consolidated into one suit, Eli Friedman
v. Rayovac Corporation, Thomas H. Lee Partners, LP, Kenneth V. Biller, Kent J. Hussey, David A. Jones,
Scott A. Schoen, Stephen P. Shanesy, Thomas R. Shepherd, Randall J. Steward, Warren C. Smith, Jr., and
Merrell Tomlin (Case No. 02 C 0308 C, United States District Court, Western District of Wisconsin). In the
settlement, Rayovac agreed to pay plaintiff class $4 million in consideration for dismissal of all claims brought
under this suit. The parties filed a Stipulation of Settlement with the Court to this effect and the Court granted its
preliminary approval of this Stipulation in April 2004 and its final approval of the Stipulation in July 2004. A
majority of the $4 million settlement was covered by our insurers, and this matter did not have a material impact
on our financial condition or operating results.
We are also involved in a number of legal proceedings with Philips in Europe with respect to trademark or
other intellectual property rights Philips claims to have in relation to the appearance of the faceplate of the
three-headed rotary shaver. In the first such legal proceeding in Europe, we were successful in having the Philips
trademark at issue declared invalid by the High Court of Justice in the United Kingdom, a decision that was
ultimately upheld by the European Court of Justice (“ECJ”) in 2002. The ECJ held that a shape consisting
exclusively of the shape of a product is unregisterable as a trademark (or is subject to being declared invalid if it
has been registered as a trademark) if it is established that the essential functional features of the shape are
attributable only to the technical result. Both prior to and following the favorable ECJ decision in 2002, litigation
over the Philips trademarks ensued between Rayovac (or one of its distributors) and Philips in each of France,
Italy, Spain, Portugal, Germany and again in the U.K. The status of these various matters is as follows:
• In each of France (decision of June 13, 2003), Italy (decision of February 26, 2004) and Spain (decision
of May 6, 2004), the respective First Instance Courts ordered that the various Philips trademarks be
cancelled. The action in France commenced May 17, 2000, the action in Italy commenced May 15, 2000
and the action in Spain commenced March 12, 2003. These decisions have been appealed by Philips. In
Portugal, Philips commenced a lawsuit against Rayovac’s distributor on December 12, 2003 seeking
only an injunction to prevent the marketing and sale of the Remington shavers. The Commercial Court
in Portugal (decision of June 23, 2004) denied the request for an injunction, and Philips has appealed
this decision.
• In the second U.K. lawsuit commenced by Philips on February 15, 2000, the U.K. High Court of Justice
(decision of October 21, 2004) ordered that Philips’ trademarks at issue be cancelled. Rayovac expects
that Philips will file an appeal in this matter.
• In Germany, Philips commenced an action on September 5, 2002 seeking to enjoin the sale of
Remington rotary shavers, money damages and other relief. On April 1, 2004, the court issued a ruling
canceling two of the four Philips marks at issue in the case and narrowing the scope of enforceability of
the two surviving marks. Each of Rayovac and Philips has appealed the decisions that were contrary to
their respective positions. Previously, in a related action, the Cologne District Court granted an
injunction in August, 2002 prohibiting the marketing and sale by Rayovac of the Remington rotary
shavers, which injunction remains in place, and Rayovac has appealed the maintenance of the injunction
in light of the April 2004 decision.
In addition, The Gillette Company and its subsidiary, Braun GmbH, filed a complaint against Remington in
the federal district court in Massachusetts on December 2, 2003 alleging that Remington’s “Smart Cleaner”
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