Stamps.com 2004 Annual Report Download - page 16

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ITEM 3. LEGAL PROCEEDINGS
On December 30, 2004 VCode Holdings, Inc. and VData LLC filed suit against us, as well as Adidas-
Salomon AG, Adidas America, Inc., Advanced Micro Devices, Inc., Boston Scientific Corp. and Hitachi Global
Storage Technologies (Thailand), Ltd., in the United States District Court for the District of Minnesota. The
complaint alleges infringement of a patent allegedly covering use of data matrices and seeks an injunction,
unspecified damages, and attorneys’ fees. We dispute the plaintiffs’ claims and intend to defend the lawsuit
vigorously.
On October 22, 2004 Kara Technology Incorporated filed suit against us in the United States District Court
for the Southern District of New York, alleging, among other claims, that Stamps.com infringed certain Kara
Technology patents and that Stamps.com misappropriated trade secrets owned by Kara Technology, most
particularly with respect to our NetStamps feature. Kara Technology seeks an injunction, unspecified damages, and
attorneys’ fees. On February 9, 2005, the court granted our motion to transfer this suit to the United States District
Court for the Central District of California. We dispute Kara Technology’ s claims and intend to defend the lawsuit
vigorously.
In May and June 2001, we were named, together with certain of our current and former board members
and/or officers, as a defendant in 11 purported class-action lawsuits, filed in the United States District Court for the
Southern District of New York. The lawsuits allege violations of the Securities Act of 1933 and the Securities
Exchange Act of 1934 in connection with our initial public offering and secondary offering of our common stock.
The lawsuits also name as defendants the principal underwriters in connection with our initial and secondary public
offerings, including Goldman, Sachs & Co. (in some of the lawsuits sued as The Goldman Sachs Group Inc.) and
BancBoston Robertson Stephens, Inc. The lawsuits allege that the underwriters engaged in improper commission
practices and stock price manipulations in connection with the sale of our common stock. The lawsuits also allege
that we and/or certain of our officers or directors knew of or recklessly disregarded these practices by the
underwriter defendants, and failed to disclose them in our public filings. Plaintiffs seek damages and statutory
compensation, including prejudgment and post-judgment interest, costs and expenses (including attorneys’ fees),
and rescissory damages. In April 2002, plaintiffs filed a consolidated amended class action complaint against us and
certain of our current and former board members and/or officers. The consolidated amended class action complaint
includes similar allegations to those described above and seeks similar relief. In July 2002, we moved to dismiss the
consolidated amended class action complaint. In October 2002, pursuant to a stipulation and tolling agreement with
plaintiffs, our current and former board members and/or officers were dismissed without prejudice. In
February 2003, the court denied our motion to dismiss the consolidated amended class action complaint. In June
2003, we approved a proposed Memorandum of Understanding among the plaintiffs, issuers and insurers as to terms
for a settlement of the litigation against us which was further documented in a Stipulation and Agreement of
Settlement filed with the court. The proposed settlement terms would not require Stamps.com to make any
payments. The proposed settlement was preliminarily approved by the court in February 2005, but remains subject
to a fairness hearing and final approval by the court which has not yet occurred.
In addition to the class action lawsuits against us, over 1,000 similar lawsuits have also been brought
against over 250 companies which issued stock to the public in 1998, 1999, and 2000, and their underwriters. These
lawsuits (including those naming us) followed publicized reports that the Securities and Exchange Commission was
investigating the practice of certain underwriters in connection with initial public offerings. All of these lawsuits
have been consolidated for pretrial purposes before United States District Court Judge Shira Scheindlin of the
Southern District of New York. We have placed our underwriters on notice of our rights to indemnification,
pursuant to our agreements with the underwriters. We have also provided notice to our directors and officers
insurers, and believe that we have insurance applicable to the lawsuits. We also believe that the claims against us
and our officers and directors are without merit, and intend to defend the lawsuits vigorously.
We are not currently involved in any other material legal proceedings, nor are we aware of any other
material legal proceedings pending against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended December 31, 2004.