Stamps.com 2007 Annual Report Download - page 19

transfer this suit to the United States District Court for the Central District of California. On August 23, 2006, the court
granted our summary judgment motions on the trade secret and other non-patent claims. The court issued a “Markman” ruling,
construing the terms of the Kara Technology patents on September 10, 2007. Following the Markman ruling, we filed two
summary judgment motions regarding the patent claims, which have not yet been ruled on by the Court. The Court has
scheduled a trial commencement date of May 13, 2008.
On November 22, 2006, we filed a lawsuit against Endicia, Inc. and PSI Systems, Inc. in the United States District Court for
the Central District of California for infringement of eleven of our patents covering,
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among other things, Internet postage technology. On January 8, 2007, Endicia, Inc. and PSI Systems, Inc. filed counterclaims
asking for a declaratory judgment that all eleven patents are invalid, unenforceable and not infringed. The Court has scheduled a
trial commencement date of October 21, 2008.
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 U.S. District Court for the Southern District of New York. The
lawsuits allege violations of the Securities Act and the Exchange Act in connection with our initial public offering and a
secondary offering of our common stock. The lawsuits also name as defendants the principal underwriters in connection with our
public offerings, and allege that the underwriters engaged in improper commission practices and stock price manipulations in
connection with the sale of our common stock. The lawsuits 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 interest, costs and expenses (including attorneys’ fees). All of these
lawsuits have been consolidated for pretrial purposes before U.S. District Court Judge Shira Scheindlin.
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. That agreement was extended as to those individuals by an addendum dated as
of September 2007. 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, which would not have required us to make any payments, was
preliminarily approved by the court in February 2005 and was the subject of a fairness hearing in April 2006.
In October 2004, however, the court issued an order regarding class certification in certain related matters. In December
2006, the U.S. Court of Appeals for the Second Circuit vacated that order, and determined that the related matters could not be
certified as a class as currently defined. That appellate decision rendered uncertain whether our proposed settlement could be
finally approved and consummated, and, in June 2007, the proposed settlement was terminated. As a result, plaintiffs have filed
an amended complaint and proposed an alternative class definition in related litigation. If such a class definition does not receive
final court approval and/or a later settlement is not consummated for any reason, we intend to defend the lawsuits vigorously.
On August 30, 2007, Sterling Realty Organization Co. filed suit against us in the Superior Court for the State of Washington
for King County, alleging they are entitled under the doctrine of equitable subrogation to recover a $575,929 sales tax related
payment for improvements under a lease related to our discontinued iShip business. The lawsuit also seeks pre-judgment interest
and costs. On March 7, 2008, the Court granted our motion for summary judgment under the doctrine of equitable subrogation,
but also granted the plaintiff’s motion to amend the complaint to allege indemnification and breach of the lease.
We are subject to various other routine legal proceedings and claims incidental to our business, or which involve primarily a
claim for damages that does not exceed 10% of our consolidated assets. We believe that the ultimate results from these actions
will not have a material adverse effect on our financial position, results of operations or cash flows.
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, 2007.
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