Symantec 1997 Annual Report Download - page 54

52 SYMANTEC CORPORATION
Note 11. Litigation
On March 18, 1996, a class action complaint was filed by the
law firm of Milberg, Weiss, Bershad, Hynes & Lerach in
Superior Court of the State of California, County of Santa
Clara, against the Company and several of its current and
former officers and directors. The complaint alleges that
Symantec insiders inflated the stock price and then sold stock
based on inside information that sales were not going to meet
analysts’ expectations. The complaint seeks damages in an
unspecified amount. The complaint has been refiled twice in
state court, most recently on January 10, 1997, to reflect
changes brought about by Symantec’s demurrer to previous
complaints. The same plaintiffs have further filed, on January
7, 1997, a complaint in federal court based on the same facts
as the state court complaint, for violation of the Securities
Act of 1934. Symantec believes that neither the state court
complaint nor the federal court complaint has any merit and
will vigorously defend itself against both complaints. The
Company has accrued certain estimated legal fees and
expenses related to this matter; however, actual amounts may
differ materially from those estimated amounts.
On September 3, 1992, Borland International, Inc.
(“Borland”) filed a lawsuit in the Superior Court for Santa
Cruz County, California against Symantec, Gordon E.
Eubanks, Jr. (Symantec’s President and Chief Executive
Officer) and Eugene Wang (a former Executive Vice
President of Symantec and former employee of Borland). The
complaint, as amended, alleged misappropriation of trade
secrets, unfair competition, including breach of contract,
interference with prospective economic advantage and unjust
enrichment. Under a confidential joint settlement agreement
entered into as of February 25, 1997, this case was fully settled.
On June 11, 1992, Dynamic Microprocessor Associates,
Inc. (“DMA”), a former wholly-owned subsidiary of
Symantec which has since been merged into Symantec, com-
menced an action against EKD Computer Sales & Supplies
Corporation (“EKD”), a former licensee of DMA and Thomas
Green, a principal of EKD, for copyright infringement,
violations of the Lanham Act, trademark infringement,
misappropriation, deceptive acts and practices, unfair
competition and breach of contract. On July 14, 1992, the
Suffolk County, New York sheriff’s department conducted
a search of EKD’s premises and seized and impounded
thousands of infringing articles.
On July 21, 1992, the Court issued a preliminary injunc-
tion against EKD and Mr. Green, enjoining them from
manufacturing, marketing, distributing, copying or purport-
ing to license DMA’s pcANYWHERE III or using DMA’s
marks. On March 18, 1997, the Magistrate assigned to the
action issued a non-binding Report and Recommendation
recommending that summary judgment be granted in
Symantec’s/DMA’s favor on certain claims and counterclaims.
Judge Block has subsequently approved the recommendation,
which has disposed of certain claims against Symantec.
On April 10, 1997, Trio Systems LLC filed a lawsuit in the
United States District Court, Central District of California,
against Symantec, for damages, injunctive and declaratory
relief and for the imposition of a constructive trust claiming
copyright infringement, fraud, misrepresentation and breach
of contract, based on Symantec’s alleged inclusion, in its
Norton Utilities, Norton Your Eyes Only and pcANYWHERE
products, of Trio’s C-Index code. No discovery motions have
as yet been filed. Symantec believes these claims have no
merit and intends to defend this action vigorously.
On April 23, 1997, Symantec filed a lawsuit against
McAfee Associates in the United States District Court,
Northern District of California, for copyright infringement
and unfair competition. Symantec believes McAfee Associates
copied portions of Symantec’s copyrighted software code and
unlawfully incorporated such code into certain of McAfee’s
products. Symantec plans to aggressively pursue its remedies
under this lawsuit, which include both injunctive relief and
monetary damages.
On May 13, 1997, Trend Micro Incorporated filed a law-
suit in the United States District Court, Northern District
of California, against Symantec Corporation and McAfee
Associates, alleging against Symantec patent infringement by
the Symantec product known as Norton AntiVirus for
Internet E-mail Gateways. The lawsuit requests damages,
injunctive relief and costs and attorney fees. Symantec
believes this claim has no merit and intends to defend the
action vigorously.
Symantec is currently evaluating claims of patent
infringement asserted by IBM with respect to certain of the
Company’s products. While the Company believes that it has
valid defenses to these claims, there can be no assurance that
the outcome of any related litigation or negotiation would
not have a material adverse impact on the Company’s future
results of operations or cash flows.
Symantec is involved in a number of other judicial and
administrative proceedings incidental to its business. The
Company intends to defend all of the aforementioned pend-