Zynga 2014 Annual Report Download - page 110

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consolidated California state action. On March 21, 2013, the court endorsed a stipulation among the parties staying the action pending the ruling
on the motion to dismiss in the federal securities class action described above. On March 24, 2014, the court endorsed a stipulation among the
parties staying the action pending a ruling on a motion to dismiss the First Amended Complaint in the federal securities class action.
Beginning on August 16, 2012, four stockholder derivative actions were filed in the United States District Court for the Northern District
of California. On December 3, 2012, the court consolidated these four actions as In re Zynga Inc. Derivative Litigation, Lead Case No. 12-CV-
4327-
JSW. On March 11, 2013, the court endorsed a stipulation among the parties staying the action pending the ruling on the motion to dismiss
in the federal securities class action described above. On March 21, 2014, the court issued an order continuing the stay pending a ruling on a
motion to dismiss the First Amended Complaint in the federal securities class action.
A derivative action was also filed in the United States District Court for the District of Delaware. The plaintiff in the District of Delaware
action voluntarily dismissed the action on November 19, 2012.
On April 2, 2014, a derivative action was filed in the Court of Chancery of the State of Delaware entitled Sandys v. Pincus, et al. Case
No. 9512
-
VCN. On October 21, 2014, the court endorsed a stipulation among the parties staying the action until the earlier of December 9, 2014,
or thirty days after a decision on the motion to dismiss the First Amended Complaint in the federal securities class action. On December 9, 2014,
the defendants filed a motion to stay or dismiss the action. Briefing on the motion to stay or dismiss is ongoing and is scheduled to continue
through April 17, 2015.
The derivative actions include claims for, among other things, unspecified damages in favor of the Company, certain corporate actions to
purportedly improve the Company’s corporate governance, and an award of costs and expenses to the derivative plaintiffs, including attorneys’
fees. We believe that the plaintiffs in the derivative actions lack standing to pursue litigation on behalf of Zynga.
Because the actions described above are in the early stages of the litigation process, we are not in a position to assess whether any loss or
adverse effect on our financial condition is probable or remote or to estimate the range of potential loss, if any.
On March 16, 2012, Spear & Sons Limited (“Spear”) filed suit against the Company and Zynga UK Limited before the Paris Civil Court
( Tribunal de Grande Instance ), claiming that the Company’s Words with Friends game infringed Spear’
s copyright and trademark in relation to
its Scrabble game, as well as committed acts of commercial poaching. Spear sought damages and an injunction barring the Company from
offering the Words with Friends game for sale in France. On May 30, 2012, the Company entered an appearance in the action and challenged the
court’s jurisdiction to hear the alleged claims. The court ruled that it would consider whether it had jurisdiction to hear the claims before
considering any substantive claims. On October 11, 2012, the court ruled that it did have jurisdiction to hear the claims. On October 31, 2012,
the Company filed a notice of appeal regarding the issue of jurisdiction, and the court stayed the lower-court action pending the appeal. On
October 18, 2013, the appellate court affirmed the lower court’s denial of the Company’s jurisdictional challenge. On March 7, 2014, the
Company filed a further appeal regarding jurisdiction to the French supreme court. The Company expected a ruling from the supreme court on
this issue in mid to late 2015.
The lower court ordered that the case proceed on the merits notwithstanding the pending appeal. The parties proceeded with briefing their
respective positions. On October 9, 2014, Spear filed an additional brief requesting that the French court grant a European Union-wide
injunction barring Zynga from offering the Words With Friends game and the tile used in the game. Spear filed its final brief on October 16,
2014, which included a demand for damages in the amount of EUR 650,000 and reimbursement of attorneys’ fees in the amount of EUR
250,000. The Company filed its final brief on October 21, 2014, which included a rebuttal to Spear’s new request for a European Union-wide
injunction. Oral arguments on the merits of the alleged claims were heard on November 5, 2014. The court indicated it would issue a ruling on
January 15, 2015.
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