eBay 2005 Annual Report Download - page 113

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
company that resulted from the merger, Shopping.com Ltd. eBay completed its acquisition of Shopping.com
Ltd. on August 30, 2005. The lawsuit contended that the defendants were responsible for breaches of fiduciary
duty and material misstatements and omissions, that defendants undervalued the DealTime stock that
Epinions' shareholders received in connection with the merger, and that plaintiffs' common stock of Epinions
was wrongfully cancelled without compensation. Defendants disputed the contentions of the case and denied
any allegations of wrongdoing. The parties tentatively reached agreement as to the monetary terms for
settlement of the dispute in September 2005, and in December 2005, the settlement was finalized and the
lawsuit was dismissed. The settlement amount has been accounted for as an assumed liability in connection
with our acquisition of Shopping.com.
Other third parties have from time to time claimed, and others may claim in the future, that we have
infringed their intellectual property rights. We have been notified of several potential patent disputes, and
expect that we will increasingly be subject to patent infringement claims as our services expand in scope and
complexity. In particular, we expect to face additional patent infringement claims involving services we
provide, including various aspects of our Payments and communications businesses. We have in the past been
forced to litigate such claims. We may also become more vulnerable to third-party claims as laws such as the
Digital Millennium Copyright Act, the Lanham Act and the Communications Decency Act are interpreted by
the courts and as we expand geographically into jurisdictions where the underlying laws with respect to the
potential liability of online intermediaries like ourselves are either unclear or less favorable. These claims,
whether meritorious or not, could be time consuming and costly to resolve, cause service upgrade delays,
require expensive changes in our methods of doing business, or could require us to enter into costly royalty or
licensing agreements.
From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary
course of business. The number and significance of these disputes and inquiries are increasing as our business
expands and our company grows larger. Any claims or regulatory actions against us, whether meritorious or
not, could be time consuming, result in costly litigation, require significant amounts of management time, and
result in the diversion of significant operational resources.
Indemnification Provisions
In the ordinary course of business, we have included limited indemnification provisions in certain of our
agreements with parties with whom we have commercial relations, including our standard marketing,
promotions and application-programming-interface license agreements. Under these contracts, we generally
indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the
indemnified party in connection with claims by any third party with respect to our domain names, trademarks,
logos and other branding elements to the extent that such marks are applicable to our performance under the
subject agreement. In a limited number of agreements, including agreements under which we have developed
technology for certain commercial parties, we have provided an indemnity for other types of third-party
claims, substantially all of which are indemnities related to our copyrights, trademarks, and patents. In our
PayPal business, we have provided an indemnity to our payments processors in the event of certain third-party
claims or card association fines against the processor arising out of conduct by PayPal. To date, no significant
costs have been incurred, either individually or collectively, in connection with our indemnification provisions.
Note 9 Ì Related Party Transactions:
We have entered into indemnification agreements with each of our directors, executive officers and
certain other officers. These agreements require us to indemnify such individuals, to the fullest extent
permitted by Delaware law, for certain liabilities to which they may become subject as a result of their
affiliation with us.
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