Adobe 2002 Annual Report Download - page 85

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disputes the other breach of contract claims. Adobe also asserts that Adobe Acrobat 5.0, which AMT and ITC
correctly acknowledge has been superceded by version 5.05, neither violates the DMCA nor induces or contributes
to the infringement of copyrights in ITC’s and AMT’s TrueType font software.
On September 5, 2002, AMT and ITC filed suit against Adobe in the U.S. District Court, Eastern District of
Illinois (“the Illinois Action”) against Adobe, asserting only that Adobe’s distribution of the superceded 5.0 version
of Adobe Acrobat violated the DMCA, as described above. The Illinois Action seeks statutory damages of $200-
$2,500 for each copy of Acrobat 5.0 found to violate the DMCA, a claim that Adobe disputes as a matter of law and
fact. The Illinois Action also seeks injunctive relief with respect to Acrobat 5.0, although it specifically alleges,
correctly, that Adobe no longer distributes Acrobat 5.0.
On November 13, 2002, ITC filed another suit against Adobe in the United States District Court for the Eastern
District of Illinois (“the Second Illinois Action”), this time asserting that Adobe breached its contract with ITC and
that ITC, and not Adobe, owns the copyrights in font software created by Adobe which generates ITC typefaces.
AMT and ITC made a motion to dismiss the California action, challenging jurisdiction and venue. That motion
was granted by the court on December 16, 2002. As such, the parties’ respective claims will be resolved in the other
actions described above.
The results of any litigation are inherently uncertain, and AMT and ITC may assert other claims. Adobe cannot
assure that it will be able to successfully defend itself against any of the actions described above. AMT and ITC seek
an unspecified aggregate dollar amount of damages. A favorable outcome for AMT or ITC in these actions could
have a material adverse effect on Adobe’s business, financial condition and operating results. We strongly believe
that all of AMT’s and ITC’s claims are without merit, and will vigorously defend against them in addition to
pursuing our own claims as described above.
On September 6, 2002, Plaintiff Fred B. Dufresne filed suit against Adobe, Microsoft Corporation,
Macromedia, Inc., and Trellix Corporation in the U.S. District Court, District of Massachusetts, alleging
infringement of U.S. Patent No. 5,835,712, entitled “Client-Server System Using Embedded Hypertext Tags For
Application And Database Development.” The plaintiff’s Complaint asserts that “Defendants have infringed, and
continue to infringe one or more claims of the ‘712 patent by making, using, selling and/or offering for sale, inter
alia, products supporting Microsoft Active Server Pages technology.” The plaintiff seeks unspecified compensatory
damages, preliminary and permanent injunctive relief, trebling of damages for “willful infringement,” and fees and
costs. Adobe strongly disagrees with the plaintiff’s claims and intends to vigorously defend against this action.
On November 18, 2002, Plaintiffs Shell & Slate Software Corporation and Ben Weiss filed a civil action in the
U.S. District Court in Los Angeles against the Company alleging false designation of origin, trade secret
misappropriation, breach of contract, and other causes of action. The claim derives from the Plaintiffs’ belief that the
“healing brush” technique of Adobe Photoshop incorporates Plaintiffs’ trade secrets. Plaintiffs seek preliminary and
permanent injunctive relief, compensatory, treble, and punitive damages, and fees and costs. We believe that the
action has no merit and intend to defend vigorously against it.
From time to time Adobe is involved in lawsuits, claims, investigations and proceedings, in addition to those
identified above, consisting of intellectual property, commercial, employment and other matters, which arise in the
ordinary course of business. In accordance with SFAS No. 5, Adobe makes a provision for a liability when it is both
probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions
are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of
legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable.
However, Adobe believes that it has valid defenses with respect to the legal matters pending against it, as well as
adequate provisions for any probable and estimable losses. It is possible, nevertheless, that cash flows or results of
operations could be affected in any particular period by the resolution of one or more of these contingencies.