Adobe 2015 Annual Report Download - page 32

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ITEM 3. LEGAL PROCEEDINGS
In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights,
including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted
litigation. Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by
diverting the attention and energies of management and key technical personnel. Although we have successfully defended or
resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual
property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable
terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our
sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy
indemnification commitments with our customers including contractual provisions under various license arrangements and service
agreements.
Between May 4, 2011 and July 14, 2011, five putative class action lawsuits were filed in Santa Clara Superior Court and
Alameda Superior Court in California. On September 12, 2011, the cases were consolidated into In Re High-Tech Employee
Antitrust Litigation (“HTEAL”) pending in the United States District Court for the Northern District of California, San Jose
Division. In the consolidated complaint, Plaintiffs alleged that Adobe, along with Apple, Google, Intel, Intuit, Lucasfilm and Pixar,
agreed not to recruit each other’s employees in violation of Federal and state antitrust laws. Plaintiffs claim the alleged agreements
suppressed employee compensation and deprived employees of career opportunities. Plaintiffs seek injunctive relief, monetary
damages, treble damages, costs and attorneys fees. All defendants deny the allegations and that they engaged in any wrongdoing
of any kind. On October 24, 2013, the court certified a class of all persons who worked in the technical, creative, and/or research
and development fields on a salaried basis in the United States for one or more of the following: (a) Apple from March 2005
through December 2009; (b) Adobe from May 2005 through December 2009; (c) Google from March 2005 through December
2009; (d) Intel from March 2005 through December 2009; (e) Intuit from June 2007 through December 2009; (f) Lucasfilm from
January 2005 through December 2009; or (g) Pixar from January 2005 through December 2009, excluding retail employees,
corporate officers, members of the boards of directors, and senior executives of all defendants. During the first quarter of fiscal
2015, the parties reached an agreement to settle the litigation. In March 2015, the court granted preliminary approval of the
settlement and on September 2, 2015, the court granted final approval of the settlement. We expect to incur no additional losses
associated with this matter.
In addition to intellectual property disputes, we are subject to legal proceedings, claims and investigations in the ordinary
course of business, including claims relating to commercial, employment and other matters. Some of these disputes and legal
proceedings may include speculative claims for substantial or indeterminate amounts of damages. We consider all claims on a
quarterly basis in accordance with GAAP and based on known facts assess whether potential losses are considered reasonably
possible, probable and estimable. Based upon this assessment, we then evaluate disclosure requirements and whether to accrue
for such claims in our financial statements. This determination is then reviewed and discussed with the Audit Committee of the
Board of Directors and our independent registered public accounting firm.
We make 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. Unless otherwise
specifically disclosed in this note, we have determined that no provision for liability nor disclosure is required related to any claim
against us because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be
incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is
immaterial.
All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we
believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our
consolidated financial position, cash flows or results of operations could be negatively affected by an unfavorable resolution of
one or more of such proceedings, claims or investigations.
In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software
Alliance, from time to time we undertake litigation against alleged copyright infringers. Such lawsuits may lead to counter-claims
alleging improper use of litigation or violation of other laws. We believe we have valid defenses with respect to such counter-
claims; however, it is possible that our consolidated financial position, cash flows or results of operations could be negatively
affected in any particular period by the resolution of one or more of these counter-claims.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.