Amazon.com 2006 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2006 Amazon.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) Represents collateral for certain debt related to our international operations.
(3) At December 31, 2006, our market capitalization was $16.3 billion. The required amount of collateral to be
pledged will increase by $6 million if our market capitalization is equal to or below $13 billion and decrease
by $5 million if our market capitalization exceeds $18 billion.
Legal Proceedings
The Company is involved from time to time in claims, proceedings and litigation, including the following:
In October 2002, Gary Gerlinger, individually and on behalf of all other similarly situated consumers in the
United States who, during the period from August 1, 2001 to the present, purchased books online from either
Amazon.com or Borders.com, instituted an action against us and Borders in the United States District Court for
the Northern District of California. The complaint alleges that the agreement pursuant to which an affiliate of
Amazon.com operates Borders.com as a co-branded site violates federal anti-trust laws, California statutory law,
and the common law of unjust enrichment. The complaint seeks injunctive relief, damages, including treble
damages or statutory damages where applicable, attorneys’ fees, costs, and disbursements, disgorgement of all
sums obtained by allegedly wrongful acts, interest, and declaratory relief. In November 2005, the Court
dismissed all of the plaintiff’s claims with prejudice. The plaintiff is appealing that dismissal. We dispute the
allegations of wrongdoing in this complaint, and we will continue to defend ourselves vigorously in this matter.
Beginning in March 2003, we were served with complaints filed in several different states, including
Illinois, by a private litigant, Beeler, Schad & Diamond, P.C., purportedly on behalf of the state governments
under various state False Claims Acts. The complaints allege that we (along with other companies with which we
have commercial agreements) wrongfully failed to collect and remit sales and use taxes for sales of personal
property to customers in those states and knowingly created records and statements falsely stating we were not
required to collect or remit such taxes. In December 2006, we learned that one additional complaint was filed in
the state of Illinois by a different private litigant, Matthew T. Hurst, alleging similar violations of the Illinois
state law. All of the complaints seek injunctive relief, unpaid taxes, interest, attorneys’ fees, civil penalties of up
to $10,000 per violation, and treble or punitive damages under the various state False Claims Acts. It is possible
that we have been or will be named in similar cases in other states as well. We dispute the allegations of
wrongdoing in these complaints and intend to vigorously defend ourselves in these matters.
In May 2004, Toysrus.com LLC filed a complaint against us for breach of contract in the Superior Court of
New Jersey. The complaint alleged that we breached our commercial agreement with Toysrus.com LLC by
selling, and by permitting other third parties to sell, products that Toysrus.com LLC alleged it has an exclusive
right to sell on our website. We disputed the allegations in the complaint and brought counterclaims alleging
breach of contract and seeking damages and declaratory relief. The trial of both parties’ claims concluded in
November 2005. In March 2006, the Court entered a judgment in favor of Toysrus.com LLC, terminating the
contract but declining to award damages to either party. We are pursuing an appeal of the lower court’s rulings
terminating the contract, declining to award us damages, and denying our motion to compel Toysrus.com to pay
certain fees incurred during the wind-down period.
In December 2005, Registrar Systems LLC filed a complaint against us and Target Corporation for patent
infringement in the United States District Court for the District of Colorado. The complaint alleges that our
website technology, including the method by which Amazon.com enables customers to use Amazon.com account
information on websites that Amazon.com operates for third parties, such as Target.com, infringes two patents
obtained by Registrar Systems purporting to cover methods and apparatuses for a “World Wide Web Registration
Information Processing System” (U.S. Patent Nos. 5,790,785 and 6,823,327) and seeks injunctive relief,
monetary damages in an amount no less than a reasonable royalty, prejudgment interest, costs, and attorneys’
65