Amazon.com 2006 Annual Report Download - page 74

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
fees. We dispute the allegations of wrongdoing in this complaint and intend to vigorously defend ourselves in
this matter. In September 2006, the Court entered an order staying the lawsuit pending the outcome of the Patent
and Trademark Office’s re-examination of the patents in suit.
In August 2006, Cordance Corporation filed a complaint against us for patent infringement in the United
States District Court for the District of Delaware. The complaint alleges that our website technology, including
our 1-Click ordering system, infringes a patent obtained by Cordance purporting to cover an “Object-Based
Online Transaction Infrastructure” (U.S. Patent No. 6,757,710) and seeks injunctive relief, monetary damages in
an amount no less than a reasonable royalty, treble damages for alleged willful infringement, prejudgment
interest, costs, and attorneys’ fees. In response, we asserted a declaratory judgment counterclaim in the same
action alleging that a service that Cordance has advertised its intent to launch infringes a patent owned by us
entitled “Networked Personal Contact Manager” (U.S. Patent No. 6,269,369). We dispute Cordance’s allegations
of wrongdoing and intend to vigorously defend ourselves in this matter.
In October 2006, IBM filed two patent infringement lawsuits against us in the United States District Court
for the Eastern District of Texas. The complaints allege that various aspects of our website technology infringe
five patents obtained by IBM purporting to cover a “System for Ordering Items Using an Electronic Catalog”
(U.S. Patent No. 5,319,542), a “Method for Storing Data in an Interactive Computer Network” (U.S. Patent
No. 5,442,771), a “System for Adjusting Hypertext Links with Weighed User Goals and Activities” (U.S. Patent
No. 5,446,891), a “Method for Presenting Applications in an Interactive Service” (U.S. Patent No. 5,796,967),
and a “Method of Presenting Advertising in an Interactive Service” (U.S. Patent No. 7,072,849). The complaints
seek injunctive relief, monetary damages in an amount no less than a reasonable royalty, treble damages for
alleged willful infringement, prejudgment interest, and attorneys’ fees. In response, we asserted counterclaims in
both actions alleging that IBM’s WebSphere service infringes several of our patents. We dispute IBM’s
allegations of wrongdoing in these lawsuits and intend to vigorously defend ourselves in this matter.
Depending on the amount and the timing, an unfavorable resolution of some or all of these matters could
materially affect our business, results of operations, financial position, or cash flows in a particular period.
Inventory Suppliers
During 2006, no vendor accounted for 10% or more of our inventory purchases. We do not have long-term
contracts or arrangements with most of our vendors to guarantee the availability of merchandise, particular
payment terms, or the extension of credit limits.
Note 7—STOCKHOLDERS’ EQUITY
Preferred Stock
We have authorized 500 million shares of $0.01 par value Preferred Stock. No preferred stock was
outstanding for any period presented.
Stock Repurchase Activity
In August 2006, our Board of Directors authorized a 24-month program to repurchase up to an aggregate of
$500 million of our common stock. We repurchased 8.2 million shares of our common stock for $252 million in
2006 under this program.
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