Autodesk 2007 Annual Report Download - page 173

113
2007 Annual Report
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Commitments and Contingencies (Continued)
underlying revenue. Royalty expense, which was recorded under cost of license and other revenues on
Autodesk’s Consolidated Statements of Income, was $16.8 million, $12.1 million and $9.2 million in fiscal
2007, 2006 and 2005, respectively.
Indemnifications
In the normal course of business, Autodesk provides indemnifications of varying scopes, including
limited product warranties and indemnification of customers against claims of intellectual property
infringement made by third parties arising from the use of its products or services. Autodesk accrues for
known indemnification issues if a loss is probable and can be reasonably estimated. Historically, costs
related to these indemnifications have not been significant, but because potential future costs are highly
variable, Autodesk is unable to estimate the maximum potential impact of these indemnifications on its
future results of operations.
In connection with the purchase, sale or license of assets or businesses with third parties, Autodesk
has entered into or assumed customary indemnification agreements related to the assets or businesses
purchased, sold or licensed. Historically, costs related to these indemnifications have not been significant,
but because potential future costs are highly variable, Autodesk is unable to estimate the maximum
potential impact of these indemnifications on its future results of operations.
As permitted under Delaware law, Autodesk has agreements whereby it indemnifies its officers and
directors for certain events or occurrences while the officer or director is, or was, serving at Autodesk’s
request in such capacity. The maximum potential amount of future payments Autodesk could be required
to make under these indemnification agreements is unlimited; however, Autodesk has Directors’ and
Officers’ Liability insurance coverage that is intended to reduce its financial exposure and may enable
Autodesk to recover a portion of any future amounts paid. Autodesk believes the estimated fair value of
these indemnification agreements in excess of applicable insurance coverage is minimal.
Legal Proceedings
On December 27, 2001, Spatial Corp. (“Spatial”) filed suit in Marin County Superior Court against
Autodesk and one of its consultants, D-Cubed Ltd., seeking among other things termination of a
development and license agreement between Spatial and Autodesk and an injunction preventing Autodesk
from working with contractors under the agreement. On October 2, 2003, a jury found that Autodesk did
not breach the agreement. As the prevailing party in the action, the court awarded Autodesk approximately
$2.4 million for reimbursement of attorneys’ fees and the costs of trial, which was paid during the second
quarter of fiscal 2005. Spatial filed a notice of appeal on December 2, 2003 appealing the decision of the
jury. Spatial claims that certain testimony of a witness should not have been considered by the jury and
as a result, Spatial asserts that it is entitled to a new trial. On March 23, 2006, the Court of Appeal denied
Spatial’s appeal. The trial court awarded Autodesk approximately $0.2 million on April 1, 2006. As a result,
the ultimate resolution of this matter did not have a material effect on Autodesk’s financial position,
results of operations or cash flows.
On September 22, 2004, z4 Technologies, Inc. (“z4”) filed suit against Autodesk and Microsoft
Corporation in the United States District Court, Eastern District of Texas, alleging infringement of U.S.
Patent No. 6,044,471 (“471 patent”), entitled “Method and Apparatus for Securing Software to Reduce
Unauthorized Use,” and U.S. Patent No. 6,785,825 (“825 patent”), entitled “Method for Securing Software
to Decrease Software Piracy.” z4’s complaint alleged that Autodesk infringed both patents by making,