Barnes and Noble 2011 Annual Report Download - page 60

Securities Exchange Act of 1934. On March 8, 2011, defen-
dants fi led a motion to dismiss all claims in the litigation.
Briefi ng on the motion is complete.
Microsoft Corp. v. Barnes & Noble, Inc. et al.
On March 21, 2011, Microsoft Corp. submitted a com-
plaint to the U.S. International Trade Commission (U.S.
ITC), encaptioned Certain Handheld Electronic Computing
Devices, Related Software and Components Thereof, Inv. No.
337-TA-769, requesting that the U.S. ITC institute an inves-
tigation pursuant to Section 337 of the Tariff Act of 1930,
as amended. The complaint was subsequently amended
on April 8, 2011. The complaint alleges that the importa-
tion into the United States, sale for importation, and/or
sale within the United States after importation of Barnes
& Noble, Inc.’s and Barnes & Noble.com’s NOOK™ and
NOOK Color™ products infringe certain claims of U.S.
Patent Nos. 5,778,372 (the ’372 patent), 6,339,780 (the
’780 patent), 5,889,522 (the ’522 patent), 6,891,551 (the
’551 patent) and 6,957,233 (the ’233 patent) and requests
that the U.S. ITC issue a permanent exclusion order and
permanent cease and desist order with respect to these
products. On April 1, 2011, the U.S. ITC published a Notice
in the Federal Register soliciting comments on any public
interest issues raised by the complaint. Barnes & Noble,
Inc. and Barnes & Noble.com submitted comments in an
April 7, 2011 letter. On April 19, 2011, the ITC served Barnes
& Noble, Inc. and Barnes & Noble.com with a Notice of
Investigation. On April 25, 2011, the U.S. ITC published the
Notice of Investigation in the Federal Register. On May 10,
2011, Barnes & Noble, Inc. and Barnes & Noble.com fi led a
response to the complaint denying that they have engaged
in any action that would constitute unlawful importation
into the United States, sale for importation, or sale within
the United States after importation. The response also sets
forth six affi rmative defenses, including a patent misuse
defense. The parties fi led their discovery statements on
May 16, 2011, and a telephonic preliminary conference
before the Administrative Law Judge (ALJ) took place on
June 2, 2011. The ALJ subsequently set a target date of
August 27, 2012 with a fi nal determination fi led no later
than April 27, 2012. On June 6, 2011, Microsoft moved to
strike Barnes & Noble, Inc.’s and Barnes & Noble.com’s
patent misuse defense.
On the same day that it submitted its original complaint
to the U.S. ITC, Microsoft also fi led a complaint against
Barnes & Noble, Inc., Barnes & Noble.com, and a number
of other defendants in the United States District Court
for the Western District of Washington. The district court
complaint also alleges that Barnes & Noble, Inc. and Barnes
& Noble.com are infringing the ’372, ’780, ’522, ’551 and
’233 patents through the sale in the United States and the
importation into the United States of the NOOK™ and
NOOK Color™ products. Barnes & Noble, Inc. and Barnes
& Noble.com answered the district court complaint on
April 25, 2011. On May 18, 2011, Barnes & Noble, Inc. and
Barnes & Noble.com fi led a motion to stay the district court
litigation until the ITC’s determination in the ITC inves-
tigation becomes fi nal. On June 8, 2011, the district court
granted the motion to stay.
21. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Company believes that the transactions and agree-
ments discussed below (including renewals of any exist-
ing agreements) between the Company and related third
parties are at least as favorable to the Company as could
have been obtained from unrelated parties at the time they
were entered into. The Audit Committee of the Board of
Directors utilizes procedures in evaluating the terms and
provisions of proposed related party transactions or agree-
ments in accordance with the fi duciary duties of directors
under Delaware law. The Company’s related party transac-
tion procedures contemplate Audit Committee review and
approval of all new agreements, transactions or courses
of dealing with related parties, including any modifi ca-
tions, waivers or amendments to existing related party
transactions. The Company tests to ensure that the terms
of related party transactions are at least as favorable to
the Company as could have been obtained from unrelated
parties at the time of the transaction. The Audit Committee
considers, at a minimum, the nature of the relationship
between the Company and the related party, the history of
the transaction (in the case of modifi cations, waivers or
amendments), the terms of the proposed transaction, the
Company’s rationale for entering the transaction and the
terms of comparable transactions with unrelated third par-
ties. In addition, management and internal audit annually
analyzes all existing related party agreements and transac-
tions and reviews them with the Audit Committee.
The Company completed the Acquisition of B&N College
from Leonard Riggio and Louise Riggio (Sellers) on
September 30, 2009 (see Note 12). Mr. Riggio is the
Chairman of the Company’s Board of Directors and a
signifi cant stockholder. The Company is a party to a Stock
Purchase Agreement dated as of August 7, 2009 among
the Company and the Sellers. As part of the Acquisition,
the Company acquired the Barnes & Noble trade name
that had been owned by B&N College and licensed to the
58 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued