Harman Kardon 2010 Annual Report Download - page 41

the Plan as well as injunctive relief, imposition of a constructive trust, restitution, and other monetary relief. The
amended complaint alleges that from April 26, 2007 to the present, defendants failed to prudently and loyally
manage the Plan’s assets, thereby breaching their fiduciary duties in violation of ERISA by causing the Plan to
invest in our common stock notwithstanding that the stock allegedly was “no longer a prudent investment for the
Participants’ retirement savings.” The amended complaint further claims that, during the Class Period,
defendants failed to monitor the Plan fiduciaries, failed to provide the Plan fiduciaries with, and to disclose to
Plan participants, adverse facts regarding Harman and our businesses and prospects. The Russell Plaintiff also
contends that defendants breached their duties to avoid conflicts of interest and to serve the interests of
participants in and beneficiaries of the Plan with undivided loyalty. As a result of these alleged fiduciary
breaches, the amended complaint asserts that the Plan has “suffered substantial losses, resulting in the depletion
of millions of dollars of the retirement savings and anticipated retirement income of the Plan’s Participants.”
On March 24, 2008, the Court ordered, for pretrial management purposes only, the consolidation of Patrick
Russell v. Harman International Industries, Incorporated, et al. with In re Harman International Industries, Inc.
Securities Litigation.
Defendants moved to dismiss the complaint in its entirety on August 5, 2008. The Russell Plaintiff opposed
the defendants’ motion to dismiss on September 19, 2008, and defendants filed a reply in further support of their
motion to dismiss on October 20, 2008. The motion is now fully briefed.
Siemens vs. Harman Becker Automotive Systems GmbH
In October 2006, Harman Becker Automotive Systems GmbH (“Harman Becker”) received notice of a
complaint filed against it by Siemens AG with the Regional Court in Düsseldorf in August 2006 alleging that
certain of Harman Becker’s infotainment products, including both radio receiver and Bluetooth hands free
telephony functionality, infringe upon a patent owned by Siemens AG. In November 2006, Harman Becker filed
suit with the German Federal Patent Court in Munich to nullify the claims of this patent. Siemens AG
subsequently assigned this patent to Continental Automotive GmbH (“Continental”).
On August 14, 2007, the court of first instance in Düsseldorf ruled that the patent in question had been
infringed and ordered Harman Becker to cease selling the products in question in Germany, and to compile and
submit data to Siemens AG concerning its prior sales of such products. Harman Becker appealed that ruling.
Despite the pending appeal, Siemens AG provisionally enforced the ruling against Harman
Becker. Accordingly, in December 2007, Harman Becker ceased selling aftermarket products covered by the
patent in Germany, and submitted the required data to Siemens AG. On June 4, 2008, the German Federal Patent
Court nullified all relevant claims of Siemens AG’s patent. As a result, Harman Becker resumed selling the
affected products, and Siemens AG suspended further attempts to enforce the patent. Siemens AG also requested
that Harman Becker suspend its appeal of the Düsseldorf court’s ruling of infringement until the German Federal
Patent Court’s nullity ruling became final. Harman Becker consented to this suspension. Harman Becker received
the written decision of the German Federal Patent Court on August 18, 2008, and Siemens AG subsequently
appealed the decision to the German Federal Supreme Court.
Harman Becker entered into settlement agreements with Siemens AG and Continental on May 27, 2010 and
May 31, 2010, respectively. Pursuant to the terms of the settlement agreements, Continental withdrew the
infringement claim and Harman Becker withdrew its invalidity suit and each party agreed to bear its own costs
and legal fees. Pursuant to the terms of the settlement agreement, Continental granted Harman Becker and its
affiliated entities, a non-exclusive, worldwide, royalty-free and perpetual license to the patent at issue.
Other Legal Actions
At June 30, 2010, we were involved in several other legal actions. The outcome of these legal actions cannot
be predicted with certainty; however, management, based upon advice from legal counsel, believes such actions are
either without merit or will not have a material adverse effect on our financial condition or results of operations.
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