LeapFrog 2003 Annual Report Download - page 94

LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
Legal Proceedings
Various claims and lawsuits involving patent and trademark infringement are pending against the Company.
The Company intends to defend these suits vigorously.
Publications International, Ltd. v. LeapFrog Enterprises, Inc.
In May 2001, Publications International, Ltd., or PIL, filed a lawsuit against the Company in federal court in
Illinois alleging that the Company was infringing PIL’s alleged common law, or unregistered, trademark LEAP
FROG for children’s books. PIL’s complaint sought unspecified monetary damages, injunctive relief and
cancellation of the company’s U.S. trademark registration for LEAPFROG for coloring books, children’s books,
children’s activity books and educational books. The Company had counter-sued PIL for infringement by PIL of
three of the Company’s federally registered LEAPFROG trademarks, including one that it had acquired in 1996
from another company. In February 2003, we entered into a settlement agreement and release of claims with PIL.
As a result of the settlement, we acquired PIL’s rights to the designation LEAP FROG and LEAP FROG design
trademark, and the lawsuit against us in federal court in Illinois alleging that we infringed PIL’s alleged common
law, or unregistered, trademark LEAP FROG for children’s book was dismissed with prejudice.
General Creation LLC, et al. v. LeapFrog Enterprises, Inc. et al.
In January 2002, General Creation LLC filed a lawsuit against the Company and against Knowledge
Universe in federal district court in Virginia alleging that by making, using, importing and selling reading toys,
the Company was infringing United States Patent No. 5,795,213. General Creation sought unspecified monetary
damages, including triple damages based on its allegation of willful infringement, attorneys’ fees and injunctive
relief. The Company joined Knowledge Universe in filing a motion to dismiss based on lack of personal
jurisdiction over Knowledge Universe, or in the alternative, to transfer the suit to a federal district court in
California. In response, General Creation filed a motion to dismiss Knowledge Universe and an opposition to the
Company’s motion to dismiss or transfer the suit. Knowledge Universe was subsequently dismissed as a party to
the lawsuit. The Company filed an answer and counterclaim seeking declaratory relief that the patent was invalid,
unenforceable and not infringing. In May 2003, we entered into a confidential settlement agreement and release
of all claims with General Creation, and filed a joint motion in federal district court in Virginia seeking dismissal
with prejudice of all of the claims and counterclaims in the patent lawsuit.
Technology Innovations, LLC v. LeapFrog Enterprises, Inc.
In July 2002, Technology Innovations, LLC filed a complaint against the Company in the western federal
district court of New York alleging that the Company infringed, and induced others to infringe, United States
Patent No. 5,517,407, which it purported to own, by manufacturing, using, offering for sale and/or selling our
LeapPad, LeapPad Pro and My First LeapPad platforms and other unspecified products. Technology Innovations
sought unspecified monetary damages, including triple damages based on its allegation of willful infringement,
an accounting for all profits received by us from the sale of allegedly infringing products, attorneys’ fees and
injunctive relief. In August 2002, Technology Innovations filed an amended complaint adding seven defendants
to the complaint: Knowledge Universe, LLC; F.A.O., Inc.; KBToys, Inc.; Staples, Inc.; Target Corporations;
Toys “R” Us, Inc.; and Wal-Mart Stores, Inc. In September 2003, we, our co-defendants and Technology
Innovations entered into a confidential settlement agreement relating to Technology Innovation’s complaint. The
case was dismissed by the federal district court for the Western District of New York in September 2003.
LeapFrog Enterprises, Inc. v. Franklin Electronic Publishers, Inc.
In April 2002, based in part on assertions by Franklin Electronic Publishers, Inc. that a number of the
Company’s products, infringed, contributorily infringed or induced infringement of United States Patent
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