Rayovac 2006 Annual Report Download - page 30

18 SPECTRUM BRANDS | 2006 ANNUAL REPORT
On December 12, 2005, we received a request for informa-
tion from the Atlanta District Offi ce of the SEC which is investi-
gating our July 28, 2005 disclosure regarding our results for the
third quarter ended July 3, 2005 and our revised guidance issued
September 7, 2005 as to earnings for the fourth quarter of fi scal
year 2005 and fi scal year 2006. We are cooperating fully with the
investigation. We are unable to predict the outcome of the inves-
tigation or the timing of its resolution.
On November 6, 2006, a purported shareholder derivative
action, captioned Errichetti v. Jones, et al., was fi led in the Superior
Court of Fulton County for the State of Georgia, on our behalf,
against us as nominal defendant, our Board of Directors,
Chairman and Chief Executive Offi cer David A. Jones and
Executive Vice President and Chief Financial Offi cer Randall J.
Steward. The plaintiff derivatively claims breaches of fi duciary
duty, abuse of control, gross mismanagement and waste against
all of the individually named defendants. The plaintiff also deriva-
tively claims that our Chief Executive Offi cer and Chief Financial
Offi cer misappropriated confi dential company information for
personal profi t by selling our stock while in possession of mate-
rial, non-public information regarding our fi nancial condition
and future business prospects. The plaintiff seeks unspecifi ed
damages, profi ts, the return of all compensation paid by us, costs
and attorneys’ fees. This purported derivative action does not
seek affi rmative relief from the Company. We believe that there
are substantial legal and factual defenses to the claims.
We are involved in a number of legal proceedings with Philips
in Europe and Latin America with respect to trademark or other
intellectual property rights Philips claims to have in relation to
the appearance of the faceplate of the three-headed rotary shaver.
In the fi rst such legal proceeding in Europe, we were successful
in having the Philips trademark at issue declared invalid by the
High Court of Justice in the United Kingdom, a decision that was
ultimately upheld by the European Court of Justice (“ECJ”) in
2002. The ECJ held that a shape consisting exclusively of the
shape of a product is unregisterable as a trademark (or is subject
to being declared invalid if it has been registered as a trademark)
if it is established that the essential functional features of the
shape are attributable only to the technical result. We (or one of
our distributors) and Philips are currently engaged in litigation
over the Philips trademark in each of France, Italy, Spain and
Germany as follows:
• In each of France (decision of June 13, 2003), Italy (deci-
sion of February 26, 2004) and Spain (decision of May 6,
2004), the respective First Instance Courts ordered that
the various Philips trademarks be cancelled. The action in
France commenced May 17, 2000, the action in Italy com-
menced May 15, 2000 and the action in Spain commenced
March 12, 2003. In France, Philips unsuccessfully fi led an
appeal to the Paris Court of Appeal, which affi rmed the
cancellation of Philips’ marks (decision of February 16,
2005). These decisions have been appealed by Philips to
the French Supreme Court and the Milan Court of Appeal,
respectively. The Spanish Appeal Court has rejected
Philips’ appeal.
• In Germany, the Cologne District Court in August 2002
granted Philips a preliminary injunction that currently pre-
vents us from selling rotary shavers in Germany. Since such
time, we have sought to cancel relevant Philips trademarks.
In a decision dated April 1, 2004, the German Federal
Patent Court issued a ruling canceling three Philips marks
and upholding Philips’ right to one mark. The parties
appealed this decision to the German Supreme Court. A
hearing in those actions took place in the German Supreme
Court on November 17, 2005 and the Court referred the
matters back to the German Federal Patent Court for fur-
ther proceedings. A hearing has been scheduled for
December 13, 2006.
Additionally, since the beginning of fi scal 2005 we have fi led
proceedings seeking to cancel relevant Philips trademarks in
Argentina, Austria, Brazil, Denmark, Hungary, Israel, the
Netherlands, Norway, South Africa and Switzerland. Philips is
opposing these efforts. In Argentina, Philips has fi led an infringe-
ment action against us and has obtained an ex parte preliminary
injunction prohibiting our sale of rotary shavers. We have appealed
the injunction order and anticipate a decision in calendar 2006.
Environmental
We are subject to various federal, state and local environmen-
tal laws and regulations. We believe we are in substantial compli-
ance with all such environmental laws which are applicable to
our operations. See also the discussion captioned “Governmental
Regulation and Environmental Matters” under Item 1 above.
ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the fourth quarter of the fi scal year covered by this Report.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.