Stamps.com 2003 Annual Report Download - page 62

Table of Contents
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
court granted the Company’s motion to transfer the lawsuit to the United States District Court for the District of Delaware. On April 18, 2002,
the claim that the Company was infringing one of the patents was dismissed with prejudice. On June 20, 2002, all remaining claims in the
Pitney II lawsuit were dismissed without prejudice.
On June 14, 2001, the Company filed a patent infringement lawsuit against Pitney Bowes in the United States District Court for the Central
District of California (“Pitney III”), alleging that Pitney Bowes infringed four patents owned by the Company. The suit sought treble damages,
an injunction against further alleged infringement, attorneys’ fees and other unspecified damages. On January 7, 2002, the court granted Pitney
Bowes’ motion to transfer the lawsuit to the United States District Court for the District of Delaware.
On September 30, 2002 the court stayed all activity in the Pitney I and Pitney III cases pending the appointment of a Special Master. On
October 15, 2002 the court appointed a Special Master and lifted the stay imposed on September 30, 2002. During the week of June 2, 2003,
following receipt of briefing from the parties, the Special Master held hearings regarding claim construction as well as various motions,
including dispositive motions that had been brought by the parties. On September 16, 2003 the Special Master sent reports and associated
proposed orders to the court containing recommendations of the Special Master regarding claim construction and motions that had been
brought by the parties.
On December 4, 2002, Pitney Bowes filed a further patent infringement lawsuit against the Company in the United States District Court for
the District of Delaware, alleging that the Company’s NetStamps postage product infringes four patents owned by Pitney Bowes. The suit
sought treble damages, an injunction against further alleged infringement, attorneys’ fees and other damages and relief. On January 23, 2003,
the Company answered Pitney’s complaint, denying the allegations of patent infringement and asserting a number of affirmative defenses as
well as a counterclaim alleging that Pitney Bowes’ DM Series Mailing Systems infringe three additional Stamps.com patents. In connection
with the Company’s counterclaim, the Company also sought treble damages, an injunction against further alleged infringement, attorneys’ fees
and other damages and relief.
On December 19, 2003, the Company reached a settlement with Pitney Bowes in all of its respective litigation. The settlement agreement
resolves all litigation between the companies with no need for material payments. The deal includes a cross-licensing agreement for the life of
all patents that have been asserted in the litigation, with each side agreeing not to sue the other for patent infringement during the next five
years. In addition, the agreement grants each company future worldwide licenses in the form of
“Picks” to a limited but equal number of the
other’s patents. The licenses are limited to fields of use that cover each company’s current respective businesses. The agreement also contains
provisions relating to “change of control”
scenarios that could limit future access to these Intellectual Property picks. In particular, an acquiring
party that is on a restricted list will lose any unused picks if it makes its acquisition before the end of a “Sunset Period.” The Sunset Period is
shorter than the five year term of the agreement.
On December 13, 2000, Cybershop (a British Columbia, Canada partnership) and its general partners filed suit against the Company in the
U.S. District Court for the Southern District of Texas, alleging that in 1998 a third party fraudulently transferred ownership of the Internet
domain name “stamps.com” away from Cybershop and subsequently transferred it to us. The complaint sought legal resolution and recognition
of Cybershop’s ownership of the “stamps.com” domain name. On January 17, 2003, the Company agreed to terms to settle the Cybershop
domain name lawsuit. Pursuant to the settlement, the Company will keep the domain name www.stamps.com and pay the plaintiffs an
immaterial amount of cash.
In May and June 2001, the Company was named, together with certain of its current or former board members and/or officers, as a
defendant in eleven purported class-action lawsuits, filed in the United States District Court for the Southern District of New York. The
lawsuits allege violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 in connection with the Company’s initial
public offering and secondary offering of the Company’s common stock. The lawsuits also name as defendants the principal underwriters in
connection with
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