THQ 2008 Annual Report Download - page 97

(6) We have omitted unrecognized tax benefits from this table due to the inherent uncertainty regarding
the timing and amount of certain payments related to these unrecognized tax benefits. The underlying
positions have not been fully developed under audit to quantify at this time. As of March 31, 2008 we
had $11.6 million of unrecognized tax benefits. See ‘‘Note 12—Income Taxes’’ for further information
regarding the unrecognized tax benefits.
Other potential future expenditures relate to the following:
Manufacturer Indemnification. We must indemnify the platform manufacturers (Microsoft, Nintendo,
Sony) of our games with respect to all loss, liability and expenses resulting from any claim against such
manufacturer involving the development, marketing, sale or use of our games, including any claims for
copyright or trademark infringement brought against such manufacturer. As a result, we bear a risk that
the properties upon which the titles of our games are based, or that the information and technology
licensed from others and incorporated into the products, may infringe the rights of third parties. Our
agreements with our third-party software developers and property licensors typically provide
indemnification rights for us with respect to certain matters. However, if a manufacturer brings a claim
against us for indemnification, the developers or licensors may not have sufficient resources to, in turn,
indemnify us.
Indemnity Agreements. We have entered into indemnification agreements with the members of our Board
of Directors, our Chief Executive Officer and our Chief Financial Officer, to provide a contractual right of
indemnification to such persons to the extent permitted by law against any and all liabilities, costs,
expenses, amounts paid in settlement and damages incurred by the any such person as a result of any
lawsuit, or any judicial, administrative or investigative proceeding in which such person is sued as a result
of their service as members of our Board of Directors, Chief Executive Officer or as Chief Financial
Officer. The indemnification agreements provide specific procedures and time frames with respect to
requests for indemnification and clarify the benefits and remedies available to the indemnitees in the event
of an indemnification request.
Litigation.
WWE related Lawsuits
On October 19, 2004, World Wrestling Entertainment, Inc. (‘‘WWE’’) filed a lawsuit in the United States
District Court for the Southern District of New York (the ‘‘Court’’) against JAKKS Pacific, Inc.
(‘‘JAKKS’’), us, THQ/JAKKS Pacific LLC (the ‘‘LLC’’), and others, alleging, among other claims,
improper conduct by JAKKS, certain executives of JAKKS, an employee of the WWE and an agent of the
WWE in granting the WWE videogame license to the LLC. The complaint seeks various forms of relief,
including monetary damages and a judicial determination that, among other things, the WWE videogame
license is void. On March 30, 2005, WWE filed an amended complaint, adding both new claims and our
president and chief executive officer, Brian Farrell, as a defendant. In August 2005, the Court directed the
parties to file briefs on the three federal law claims alleged by the Plaintiffs (i.e., Robinson-Patman, and
Sherman Act, and a threshold issue concerning the Plaintiff’s RICO claim). The motions to dismiss the
amended complaint based on these issues were fully briefed and argued and, on March 31, 2006, the Court
granted the defendants’ motion to dismiss the Robinson-Patman Act and Sherman Act claims and denied
the defendants’ motion seeking to dismiss the RICO claims on the basis of the threshold ‘‘enterprise’’ issue
that was briefed.
The Court then set a second round of briefing on the motions to dismiss on all other federal issues,
including other defenses under RICO. After extensive briefing concluded in August 2006 and a hearing
held in September 2006, on December 21, 2007, the Court granted our motions to dismiss the federal
claims, and denied a motion by WWE to reconsider the Court’s prior March 2006 order dismissing the
antitrust claims. Among the Court’s grounds for its decision were its findings that WWE had failed to
allege a pattern of racketeering activity, RICO injury or antitrust injury, and that its RICO claims were
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