iRobot 2008 Annual Report Download - page 126

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11. Commitments and Contingencies
Legal
The Company received a letter from the United Kingdom’s Ministry of Defence (the “Customer”) dated
February 9, 2004, attempting to terminate a contract for the design, development, production and support of a
number of man-portable remote control vehicles for use in explosive ordnance disposal operations. The Company
entered into the contract with the Customer on May 23, 2001, and substantially completed the product design and
development phase of the work. The Company received payments based upon achieving a number of contract
milestones and has recognized revenue based on progress under the percentage-of-completion method of account-
ing. In addition to the milestone payments, the Customer advanced the Company funds to purchase long-lead
inventory components in advance of the production contemplated in the contract. On July 27, 2006, the Company
signed an agreement with the United Kingdom’s Ministry of Defence (MoD) Defence Procurement Agency (DPA)
to supply 30 iRobot PackBot EOD robots, spare parts and support in exchange for the payments received by the
Company under the contract. At December 30, 2006, all obligations, with the exception of normal warranty and
support, resulting from the signing of this agreement had been satisfied.
On August 17, 2007, the Company filed a lawsuit in Massachusetts Superior Court against Robotic FX, Inc.
and Jameel Ahed alleging, among other things, misappropriation of trade secrets and breach of contract, and
seeking both injunctive and monetary relief. The case was subsequently removed to the United States District Court
for the District of Massachusetts. On November 2, 2007, the court issued a preliminary injunction, and on
December 21, 2007 issued a permanent injunction, against Robotic FX, Inc. and Mr. Ahed preventing the sale of
products using certain of our trade secrets, including the Robotic FX Negotiator product.
In addition, on August 17, 2007, the Company filed a lawsuit in the United States District Court for the
Northern District of Alabama against Robotic FX, Inc. alleging willful infringement of two patents owned by the
Company, and seeking both injunctive and monetary relief. On December 21, 2007, the court entered a judgment
that Robotic FX, Inc. knowingly infringed on both asserted patents.
In a related settlement, Robotic FX, Inc. was dissolved and certain residual assets were retained by the
Company at its election. Mr. Ahed is prohibited from participating in competitive activities in the robotics industry
for five years.
The cumulative litigation and settlement-related expenditures associated with this dispute are expected to total
approximately $3.0 million, including an obligation to make cash payments up to $0.5 million through 2012,
contingent upon Mr. Ahed and Robotic FX, Inc. continuing to meet obligations pursuant to various agreements,
including but not limited to certain non-competition provisions, $0.1 million has been paid to Mr. Ahed during the
fiscal year ended December 27, 2008. These contingent payments will continue to be expensed, when and if earned.
78
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)