Versata Enterprises, Inc. v. Selectica, Inc.
Supreme Court of Delaware
5 A.3d 586 (2010)
Selectica, Inc. (Selectica) (plaintiff), having accumulated roughly $160 million in valuable net-operating-loss carryforwards (NOLs) that could reduce future taxes, faced restriction of those NOLs under Internal Revenue Code § 382 if an ownership change occurred among shareholders holding 5% or more of its stock. After competitor Trilogy bought about 6% of Selectica's stock, Selectica's board, after consulting financial experts, amended its shareholder-rights plan (poison pill) to reduce the triggering threshold from 15% to 4.99%; Trilogy continued buying and triggered this pill while refusing any NOL-protecting conditions, prompting the board to adopt a reloaded poison pill doubling all outstanding shares except Trilogy's, reducing Trilogy's stake to roughly 3.3%. The Court of Chancery found the poison pills valid, and Trilogy appealed.
Whether defensive measures taken by a corporate board are valid if (1) the board had reasonable grounds to believe that a threat to the corporation existed and (2) the defensive measures were not preclusive or coercive and were reasonable in relation to the threat.