Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
Commitments and Contingencies |
Except as discussed below, there were no material changes in the Company's commitments under contractual obligations as disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2013. Please also refer to Note 13 - Subsequent Event for additional commitments that the Company has entered into subsequent to September 30, 2014. |
Revolving Line of Credit |
In May 2014, the Company entered into a credit agreement with Wells Fargo Bank, National Association ("Lender"), under which the Lender agreed to make a revolving loan ("Revolver") to the Company in an amount not to exceed $10.0 million, with an accordion feature that allows the Company to increase the maximum borrowing amount by not less than $5.0 million and not more than $10.0 million. The Revolver matures in May 2019. Outstanding borrowings under the Revolver bear interest, at the Company's option, at a base rate plus an applicable margin. The applicable margin ranges between 0.75% and 2.25% depending on the Company's leverage ratio. Interest is payable every three months. |
During the three months ended September 30, 2014, the Company increased the maximum borrowing amount under the Revolver to $15.0 million. |
As of September 30, 2014, the Company had borrowed $10.5 million under the Revolver. The carrying value of total debt approximates fair market value. |
Letter of Credit |
During the three months ended September 30, 2014, the Company reduced the security deposit from $0.4 million to $0.2 million for its current headquarters office at 6200 Stoneridge Mall Road, Suite 500, Pleasanton, California 94588. As a result, $0.4 million was released to the Company in cash, and the Company obtained a $0.2 million letter of credit in August 2014 for the security deposit. The letter of credit will expire on August 31, 2015. |
Financing Arrangement for Equipment Purchase |
In September 2014, the Company entered into a financing arrangement for the purchase of storage equipment, primarily for its data centers. The principal amount financed is $3.8 million and is payable in two installments of $2.6 million and $1.2 million in three months and one year, respectively, from November 2014. The financing arrangement does not bear interest. There are no financial covenants associated with the financing arrangement. In the event of default by the Company, the financing company may repossess the equipment and sell it in the in order to offset the Company’s liability to it. As of September 31, 2014, the Company had received, and accrued for, $0.1 million of storage equipment. Any shortfall from the sale of the equipment will be due and payable by the Company to the financing company. |
Warranties and Indemnification |
The Company generally warrants that its software will perform in accordance with its standard documentation. Under the Company’s standard warranty, should a software product not perform as specified in the documentation within the warranty period, the Company will repair or replace the software or refund the license fee paid. To date, the Company has not incurred any incremental costs related to warranty obligations for its software. |
The Company’s product license and on-demand agreements typically include a limited indemnification provision for claims by third parties relating to the Company’s intellectual property. To date, the Company has not incurred material costs, and has not accrued any costs related to such indemnification provisions. |
Intellectual Property Litigation |
Versata Software, Inc. and Versata Development Group, Inc. v. Callidus Software, Inc. - Ongoing |
On July 19, 2012, Versata Software, Inc. and Versata Development Group, Inc. (collectively, “Versata”) filed suit against Callidus in the United States District Court for the District of Delaware (“Delaware District Court”). The suit asserts that the Company infringes U.S. Patent Nos. 7,904,326, 7,908,304 and 7,958,024. The Company believes that the claims are without merit and intends to vigorously defend against these claims. On May 30, 2013, the Company answered the complaint and filed a counterclaim against Versata in the Delaware District Court. The Company's counterclaim asserts that Versata infringes U.S. Patent Nos. 6,269,355, 6,850,924 and 6,473,748. On August 30, 2013, the Company filed petitions with the United States Patent and Trademark Office Patent Trial and Appeal Board (“PTAB”) for covered business method (“CBM”) patent review of U.S. Patent Nos. 7,904,326, 7,908,304 and 7,958,024, which Versata filed responses to on December 12, 2013. The Company also filed a motion with the Delaware District Court on August 30, 2013 to stay the litigation pending completion of the patent review proceedings with the PTAB (“Motion to Stay”). On January 8, 2014, the Company was granted leave by the Delaware District Court to add Versata Inc. as a counterclaim defendant. On March 4, 2014, the PTAB instituted covered business method patent review of each of Versata’s patents, namely, U.S. Patent Nos. 7,904,326, 7,908,304 and 7,958,024, finding that it is more likely than not that the Company will prevail in establishing that the challenged claims are not patentable. After requesting that the PTAB reconsider its decision to institute, which was denied, Versata filed a petition for writ of mandamus with the Court of Appeals for the Federal Circuit (“CAFC”) on April 11, 2014 asking that Court to deny institution of CBM patent review by the PTAB. The CAFC denied Versata’s petition for writ of mandamus on May 5, 2014. On April 17, 2014, the Company filed additional petitions with the PTAB for CBM patent review to address all of the remaining claims not previously covered in the prior petitions with respect to U.S Patent Nos. 7,908,304 and 7,958,024. On May 8, 2014, the Delaware District Court: (i) granted the Company’s Motion to Stay in part with respect to U.S. Patent No. 7,904,326, and (ii) denied the Company’s Motion to Stay in part with respect to U.S. Patent Nos. 7,908,304 and 7,958,024. On May 8, 2014, the Company appealed to the CAFC the Delaware District Court’s denial of the Motion to Stay with respect to U.S. Patent Nos. 7,908,304 and 7,958,024. On October 2, 2014, the PTAB instituted covered business method patent review of the remaining claims covered in the second set of petitions for U.S Patent Nos. 7,908,304 and 7,958,024. On October 21, 2014, the Company and Versata engaged in a mediation to settle their present dispute and to reach global settlement to avoid future patent infringement lawsuits. Following the mediation, considering all facts and circumstances, the Company determined that it had incurred a liability as of September 30, 2014 and recorded an estimated potential loss for this case in the amount of $3.0 million. The estimated potential loss was recorded to cost of recurring revenue and to general and administrative expenses in the amounts of $1.2 million and $1.8 million, respectively. |
Other Matters |
In addition to the above litigation matter, the Company is from time to time a party to other various litigation and customer disputes incidental to the conduct of its business. At the present time, the Company believes that none of these matters are likely to have a material adverse effect on the Company’s future financial results. |
The Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company reviews the need for any such liability on a quarterly basis and records any necessary adjustments to reflect the effect of ongoing negotiations, contract disputes, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case in the period they become known. At September 30, 2014, the Company had not recorded any such liabilities in accordance with accounting for contingencies. However, litigation and other disputes are subject to inherent uncertainties and the Company's view on these matters may change in the future. |