Commitments and Contingencies | 6 Months Ended |
Dec. 31, 2013 |
Commitments and Contingencies | ' |
| -7 | Commitments and Contingencies |
Litigation |
| (a) | Openwave Systems Inc.(Unwired Planet) v. Apple Inc. (“Apple”), Research in Motion Ltd, and Research in Motion Corp. (“RIM”) (now known as Blackberry) |
On August 31, 2011, the Company filed a complaint in the Federal District Court for the District of Delaware against Apple and RIM, alleging that Apple and RIM products infringe certain of the Company’s patents, seeking among other things a declaration that the Company’s patents cited in the complaint have been infringed by Apple and RIM and that these patents are valid and enforceable, damages as a result of the infringement, and an injunction against further infringement. This matter was stayed pending a parallel case filed with the International Trade Commission (“ITC”). The Company withdrew the ITC investigation in October 2012. The Federal District Court in Delaware lifted the stay in January 2013 and a Markman hearing was held in November of 2013. The Company is currently awaiting an order from the above hearing, which will determine the claim construction for the patents the Company alleges have been infringed. |
| (b) | Unwired Planet LLC v. Apple Inc. (“Apple”) |
On September 20, 2012, the Company filed a complaint in the U.S. District Court for the District of Nevada, charging Apple with infringing ten of its patents. The case charges infringement of ten patents related to smart mobile devices, cloud computing, digital content stores, push notification technologies, and location-based services such as mapping and advertising. On August 30, 2013, the U.S. District Court for the District of Nevada granted Apple’s motion to transfer venue from the District of Nevada to the Northern District of California. A scheduling conference in the above matter occurred in January of 2014 and a Markman hearing has been scheduled for May of 2014. |
| (c) | Unwired Planet LLC v. Google, Inc. (“Google”) |
On September 20, 2012, the Company filed a complaint in the U.S. District Court for the District of Nevada, charging Google with infringing ten patents. The case charges infringement of ten patents related to cloud computing, digital content stores, push notification technologies, and location-based services such as mapping and advertising. A Markman hearing has been scheduled in July of 2014. |
| (d) | Unwired Planet LLC v. Square Inc. (“Square”) |
On October 20, 2013, the Company filed a complaint in the U.S. District Court for the District of Nevada, charging Square with infringing three patents related to mobile payment technologies. |
From time to time, the Company may be involved in litigation or other legal proceedings, including those noted above, relating to or arising out of its day-to-day operations or otherwise. Litigation is inherently uncertain and the Company could experience unfavorable rulings. Should the Company experience an unfavorable ruling, there exists the possibility of a material adverse impact on its financial condition, results of operations, cash flows or on its business for the period in which the ruling occurs and/or in future periods. |
Ericsson Master Sales Agreement |
On February 13, 2013, the Company, through a wholly-owned subsidiary, acquired a patent portfolio from a wholly owned subsidiary of Telefonaktiebolaget L M Ericsson (“Ericsson”) that consists of approximately 2,150 patents and patent applications and the right to receive 100 additional patents per year for five years beginning in 2014. The acquired patents cover technology utilized in telecommunications infrastructure and mobile devices including, among other things, signal processing, network protocols, radio resource management, voice/text applications, mobility management, software, hardware, and antennas and were purchased subject to existing encumbrances. The Company is not entitled to royalty payments that are currently being received by Ericsson under third party license agreements on any patents included in the portfolio. Consideration to be paid to Ericsson consists of a nontransferable, limited license to the Company’s patents and a right to receive an amount equal to a percentage of future gross revenues generated by a combined patent portfolio that includes both the Ericsson Patents plus the Company’s legacy mobility patents (“fee share”). The payments Ericsson will receive from the derived value of the patent portfolio are computed on a tiered basis. Specifically, Ericsson will receive an amount equal to 20% of the first $100 million of gross revenue, 50% of the next $400 million and 70% of any amounts above $500 million. The fee share has no termination date. |
The Company has recognized cumulative revenues of $106,000 and incurred a cumulative fee share of $21,000 from inception of the Master Sales Agreement through December 31, 2013. The Company did not recognize any revenues nor incur any fee share for the six months ended December 31, 2013. |
Contingent Legal Expenses |
In September 2013, the Company entered into blended fee arrangement with its lead patent infringement counsel on the Apple/RIM, Apple/Google, and Google cases for a period of five years. The agreement calls for monthly cash payments of $0.5 million for a period of twenty-four (24) months retroactively commencing on July 1, 2013 and a sliding scale percentage of any negotiated license fees, settlements or judgments awarded, if any, from the three defendants covered up to a maximum of $70 million. During the six months ended December 31, 2013, the Company recognized $2.5 million in legal fees and $0.9 million in out of pocket costs related to this agreement, which are included in Patent licensing expenses in the accompanying Condensed Consolidated Statements of Operations. |
In October 2013, the Company entered into a blended fee arrangement with its lead counsel on the Square litigation. The agreement calls for periodic fixed fees beginning in July 2014 and a contingency fee due upon successful settlement or a judgment. During the six months ended December 31, 2013, the Company recognized $0.1 million in legal fees and expenses related to this agreement included in patent licensing expenses in the accompanying condensed consolidated statements of operations. |
Indemnification claims |
Prior to the sale of the Company’s product businesses, the Company’s software license and services agreements generally included a limited indemnification provision for claims from third parties relating to its intellectual property. In connection with the sale of the Company’s product businesses, the Company retains certain ongoing liabilities with respect to indemnification claims related to its former customers that were initiated prior to the sale of the Location business line and the Messaging and Mediation product businesses. |
Originally, three licensees of the Company sought indemnification from the Company under their respective license agreements in connection with being named as defendants in two matters pending in the United States District Court for the Eastern District of Texas captioned Unified Messaging Solutions, Inc. v. Google, et al. (Civil Action No. 6:11cv00464) and Unified Messaging Solutions, Inc. v. Facebook, et al. (Civil Action No. 6:11cv00120) (the “Actions”). Plaintiffs in the Actions allege that the licensees’ web-based communication services infringe patents allegedly owned by the plaintiff and the licensees claim that their web-based services are comprised of products licensed from the Company. The Company assumed the defense on behalf of two of the licensees and settled those matters in the second quarter of the current fiscal year for an immaterial amount. These indemnification payments are included in General and administrative expenses in our Condensed Consolidated Statement of Operations. With respect to the third, the licensee conducted its own defense and has resolved this issue. |