Commitments And Contingencies | 3 Months Ended |
Mar. 31, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments And Contingencies | ' |
Commitments and Contingencies |
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Litigation |
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From time-to-time, j2 Global is involved in litigation and other disputes or regulatory inquiries that arise in the ordinary course of its business. Many of these actions involve or are filed in response to patent actions filed by j2 Global against others. The number and significance of these disputes and inquiries has increased as our business has expanded and j2 Global has grown. Any claims or regulatory actions against j2 Global, whether meritorious or not, could be time-consuming, result in costly litigation, require significant management time and result in diversion of significant operational resources. |
As part of the Company’s continuing effort to prevent the unauthorized use of its intellectual property, j2 Global has brought claims against several companies for infringing its patents relating to online fax, voice and other messaging technologies, including, among others, Nextiva, Inc. (“Nextiva”), Vitelity Communications, Inc. (“Vitelity”), EC Data Systems, Inc. (“EC Data”) and Integrated Global Concepts, Inc. (“IGC”). |
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On August 5, 2011, j2 Global and one of its affiliates filed suit in the United States District Court for the Central District of California (the “Central District of California”) against Nextiva, alleging infringement of U.S. Patents Nos. 6,208,638 (the “‘638 Patent”), 6,350,066 (the “‘066 Patent”) and 7,020,132 (the “’132 Patent”). On July 23, 2013, j2 Global filed an amended complaint, adding a claim for infringement of U.S. Patent No. 6,020,980 (the “‘980 Patent”). On February 7, 2014, this action was dismissed pursuant to a settlement agreement. |
On September 23, 2011, j2 Global and one of its affiliates filed suit against Vitelity in the Central District of California, alleging infringement of the ‘638 and ‘066 Patents. On April 3, 2014, this action was dismissed pursuant to a settlement agreement. |
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On February 21, 2012, EC Data filed a complaint against j2 Global and one of its affiliates in the United District Court for the District of Colorado, seeking declaratory judgment of non-infringement of the ‘638 and ‘066 Patents. On April 9, 2012, j2 Global filed an answer to the complaint and counterclaims asserting that EC Data infringes these and other patents. On October 25, 2013, EC Data filed an amended complaint asserting claims for declaratory judgments of non-infringement and invalidity of the ‘638, ‘132, and ‘066 Patents, and U.S. Patent No. 6,597,688 (the “‘688 Patent”). On April 3, 2014 this action was dismissed pursuant to a settlement agreement. |
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On June 28, 2013, j2 Global filed suit against EC Data in the Central District of California, alleging infringement of the ‘980 Patent. On April 3, 2014, this action was dismissed pursuant to a settlement agreement. |
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On October 16, 2013, one of j2 Global’s affiliates entered its appearance as a plaintiff in a multi-district litigation proceeding entitled In re: Unified Messaging Solutions LLC and Advanced Messaging Technologies, Inc. Patent Litigation (N.D. Ill. Master Docket No. 12 C 6286). In that litigation, a company with certain rights to assert patents owned by the j2 Global affiliate has asserted those patents against a number of defendants, and those defendants have filed counterclaims for, inter alia, non-infringement, unenforceability, and invalidity of U.S. Patent Nos. 6,857,074; 7,836,141; 7,895,306; 7,895,313 and 7,934,148. On December 20, 2013, the Court issued a claim construction ruling, construing certain terms of the patents-in-suit. |
On August 28, 2013, Phyllis A. Huster (“Huster”) filed suit in the United States District Court for the Northern District of Illinois against Unified Messaging Solutions, LLC, Acacia Patent Acquisition LLC (“Acacia”), Charles R. Bobo, II (“Bobo”), j2 Global, and one of j2 Global’s affiliates for correction of inventorship of the ‘066 Patent and U.S. Patents Nos. 5,675,507; 5,870,549; 6,564,321; 6,857,074; 7,895,306; 7,836,141; 7,895,313 and 7,934,148. Huster seeks a declaration that she was the inventor of the patents at issue, an order directing the USPTO to substitute or add Huster as inventor of the patents at issue, an order that the defendants pay to Huster at least half of all earnings from licensing and sales of rights in the patents at issue, and costs and attorneys’ fees. On October 28, 2013, j2 Global, the j2 Global affiliate, and the other defendants in the case filed a motion to dismiss Huster’s action on the basis of improper venue and on the basis that Huster’s action is barred by laches. The defendants also filed a motion to strike certain portions of Huster’s prayer for relief. On the same day, j2 Global filed a motion to dismiss on the basis that it is not a proper party to Huster’s action; Bobo filed a motion to dismiss for lack of personal jurisdiction; and Acacia filed a motion to dismiss on the basis of lack of subject matter jurisdiction. Those motions remain pending. |
On September 15, 2006, a j2 Global affiliate filed a patent infringement suit against IGC in the United States District Court for the Northern District of Georgia (the “Northern District of Georgia”). On May 13, 2008, IGC filed counterclaims alleging violations of Section 2 of the Sherman Act and breach of contract. IGC is seeking damages, including treble and punitive damages, an injunction against further violations, divestiture of certain assets, and attorneys’ fees and costs. On February 18, 2009, the Court granted the j2 Global affiliate’s motion to stay the case pending the conclusion of the j2 Global affiliate’s appeal of a summary judgment ruling of non-infringement in another case involving the same patents and issues as this action. On January 22, 2010, the United States Court of Appeals for the Federal Circuit affirmed the non-infringement ruling in the other case and on June 7, 2010 the Court lifted the stay. On September 2, 2011, the Northern District of Georgia Court granted the j2 Global affiliate’s motion to dismiss IGC’s breach of contract counterclaim and one portion of IGC’s antitrust counterclaim. On October 21, 2011, IGC filed a motion to strike certain of the affirmative defenses asserted by the j2 Global affiliate, which the Northern District of Georgia Court granted in part on July 26, 2012, striking certain of the affirmative defenses at issue. Following additional discovery, on June 20, 2012, the j2 Global affiliate filed a motion to dismiss its infringement claims and IGC's counterclaims for declaratory relief. On July 27, 2012, the Northern District of Georgia Court granted the j2 Global affiliate’s motion to dismiss, dismissing the j2 Global affiliate’s infringement claims and IGC’s related declaratory judgment counterclaims. On June 28, 2013, the Court bifurcated discovery, with the first stage of discovery limited to the issue of whether the j2 Global affiliate’s infringement claims were objectively baseless. The period for discovery into that issue ended on February 3, 2014. Also on February 3, 2014, IGC moved for leave to file amended counterclaims to assert a breach of contract claim. On March 12, 2014, j2 moved for summary judgment on IGC’s remaining antitrust claims. Both of those motions remain pending. |
On July 2, 2012, IGC filed suit against j2 Global and its affiliate in the United States District Court for the Northern District of California (“Northern District of California”), alleging that j2 Global - through filing suit in the Central District of California - breached a contract not to sue IGC. IGC seeks monetary damages, attorneys' fees, costs, injunctive relief and specific performance of the alleged covenant not to sue IGC. On August 24, 2012, j2 Global filed a motion to dismiss or alternatively to transfer the case to the Central District of California. The motion was heard on October 26, 2012; the Court denied the motion on March 29, 2013. On April 12, 2013, j2 Global filed its answer and asserted counterclaims for infringement of the ‘638, ‘066, ‘688, and ‘132 Patents. On May 3, 2013, IGC asserted counterclaims seeking declaratory judgments of invalidity, unenforceability and non-infringement of the ‘638, ‘066, ‘688, and ‘132 Patents, implied license and exhaustion, punitive damages, attorneys’ fees and costs. On June 28, 2013, the Court granted in part and denied in part j2 Global’s motion to dismiss certain of IGC’s counterclaims, dismissing the claims for declaratory judgment of exhaustion and punitive damages. On January 31, 2014, j2 moved for summary judgment on IGC’s breach of contract claims. On March 21, 2014, the Court granted summary judgment. |
On June 27, 2013, j2 Global filed suit against IGC in the Northern District of California, alleging infringement of the ‘980 Patent. On August 29, 2013, IGC filed counterclaims for declarations of invalidity, unenforceability, and non-infringement of the ‘980 Patent; an implied license to the ‘980 Patent; and breach and specific enforcement of an alleged covenant not to sue IGC. On September 26, 2013, j2 moved to dismiss IGC’s counterclaims for unenforceability and an implied license of the ‘980 Patent and for breach and specific performance of the contract not to sue. On February 26, 2014, the Court granted j2’s motion to dismiss in part, dismissing IGC’s claim for declaratory judgment of unenforceability of the ‘980 Patent and striking related affirmative defenses. On October 18, 2013, the Court consolidated IGC’s breach of contract counterclaim with the other case pending in the Northern District of California and stayed j2 Global's patent infringement claims pending resolution of the breach of contract claims. On March 21, 2014, the Court granted summary judgment on IGC’s breach of contract counterclaims. |
On February 17, 2011, Emmanuel Pantelakis (“Pantelakis”) filed suit against j2 Global Canada, Inc., carrying on business as Protus IP Solutions (“j2 Canada”), in the Ontario Superior Court of Justice, alleging that Protus breached a contract with Pantelakis in connection with Protus’s e-mail marketing services. Pantelakis is seeking damages, attorneys’ fees, interest, and costs. On November 6, 2012, Pantelakis filed a second amended statement of claim adding claims for negligence and breach of contract. Following a pre-trial, Pantelakis expressed a desire to bring a motion seeking to remove Ontario counsel for j2 Canada due to an alleged conflict of interest. This motion was subsequently adjourned, as Pantelakis changed legal counsel. The parties are scheduled to have additional discussions, at which time Pantelakis will determine whether or not to proceed with this motion. |
On January 18, 2013, Paldo Sign and Display Company (“Paldo”), filed an amended complaint adding j2 Global, j2 Canada, and a former j2 Canada employee, Tyler Eyamie (“Eyamie”), as additional defendants in an existing purported class action pending in the United States District Court for the Northern District of Illinois. The amended complaint alleged violations of the Telephone Consumer Protection Act (“TCPA”), the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), and common law conversion, arising from a customer’s alleged use of the j2 Canada system to send unsolicited facsimile transmissions. On August 23, 2013, Paldo filed a second amended complaint to add a second plaintiff, Sabon, Inc. (“Sabon”). j2 Global and j2 Canada filed a motion to dismiss the ICFA and conversion claims, which was granted. Paldo and Sabon seek statutory damages, costs, attorneys’ fees and injunctive relief for the remaining TCPA claims. Eyamie filed a motion to dismiss for lack of personal jurisdiction, which was granted on March 11, 2014. The discovery period commenced on April 17, 2014, and will close in August 2015. The case is set for trial in late January 2016. |
On February 19, 2013, Asher & Simons, P.A. (“Simons”) and Dr. Stuart T. Zaller, LLC (“Zaller”) filed suit against j2 Global and j2 Canada in the Circuit Court for Baltimore County, Maryland, alleging violations of the TCPA. j2 Global was dismissed from the lawsuit for lack of personal jurisdiction and in Q1 2014 the entire case was dismissed pursuant to a settlement agreement. |
On December 16, 2013, Anthony Jenkins filed a purported class action against “j2 Global, carrying on business as eFax” in the Central District of California. An amended complaint was filed on March 18, 2014 adding two named plaintiffs. The amended complaint includes causes of action for breach of contract, several state statutory violations and conversion. The claims arose either out of alleged difficulties some users encountered in canceling their eFax® online fax accounts or out of j2 Global allegedly being unjustly enriched and converting users’ funds. The potential class representatives are seeking damages, statutory damages, restitution, attorneys’ fees, interest, costs and injunctive relief on behalf of themselves and a purported nationwide class of persons allegedly similarly situated. On April 7, 2014, j2 Global filed a motion to dismiss the amended complaint. Plaintiffs have yet to file a responsive pleading to the motion to dismiss. |
On January 7, 2011 the Department of Revenue for the State of Washington (“Washington Department of Revenue”) issued assessments to j2 Global for business and occupations and retail sales tax for the periods January 1, 2004 through December 31, 2008 and January 1, 2009 through September 30, 2010. On February 4, 2011, j2 Global filed a petition for correction with the Washington Department of Revenue. On November 16, 2012, the Washington Department of Revenue issued a determination denying j2 Global’s petition. j2 Global paid the assessments on or about December 13, 2012 and on June 21, 2013 filed a complaint against the Washington Department of Revenue in the Superior Court of Washington for Thurston County, seeking a refund of the entire amount paid and asserting various declarations that the State improperly imposed tax. Discovery is ongoing. |
j2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, including those where an unfavorable outcome is reasonably possible, after giving effect to existing reserves, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect j2 Global’s consolidated financial position, results of operations or cash flows in a particular period. The Company has not accrued for a loss contingency relating to these legal proceedings because unfavorable outcomes are not considered by management to be probable or the amount of any losses reasonably estimable. |