Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Commitments. See Note 13, Lease exit and related charges, for details on office lease commitments.

Litigation. In October 2013, we executed settlement agreements relating to certain of our outstanding litigation matters; specifically, the matters brought against us by VoiceAge Corporation and Callertone Innovations, Inc., which are more fully described below. During the fourth quarter of 2013 we paid an aggregate of $11.5 million, representing our total obligation under these settlements. This amount was accrued as of September 30, 2013, and is identified in our Condensed Consolidated Statements of Operations as "Loss on litigation settlements."

On July 3, 2012, a lawsuit was filed against us by VoiceAge Corporation in the Supreme Court of the State of New York, wherein VoiceAge asserted that we had breached our payment obligations under the terms of a patent license agreement between us and VoiceAge in respect of distribution of specified codec technology, and sought a material amount of damages. We removed the proceedings to New York federal court, and discovery took place from January 4 to May 15, 2013. In June 2013, VoiceAge submitted a motion for summary judgment, which was denied by the Supreme Court of the State of New York on August 5, 2013. On October 24, 2013, we executed a settlement agreement with VoiceAge to settle and dismiss with prejudice all outstanding claims in the lawsuit.

On October 28, 2011 and November 1, 2011, respectively, two lawsuits were filed by Callertone Innovations, LLC in the U.S. District Court for the District of Delaware. The first lawsuit was against T-Mobile USA, Inc. and the second lawsuit was against MetroPCS Wireless, Inc. and MetroPCS Communications, Inc., which we collectively refer to as MetroPCS. The lawsuits alleged that T-Mobile and MetroPCS, respectively, infringed Callertone's patents by providing ringback tone services. We agreed to indemnify each of T-Mobile and MetroPCS against the claims based on an indemnity that was claimed to be owed by us. The respective complaint was served on T-Mobile on January 16, 2012 and on MetroPCS on January 14, 2012. We filed our answers to each complaint on April 9, 2012. In each matter, we disputed the plaintiff's allegations regarding both the validity of its patents and its claims of infringement against T-Mobile and MetroPCS, respectively. A claims construction hearing was held on September 6, 2013. On October 21, 2013, we executed a settlement agreement with Callertone to settle and dismiss with prejudice all outstanding claims in each of the lawsuits.

On April 25, 2007, a lawsuit was filed by Greenville Communications, LLC in Greenville, Mississippi against a number of cell phone carriers, including our partners T-Mobile USA, Inc. and Alltel Corporation, alleging that they infringed Greenville's patents by providing ringback tone services. We agreed to indemnify T-Mobile and Alltel against the claims based on an indemnity that was claimed to be owed by us. On August 27, 2007, our motion to transfer this matter to the U.S. District Court for the District of New Jersey was granted. The parties briefed claims construction, but the case was subsequently stayed pending reexamination of the patents at issue. On December 10, 2009, the U.S. Patent and Trademark Office issued notice of its intent to issue reexamination certificates for the patents in the suit. The District Court lifted the stay on the litigation on January 29, 2010 and discovery resumed. On September 28, 2011, the District Court held a claims construction hearing, and on May 10, 2012, the District Court issued a non-infringement judgment that was favorable to us and the other defendants. On December 4, 2012, Greenville appealed the claims construction order and the judgment, and the defendants filed a reply brief on January 28, 2013. On May 17, 2013, the U.S. Court of Appeals for the Federal Circuit affirmed the judgment of non-infringement of the District Court. Greenville has filed a petition for re-hearing with the U.S. Court of Appeals. Due to the uncertainties inherent in this matter, we are unable to estimate the range of possible loss that could result from this litigation.

Although the matters described above have been either settled, as in the lawsuits filed by VoiceAge and Callertone, or the appeals process has been nearly exhausted, as in the Greenville matter, we could in the future become subject to legal proceedings, governmental investigations and claims in the ordinary course of business, including employment claims, contract-related claims, and claims of alleged infringement of third-party patents, trademarks and other intellectual property rights. Such claims, even if not meritorious, could force us to expend significant financial and managerial resources. In addition, given the broad distribution of some of our consumer products, any individual claim related to those products could give rise to liabilities that may be material to us. In the event of a determination adverse to us, we could incur substantial monetary liability, and/or be required to change our business practices. Either of these could have a material adverse effect on our consolidated financial statements.