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Commitments and Contingencies
3 Months Ended
Mar. 31, 2012
Commitments and Contingencies

Note 14. Commitments and Contingencies

Litigation. On November 1, 2011, a lawsuit was filed by Callertone Innovations, LLC (“Callertone”) against MetroPCS Wireless, Inc. and MetroPCS Communications, Inc., (collectively, “MetroPCS”) in the U.S. District Court for the District of Delaware alleging that MetroPCS infringes Callertone’s patents by providing ringback tone services. We agreed to indemnify MetroPCS against the claims based on an indemnity that is claimed to be owed by us. The complaint was served on MetroPCS on January 14, 2012, and we filed our answer on April 9, 2012. We dispute the plaintiff’s allegations regarding both the validity of its patents and its claims of infringement against MetroPCS. We are unable to provide meaningful quantification of how the final resolution of this litigation may impact our future consolidated financial statements.

On October 28, 2011, a lawsuit was filed by Callertone Innovations, LLC (“Callertone”) against T-Mobile USA, Inc. (“T-Mobile”) in the U.S. District Court for the District of Delaware alleging that T-Mobile infringes Callertone’s patents by providing ringback tone services. We agreed to indemnify T-Mobile against the claims based on an indemnity that is claimed to be owed by us. The complaint was served on T-Mobile on January 16, 2012, and we filed our answer on April 9, 2012. We dispute the plaintiff’s allegations regarding both the validity of its patents and its claims of infringement against T-Mobile. We are unable to provide meaningful quantification of how the final resolution of this litigation may impact our future consolidated financial statements.

In July 2010, the Washington State Office of the Attorney General (Washington AG) sent a letter referencing complaints from consumers relating to RealNetworks’ various consumer products since 2005. The letter advised us that we may be violating Washington State’s consumer protection laws, and invited us to consider changing certain of our consumer practices. We subsequently met with representatives of the Washington AG to review and discuss the complaints and, although we did not believe that our practices violated the law, we voluntarily made changes to certain of our online order paths through which consumers purchase our subscription products in order to address certain of the Washington AG’s concerns.

Notwithstanding the foregoing, in March and September 2011, the Consumer Protection Division of the Washington AG issued civil investigative demands to us requesting information and documents relating to certain of our consumer marketing practices during the period from 2005 to 2011. We are cooperating and are in discussions with the Washington AG regarding the investigation, and have been responding to the Washington AG’s requests. The Washington AG has not initiated any enforcement action against us. We do not believe we have violated any laws, but the final outcome of the investigation remains uncertain. In light of the status of the investigation, we accrued $2.4 million for potential amounts associated with the investigation in the quarter ended March 31, 2012, but the investigation could ultimately result in additional expenses, monetary damages, penalties or injunctive relief against us that could have a material adverse impact on our future consolidated financial statements.

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 infringe its patents by providing ringback tone services. We agreed to indemnify T-Mobile and Alltel against the claims based on an indemnity that is 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 claim 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 suit. The District Court lifted the stay on the litigation on January 29, 2010 and discovery has resumed. On September 28, 2011, the District Court held a claims construction hearing but has not yet issued a ruling. We dispute the plaintiff’s allegations regarding both the validity of its patents and its claims of infringement against our partners. We are unable to quantify in a meaningful way the potential impact of the final resolution of this litigation on our future consolidated financial statements.

 

From time to time we are, and expect to continue to be, 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. These claims, including those described above, even if not meritorious, could force us to spend significant financial and managerial resources. We are not aware of any other legal proceedings or claims that we believe will have, individually or taken together, a material adverse effect on our business, prospects, financial condition or results of operations. However, we may incur substantial expenses in defending against third-party claims. 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 may 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.