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Commitments and Contingencies
12 Months Ended
Jan. 31, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 11:  Commitments and Contingencies

Purchase Commitments.  As of January 31, 2020 and 2019, non-cancelable purchase commitments with the Company’s contract manufacturers and other parties were $4.0 million and $4.2 million, respectively.

Legal Proceedings

In addition to the litigation matters described below, from time to time, the Company may be involved in a variety of other claims, lawsuits, investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance matters, and other litigation matters relating to various claims that arise in the normal course of business. Defending such proceedings is costly and can impose a significant burden on management and employees, the Company may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained.

The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using reasonably available information. The Company develops its views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. Legal fees are expensed in the period in which they are incurred.

As of January 31, 2020, the Company does not have any accrued liabilities recorded for loss contingencies in its consolidated financial statements.

Berks County Litigation

On January 21, 2016, the County of Berks, Pennsylvania filed a lawsuit in the Berks County Court of Common Pleas (the “Court”) naming the Company and 113 other telephone service providers as defendants (the “Berks County Litigation”), alleging breach of fiduciary duty, fraud, and negligent misrepresentation in connection with alleged violations of the Pennsylvania 911 Emergency Communication Services Act (“PA 911 Act”) for failure to collect from subscribers and remit certain fees pursuant to the PA 911 Act. On June 13, 2019, the case was dismissed by the Court and on June 26, 2019, the parties to the litigation entered into a Joint Stipulation of Dismissal, which was approved by the Court.  

Deep Green Wireless Litigation

On June 8, 2016, plaintiff Deep Green Wireless LLC (“Deep Green”) filed a complaint in the U.S. District Court for the Eastern District of Texas against Ooma, Inc., alleging infringement of U.S. Patent No. RE42,714 (the “Deep Green Wireless Patent”, and such litigation, the “Deep Green Wireless Litigation”). The complaint seeks unspecified monetary damages, costs, attorneys’ fees and other appropriate relief. In February 2017, the Court granted the Company’s motion to transfer the case to the Northern District of California, which proceeding has been stayed pending the outcome of an inter partes review of the Deep Green Wireless Patent by the United States Patent Trial and Appeal Board (“PTAB”).  On December 17, 2018, the PTAB issued its final decision regarding the claims at issue in the Deep Green Wireless Litigation, in which it determined that all challenged claims of the Deep Green Wireless Patent are obvious and unpatentable. On February 19, 2019, the plaintiff filed a Notice of Appeal to the Court of Appeals for the Federal Circuit. The matter was fully briefed and oral argument was held on February 7, 2020. On March 31, 2020, the Federal Circuit affirmed the final decision by the PTAB with respect to all asserted claims of the Deep Green Wireless Patent. Deep Green has 30 days to petition for rehearing by the Federal Circuit. Deep Green may also petition the Supreme Court to hear the case, provided a petition is filed on the later of 90 days from March 31, 2020 or 90 days from the date of denial of any petition for rehearing.  If Deep Green does not petition for rehearing by the Federal Circuit or for the Supreme Court to hear the case, or if the petition for rehearing is denied, we expect the Deep Green Wireless Litigation will be dismissed.

Based on the Company’s current knowledge, the Company has determined that the amount of any material loss or range of any losses that is reasonably possible to result from the Deep Green Wireless Litigation is not estimable.

Oregon Tax Litigation

On August 30, 2016, the Oregon Department of Revenue (the “DOR”) issued tax assessments against the Company for the Oregon Emergency Communications Tax (the “Tax”), which the DOR alleges Ooma should have collected from its subscribers in Oregon and remitted to the DOR during the period between January 1, 2013 and March 31, 2016 (collectively, the “Assessments”).  

The Company believes that the Commerce Clause of the United States Constitution bars the application of the Tax and the Assessments to the Company, since the Company has no employees, property or other indicia of a “substantial nexus” with the State of Oregon. On January 17, 2019, the Regular Division of the Oregon Tax Court heard oral arguments on the parties’ cross motions for summary judgment. During fiscal 2019, the Company paid $0.6 million to the State of Oregon in connection with the Oregon Tax Litigation, of which $0.3 million was charged to the consolidated statement of operations as the amount of loss deemed probable and reasonably estimable, and $0.3 million was recorded as a receivable in other current assets on the consolidated balance sheet for interest and penalties. As of January 31, 2020, the Company determined the $0.3 million receivable was not probable of recovery and charged the amount to general and administrative expense in the consolidated statement of operations.

On March 2, 2020, Oregon Tax Court issued a decision upholding the Assessments. On April 1, 2020, the Company filed a Notice of Appeal with the Supreme Court of the State of Oregon. However, litigation is unpredictable and there can be no assurances that the Company will obtain a favorable final outcome or that it will be able to avoid further unfavorable interim rulings in the course of litigation that may significantly add to the expense of its defense and could result in substantial costs and diversion of resources.

Securities Litigation

On January 14, 2016, Michael Barnett filed a purported stockholder class action in the San Mateo County Superior Court of the State of California (Case No. CIV536959) against the Company, certain of its officers and directors, and certain of the underwriters of the Company’s IPO on July 17, 2015. After the case was consolidated with two other identical lawsuits, a “consolidated complaint” was filed on behalf of all persons who purchased shares of common stock in the Company’s IPO in reliance upon the Registration Statement and Prospectus the Company filed with the SEC. The consolidated complaint alleged that the Company and the other defendants violated the Securities Act of 1933, as amended (the “Securities Act”) by issuing the Registration Statement and Prospectus, which the plaintiffs alleged contained material misstatements and omissions in violation of Sections 11, 12(a)(2) and 15 of the Securities Act.

On May 30, 2019, the parties filed with the Court a Stipulation of Settlement, and on October 18, 2019 the Court entered final approval of the settlement. Under the terms of the settlement, the Company’s directors’ and officers’ liability insurers deposited $8.65 million into a settlement fund for payment to class members, and paid plaintiff’s attorneys’ fees and costs of administering the settlement. The Stipulation of Settlement contains no admissions of wrongdoing, and the Company and the other defendants have maintained and continue to deny liability and wrongdoing of any kind with respect to the class action claims. As part of the final settlement approval, the Court dismissed the class action lawsuit with prejudice and the plaintiff released all claims against the Company and all other defendants relating to the allegations in the class action.

Indemnification

The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for certain losses suffered or incurred by the indemnified party. In some cases, the term of these indemnification agreements is perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future but have not yet been made.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director and officer insurance coverage that reduces the Company’s exposure and enables the Company to recover a portion of any future amounts paid.

To date the Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with such indemnifications has been recorded to date.