Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 8—Commitments and Contingencies

The Company retains the services of law firms that specialize in intellectual property licensing, enforcement and patent law. These law firms are retained on an hourly fee, monthly fee, project fee, contingent fee, or blended fee basis. In a contingency fee arrangement, law firms are paid a scaled percentage of any negotiated fees, settlements or judgments awarded, based on how and when the fees, settlements or judgments are obtained.

On November 6, 2012, the Company received a verdict in its case against AOL, Inc., Google, Inc., IAC Search & Media, Inc., Gannett Company, Inc. and Target Corporation (collectively, "Defendants") with respect to the Defendants' infringement of the asserted claims of U.S. Patent Nos. 6,314,420 and 6,775,664 (collectively, the "IPE Patents"). After finding that the asserted claims of the IPE Patents were not invalid, and infringed by the Defendants, the jury found that reasonable royalty damages should be based on a "running royalty", and that the running royalty rate should be 3.5%. The jury also found that the following sums of money, if paid now in cash, would reasonably compensate I/P Engine for the Defendants’ past infringement as follows: Google: $15,800, AOL: $7,943, IAC: $6,650, Gannett: $4, Target: $99. Motions by I/P Engine for awards of pre-judgment interest, post-judgment interest, supplemental damages and post-judgment royalties, are pending in U.S. District Court. I/P Engine and Defendants have filed notices of appeal with the Court of Appeals for the Federal Circuit. In response to a request by Google, Inc., the IPE Patents are being reexamined by the U.S. Patent and Trademark Office (see also Note 9 (b)). On January 31, 2013, I/P Engine filed an action asserting infringement of the IPE Patents in the United States District Court, Southern District of New York, against Microsoft Corporation. According to certain scaled fee agreements, I/P Engine will pay between 15% and 20% of any recovery to professional service providers. As of March 31, 2013, the Company did not record any revenue, nor a liability for any potential, contingent, legal fees, related to these litigations, as timing of collection, if any, or the amounts due to it, cannot be determined.

From October 2012 through March 31, 2013, the Company’s subsidiaries filed patent infringement lawsuits against the subsidiaries of ZTE Corporation in the United Kingdom, France and Germany. Should the Company be deemed the losing party in any of its applications to the court in the UK, it may be held responsible for a substantial percentage of the defendant’s legal fees for the relevant application or for the litigation. As a result, the Company placed a guarantee to ensure the payment of a potential liability, which the defendants estimated to be approximately $2,900. However, should the Company be successful on any court applications or the entire litigation, ZTE would be responsible for a substantial percentage of its legal fees. In addition, the Company will grant additional guarantees, as necessary, in connection with its commenced proceedings against ZTE in Europe.

In July 2012, the Company signed a rental agreement for its new headquarters in New York. According to the new agreement, the Company shall pay an annual fee of approximately $137 (subject to certain adjustments). The Company’s subsidiary in Israel leases an office space for a period of up to four years (including options to extend the terms of the lease). According to the agreement, the subsidiary in Israel shall pay an annual fee of approximately $72 (in NIS, subject to certain adjustments). Rent expense for operating leases and automobiles for the three month periods ended March 31, 2013 and 2012, and the cumulative period from Inception until March 31, 2013, was $53, $8 and $227, respectively.

Future minimum lease payments under non-cancelable operating leases for office space and cars, as of March 31, 2013, are as follows:

	Amount
Period ending December 31,
2013 (nine months ending December 31, 2013)		177
2014		178
2015		104
		459