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Commitments And Contingencies
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6 Months Ended |
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Jun. 30, 2011
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| Commitments And Contingencies | |
| Commitments And Contingencies |
Note B - COMMITMENTS AND CONTINGENCIES
[1] Legal Fees:
Dovel & Luner, LLP provided legal services to the Company with respect to the litigation settled in July 2010 against several major data networking equipment manufacturers (See Note D[1]). The terms of the Company's agreement with Dovel & Luner, LLP provide for legal fees of a maximum aggregate cash payment of $1.5 million plus a contingency fee of up to 24% (based on the settlement being achieved at the trial stage). Because of the royalty payments payable quarterly by Cisco in accordance with the Company's settlement and license agreement with Cisco, the Company has an obligation to pay Dovel & Luner 24% of such royalties received. During the six months ended June 30, 2011 and 2010, the Company incurred aggregate legal fees to Dovel & Luner, LLP of approximately $1,240,000 and $300,000, respectively.
With respect to the Company's litigation against D-Link, which was settled in May 2007 (See Note D[2]), the Company utilized the services of Blank Rome, LLP on a full contingency basis. In accordance with the Company's contingency fee agreement with Blank Rome LLP, once the Company recovers its expenses related to the litigation (which have not yet been recovered), the Company is obligated to pay legal fees to Blank Rome LLP equal to 25% of the royalty revenue received by the Company from its license agreement with D-Link.
[2] Amended Patent Purchase Agreement:
On January 18, 2005, the Company and Merlot Communications, Inc. ("Merlot"), the successor of which is BAXL Technologies, Inc. ("BAXL"), amended the Patent Purchase Agreement originally entered into in November 2003 (the "Amendment") pursuant to which the Company paid an additional purchase price of $500,000 to Merlot in consideration for the restructuring of future contingent payments to Merlot from the licensing or sale of the Patents. The Amendment provides for future contingent payments by the Company to BAXL of $1.0 million upon achievement of $25 million of Net Royalties (as defined), an additional $1.0 million upon achievement of $50 million of Net Royalties and an additional $500,000 upon achievement of $62.5 million of Net Royalties from licensing or sale of the patents acquired from Merlot. At June 30, 2011, a payment of $1.0 million was payable to BAXL since Net Royalties (as defined) of $25 million was achieved. This amount has been recorded as additional patent expense.
[3] Services Agreement:
Pursuant to an agreement, dated November 30, 2004, between the Company and ThinkFire Services USA, Ltd. ("ThinkFire"), the Company is obligated to pay ThinkFire fees from royalty payments received from certain licensees in consideration for services performed on behalf of the Company. At June 30, 2011, the Company accrued fees of approximately $138,000 with respect to its obligation to ThinkFire.
[4] Lease Agreement:
On June 16, 2011, the Company entered into a four-year lease agreement commencing July 18, 2011 to rent office space, consisting of approximately 2,400 square feet, for offices in New Canaan, Connecticut. In accordance with the lease, the Company will pay a base rent of $6,400 per month for the first two years, $6,800 per month for the third year and $7,000 per month for the fourth year. The base rent is subject to annual adjustments to reflect increases in real estate taxes and operating expenses. The Company also entered into a one year sublease at a base rent of $3,700 per month to sublet approximately 50% of the space to a third party.
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