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Commitments And Contingencies
9 Months Ended
Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies
Commitments and Contingencies

Litigation

From time-to-time, j2 Global is involved in litigation and other disputes or regulatory inquiries that arise in the ordinary course of its business. Many of these actions involve or are filed in response to patent actions filed by j2 Global against others. The number and significance of these disputes and inquiries has increased as our business has expanded and j2 Global has grown. Any claims or regulatory actions against j2 Global, whether meritorious or not, could be time-consuming, result in costly litigation, require significant management time and result in diversion of significant operational resources.
As part of the Company’s continuing effort to prevent the unauthorized use of its intellectual property, j2 Global has brought claims against several companies for infringing its patents relating to online fax, voice and other messaging technologies, including, among others, Nextiva, Inc. (“Nextiva”), Vitelity Communications, Inc. (“Vitelity”), EC Data Systems, Inc. (“EC Data”) and Integrated Global Concepts, Inc. (“IGC”).

On August 5, 2011, j2 Global and one of its affiliates filed suit in the United States District Court for the Central District of California (the “Central District of California”) against Nextiva, alleging infringement of U.S. Patents Nos. 6,208,638 (the “‘638 Patent”), 6,350,066 (the “‘066 Patent”) and 7,020,132 (the “’132 Patent”). On July 23, 2013, j2 Global filed an amended complaint, adding a claim for infringement of U.S. Patent No. 6,020,980 (the “‘980 Patent”). On September 23, 2013, Nextiva filed an amended answer and counterclaims for non-infringement and invalidity of the ‘638, ‘066, ‘132 and ‘980 Patents and for unfair competition in violation of California’s Business & Professions Code § 17200, et. seq. and prohibited restraints on competition and unfair practices in violation of California’s Business & Professions Code §§ 16720, et. seq. and 17000, et. seq. On October 15, 2013, j2 Global and its affiliate moved to dismiss Nextiva’s counterclaims for unenforceability of the ‘980 Patent and for unfair competition, prohibited restraints on competition and unfair practices. j2 Global also moved to strike from Nextiva’s amended answer certain affirmative defenses related to the alleged unenforceability of the patents at issue. Discovery is ongoing.
On September 23, 2011, j2 Global and one of its affiliates filed suit against Vitelity in the Central District of California, alleging infringement of the ‘638 and ‘066 Patents. On June 15, 2012, Vitelity filed counterclaims for invalidity and non-infringement of the ‘638 and ‘066 Patents. On September 13, 2013, the Court entered its Claim Construction Order. Discovery is ongoing.

On February 21, 2012, EC Data filed a complaint against j2 Global and one of its affiliates in the United District Court for the District of Colorado, seeking declaratory judgment of non-infringement of the ‘638 and ‘066 Patents. On April 9, 2012, j2 Global filed an answer to the complaint and counterclaims asserting that EC Data infringes these and other patents. On May 14, 2012, EC Data filed an answer to j2 Global’s counterclaims and asserted counterclaims for declaratory judgments of non-infringement and invalidity of the ‘132 Patent and non-infringement of U.S. Patent No. 6,597,688 (the “‘688 Patent”). On August 29, 2012, the Court granted j2 Global’s motion to transfer the case to the Central District of California. On May 31, 2012, EC Data submitted a request to the United States Patent and Trademark Office (“USPTO”) to submit the ‘132 Patent into inter-partes reexamination proceedings. On August 22, 2012, the USPTO granted EC Data’s reexamination request and issued a non-final office action rejecting certain of the ‘132 Patent’s claims. On April 25, 2013, the USPTO issued an Action Closing Prosecution and on July 26, 2013 a second Action Closing Prosecution. On September 13, 2013, the Court entered its Claim Construction Order. Discovery is ongoing.

On June 28, 2013, j2 Global filed suit against EC Data in the Central District of California, alleging infringement of the ‘980 Patent. On October 4, 2013, EC Data filed its amended answer and counterclaims for non-infringement and invalidity of the ‘980 Patent.

On October 16, 2013, one of j2 Global’s affiliates entered its appearance as a plaintiff in a multi-district litigation proceeding entitled In re: Unified Messaging Solutions LLC and Advanced Messaging Technologies, Inc. Patent Litigation (N.D. Ill. Master Docket No. 12 C 6286). In that litigation, a company with certain rights to assert patents owned by the j2 Global affiliate has asserted those patents against a number of defendants, and those defendants have filed counterclaims for, inter alia, non-infringement, unenforceability, and invalidity of U.S. Patent Nos. 6,857,074; 7,836,141; 7,895,306; 7,895,313; and 7,934,148.
On August 28, 2013, Phyllis A. Huster (“Huster”) filed suit in the United States District Court for the Northern District of Illinois against Unified Messaging Solutions, LLC, Acacia Patent Acquisition LLC (“Acacia”), Charles R. Bobo, II (“Bobo”), j2 Global, and one of j2 Global’s affiliates for correction of inventorship of the ‘066 Patent and U.S. Patents Nos. 5,675,507; 5,870,549; 6,564,321; 6,857,074; 7,895,306; 7,836,141; 7,895,313 and 7,934,148. Huster seeks a declaration that she was the inventor of the patents at issue, an order directing the USPTO to substitute or add Huster as inventor of the patents at issue, an order that the defendants pay to Huster at least half of all earnings from licensing and sales of rights in the patents at issue, and costs and attorneys’ fees. On October 28, 2013, j2 Global, the j2 Global affiliate, and the other defendants in the case filed a motion to dismiss Huster’s action on the basis of improper venue and on the basis that Huster’s action is barred by laches. The defendants also filed a motion to strike certain portions of Huster’s prayer for relief. On the same day, j2 Global filed a motion to dismiss on the basis that it is not a proper party to Huster’s action; Bobo filed a motion to dismiss for lack of personal jurisdiction; and Acacia filed a motion to dismiss on the basis of lack of subject matter jurisdiction.
On September 15, 2006, one of j2 Global’s affiliates filed a patent infringement suit against IGC in the United States District Court for the Northern District of Georgia (the “Northern District of Georgia”). On May 13, 2008, IGC filed counterclaims alleging violations of Section 2 of the Sherman Act and breach of contract. IGC is seeking damages, including treble and punitive damages, an injunction against further violations, divestiture of certain assets, and attorneys’ fees and costs. On February 18, 2009, the Court granted the j2 Global affiliate’s motion to stay the case pending the conclusion of the j2 Global affiliate’s appeal of a summary judgment ruling of non-infringement in another case involving the same patents and issues as this action. On January 22, 2010, the United States Court of Appeals for the Federal Circuit affirmed the non-infringement ruling in the other case and on June 7, 2010 the Court lifted the stay. On September 2, 2011, the Northern District of Georgia Court granted the j2 Global affiliate’s motion to dismiss IGC’s breach of contract counterclaim and one portion of IGC’s antitrust counterclaim. On October 21, 2011, IGC filed a motion to strike certain of the affirmative defenses asserted by the j2 Global affiliate, which the Northern District of Georgia Court granted in part on July 26, 2012, striking certain of the affirmative defenses at issue. Following additional discovery, on June 20, 2012, the j2 Global affiliate filed a motion to dismiss its infringement claims and IGC's counterclaims for declaratory relief. On July 27, 2012, the Northern District of Georgia Court granted the j2 Global affiliate’s motion to dismiss, dismissing the j2 Global affiliate’s infringement claims and IGC’s related counterclaims. Discovery is ongoing.
On July 2, 2012, IGC filed suit against j2 Global and one of its affiliates in the United States District Court for the Northern District of California (“Northern District of California”), alleging that j2 Global - through filing suit in the Central District of California - breached a contract not to sue IGC. IGC seeks monetary damages, attorneys' fees, fees and costs, injunctive relief and specific performance of the alleged covenant not to sue IGC. On August 24, 2012, j2 Global filed a motion to dismiss or alternatively to transfer the case to the Central District of California. The motion was heard on October 26, 2012; the Court denied the motion on March 29, 2013. On April 12, 2013, j2 Global filed its answer and asserted counterclaims for infringement of the ‘638, ‘066, ‘688, and ‘132 Patents. On May 3, 2013, IGC asserted counterclaims seeking declaratory judgments of invalidity, unenforceability and non-infringement of the ‘638, ‘066, ‘688, and ‘132 Patents, implied license and exhaustion, punitive damages, attorneys’ fees and costs. On June 28, 2013, the Court granted in part and denied in part j2 Global’s motion to dismiss certain of IGC’s counterclaims, dismissing the claims for declaratory judgment of exhaustion and punitive damages. Discovery is underway, and the Court has set a trial date of April 21, 2014 on the issue of interpretation of the contract that IGC alleges j2 Global breached.
On June 27, 2013, j2 Global filed suit against IGC in the Northern District of California, alleging infringement of the ‘980 Patent. On August 29, 2013, IGC filed counterclaims for invalidity, unenforceability, non-infringement, an implied license of the ‘980 Patent and breach and specific enforcement of the contract not to sue IGC. On September 26, 2013, j2 moved to dismiss IGC’s counterclaims for unenforceability and an implied license of the ‘980 Patent and for breach and specific performance of the contract not to sue. That motion remains pending. On October 18, 2013, the Court consolidated IGC’s breach of contract claim with the other case pending in the Northern District of California and stayed j2 Global's patent infringement claims pending a resolution of the breach of contract claims.
On February 17, 2011, Emmanuel Pantelakis (“Pantelakis”) filed suit against j2 Global Canada, Inc., carrying on business as Protus IP Solutions (“Protus”), in the Ontario Superior Court of Justice, alleging that Protus breached a contract with Pantelakis in connection with Protus’s e-mail marketing services. Pantelakis is seeking damages, attorneys’ fees, interest, and costs. Protus filed a responsive pleading on March 23, 2011. On July 16, 2012, Protus filed its responses to undertakings. On July 24, 2012, Pantelakis moved for an order granting him leave to file a second amended statement of claim re-framing his lawsuit as a negligence action. On September 27, 2012, the Court granted in part Pantelakis’s motion, permitting him to plead claims for negligence and breach of contract, but limited the scope of discovery, awarded j2 Global its costs associated with its amended statement of defence and reserved a further award of costs for the trial court. On November 6, 2012, Pantelakis filed his second amended statement of claim. j2 Global filed its amended statement of defence on April 8, 2013. The parties filed their pre-trial briefs on October 15, 2013. A pre-trial was held on October 23, 2013, at which time the Court allowed additional discovery and set a new time table.
j2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, including those where an unfavorable outcome is reasonably possible, after giving effect to existing reserves, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect j2 Global’s consolidated financial position, results of operations or cash flows in a particular period. The Company has not accrued for a loss contingency relating to certain of these legal proceedings because unfavorable outcomes are not considered by management to be probable or the amount of any losses reasonably estimable.