Commitments and Contingencies

The following table summarizes our contractual obligations as of December 31, 2012 and the years in which these obligations are due (in thousands):



	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating lease obligations	$	4,503	$	2,565	$	1,938	$	—	$	—
Minimum royalty and content license fee commitments	7,980		6,152		1,828		—		—
Uncertain tax positions ⁽¹⁾	1,223		—		—		—		1,223
Total	$	13,706	$	8,717	$	3,766	$	—	$	1,223


⁽¹⁾	Represents uncertain tax positions for which we could not make a reasonable estimate of the amount or the exact period of related future payments. Refer to Note 9. Income Taxes.

Operating Lease Obligations

Operating leases primarily consist of office space but also include several pieces of office equipment. The Company leases one office space in Ewing, New Jersey; one in San Mateo, California; and one in Durham, North Carolina under non-cancellable operating leases which expire in March 2014, December 2014 and December 2014, respectively. Rent expense for the years ended December 31, 2012, 2011 and 2010 was $2.7 million, $2.5 million and $2.0 million, respectively. Future minimum lease payments under these leases as of December 31, 2012 are shown above.

Minimum Royalty and Content License Fee Commitments

The Company’s royalty and license fee expenses consist of fees that the Company pays to branded content owners for the use of their intellectual property. Royalty and license fee expenses are expensed as incurred.

The Company’s contracts with some licensors include minimum guaranteed royalty payments, which are payable regardless of the ultimate sales of subscriptions. Because significant performance remains with the content owner, including the obligation on the part of the content owner to keep its content accurate and up to date, the Company records royalty payments as a liability when incurred, rather than upon execution of the agreement.

Typically, the terms of the Company’s royalty agreements call for the Company to pay the content owner either a percentage of sales of subscription products that use such content or are based upon the number of members to subscription products that use such content. However, certain royalty agreements require payment to content owners only after funds are received from the Company’s customers. Payments are due within 30-45 days of the designated royalty period, which is typically either three or six months. Royalty agreements require the Company to report subscription sales data as well as data regarding the number of members for subscription products that use such data. Royalty agreements may initially be signed for multi-year terms, typically two to four years, but revert to automatically renewable one-year agreements after the initial contract term expires.

Actual royalty expense under such royalty agreements was $3.8 million, $4.2 million and $3.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. Future minimum payments under various royalty and license fee agreements with vendors as of December 31, 2012 are shown above.

Legal Matters

On January 11, 2013, a complaint was filed in San Mateo County Superior Court captioned Bushansky v. Epocrates, Inc., et al., Case No. 519078, on behalf of a putative class of Epocrates' shareholders against Epocrates and each member of the Epocrates board challenging the proposed merger with athenahealth. On January 25, 2013, a similar complaint was filed in San Mateo County Superior Court captioned DeJoice v. Epocrates, et al., Case No. 519461. This complaint alleges similar allegations against Epocrates and each member of the Epocrates board and includes a claim against athenahealth, for aiding and abetting a breach of fiduciary duty. On January 31, 2013, the Bushansky complaint was amended to include additional allegations. Plaintiffs allege, among other things, that the Epocrates directors breached their fiduciary duties by allegedly agreeing to sell Epocrates at an unfair and inadequate price, by allegedly failing to take steps to maximize the sale price of Epocrates and by allegedly making material omissions to the preliminary proxy statement dated January 25, 2013. The complaints seek to enjoin the merger, other equitable relief and money damages. On March 5, 2013, Epocrates and the plaintiffs signed a memorandum of understanding in which the parties agreed to enter into a stipulation of settlement whereby the plaintiffs and all class members will release all claims related to the merger in exchange for Epocrates filing a supplement to its definitive proxy statement regarding the merger with athenahealth with the Securities and Exchange Commission in which the Company will make additional disclosures regarding the merger agreement and an agreement to negotiate in good faith regarding the amount of attorneys' fees and expenses for which plaintiffs may seek approval from the Court. The Company expects this range to be between $0.3 million to $0.6 million; however, its maximum exposure for its defense and the plaintiffs' costs is the Company's insurance deductible of $0.5 million.

On March 1, 2013, a complaint was filed in the United States District Court for the Northern District of California captioned Police and Fire Retirement System of the City of Detroit v. Epocrates, Inc. et al., Case No. 5:13cv945, on behalf of a putative class of Epocrates' stockholders against Epocrates and its officers and directors. The complaint asserts claims under sections 11, 12 and 15 of the Securities Act of 1933 on behalf of all stockholders that purchased Epocrates stock in its Initial Public Offering and claims under sections 10(b) and 20 of the Securities Exchange Act of 1934 on behalf of all stockholders that purchased shares between the IPO and August 9, 2011. The complaint alleges that Epocrates made false or misleading statements with respect to the fact that Epocrates' pharmaceutical clients were awaiting guidance from the Food and Drug Administration on the use of advertising and social media, which caused the clients to delay spending on marketing and negatively impacted Epocrates' sales and revenue growth. The complaint seeks money damages, costs and expenses.

From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business. In accordance with GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. If any unfavorable ruling were to occur in any specific period or if a loss becomes probable and estimable, there exists the possibility of a material adverse impact on the Company’s results of operations, balance sheet or cash flows.

Indemnification

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, each party may indemnify, defend and hold the other party harmless with respect to such claim, suit or proceeding brought against it by a third party for certain claims identified in such agreements. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these obligations on the condensed consolidated balance sheets as of December 31, 2012, or December 31, 2011.

The Company also indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has a Director and Officer Insurance Policy that limits its exposure and enables the Company to recover a portion of any future amounts paid. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these obligations on the condensed consolidated balance sheets as of December 31, 2012, or December 31, 2011.