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Commitments and Contingencies
6 Months Ended
Oct. 31, 2013
Commitments and Contingencies

10. Commitments and Contingencies

In the ordinary course of business, the Company may be subject to various legal proceedings and claims including alleged infringement of third-party patents and other intellectual property rights. The Company reviews the status of each matter and records a provision for a liability when it is considered both probable that a liability has been incurred and that the amount of the loss can be reasonably estimated. These provisions are reviewed quarterly and adjusted as additional information becomes available. If either or both of the criteria are not met, the Company assesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of loss or range of losses, discloses that the amount would not have a material effect on the Company’s consolidated financial statements (if applicable) or discloses that an estimate of the possible loss or range of loss cannot be made. Legal fees are recognized as incurred when the legal services are provided, and therefore are not recognized as a part of a loss contingency accrual.

 

On January 10, 2013, the U.S. Department of Justice filed a complaint against the Company with the U.S. District Court for the Northern District of California, San Francisco Division, alleging that the Company’s acquisition of PowerReviews violates Section 7 of the Clayton Act, 15 U.S.C. Section 18 and seeking the Company’s divestiture of assets sufficient to create a competing business that can replace the competitive significance of PowerReviews in the marketplace. The Company disputes the allegations and has vigorously contested the matter. The trial for this matter in the U.S. District Court for the Northern District of California, San Francisco Division, concluded on October 15, 2013. The Company and the U.S. Department of Justice have each made the post-trial filings requested by the court. The court’s opinion in this matter is pending and the Company currently does not know when the opinion will be delivered. If the court finds in favor of the U.S. Department of Justice, the court may order additional hearings and filings to determine remedies. In addition, either the Company or the U.S. Department of Justice may appeal the judgment. It is not possible to reliably predict the outcome of the case. Therefore, the Company cannot currently estimate the possible loss or range of loss that could result from the case.

On March 12, 2013, a purported shareholder derivative action was filed in the Texas State District Court for Travis County, Texas against certain of the Company’s officers and directors, former officers and directors, and against the Company as nominal defendant. The complaint in this matter alleges corporate waste, breaches of fiduciary duties and breaches of the Company’s corporate policies in connection with the acquisition of PowerReviews and certain of the Company’s officers’ and directors’ sales of shares of the Company’s stock. The complaint requests declaratory judgment, a disgorgement of $91.4 million in proceeds received from such sales of the Company’s stock, unspecified damages on behalf of the Company, reasonable attorneys’, accountants’ and experts’ fees, and equitable relief. On October 23, 2013, the District Court granted a motion filed by the Company and individual defendants ordering the plaintiff to file an amended complaint within 30 days setting forth the allegations with the requisite specificity. On November 22, 2013, the plaintiff filed its amended complaint and it remains pending at this time. Due to the early stages of the case, it is not possible to reliably predict the outcome of the case. Therefore, the Company cannot currently estimate the reasonably possible loss or range of loss that could result from the case.

On August 21, 2013, c4cast.com, Inc. filed a complaint against the Company in the United States District Court for the Eastern District of Texas alleging infringement of United States Patent No. 7,958,204, which is entitled “Community-Selected Content.” On November 19, 2013, c4cast.com, Inc. and the Company jointly moved to dismiss the action with prejudice, pursuant to a settlement consideration in exchange for a license of certain patents and patent applications from c4cast.com, Inc. (see Note 11). The settlement consideration did not have a material impact on the Company’s condensed consolidated financial statements and is accrued for as of October 31, 2013.

As of October 31, 2013, the Company was in the process of assessing the sales tax status of the Bazaarvoice enterprise service offering with sales tax agencies in certain states in which it operates. Based on the limited information received from certain of these states, the Company cannot estimate with certainty the historical time period for which these services were taxable, and, for certain states, which of its service offerings and features these states may determine to be subject to state sales tax. The Company currently estimates that its liability, net of amounts to be recovered from customers, will be between $2.5 million and $3.8 million. The Company has accrued a liability of $3.2 million, representing the best estimate of the amount within this range that will probably be incurred to settle these obligations. The estimated range includes continuing to execute its action plan for recovering these amounts due from the Company’s customers. If it is determined that the time period in which the products are taxable or the portion of the Company’s product offering subject to state sales tax is greater than that used to determine the accrual as of October 31, 2013, or if there are changes in our underlying assumptions, then the actual liability incurred will likely approach the higher end of the current estimated range.