10. Commitments and Contingencies

Operating Leases — The Company has operating lease agreements for offices in Massachusetts, Hungary, Australia, the United Kingdom, Ireland and India that expire through 2023.

In April 2014, the Company amended its current lease for its Budapest, Hungary office space to provide for an expansion of leased space and to extend the term of the lease. The term of the amended lease began in July 2014 and will extend through June 2019. The aggregate amount of minimum lease payments to be made over the term of the lease is approximately $7.8 million (EUR 5.7 million). The amended lease agreement required a bank guarantee of approximately $483,000 (EUR 354,000). The bank guarantee is classified as restricted cash.

Rent expense under all leases was approximately $1.6 million and $1.7 million for the three months ended June 30, 2013 and 2014, respectively, and $2.7 million and $3.4 million for the six month ended June 30, 2013 and 2014, respectively. The Company records rent expense on a straight-line basis for leases with scheduled escalation clauses or free rent periods.

The Company also enters into hosting services agreements with third-party data centers and internet service providers that are subject to annual renewal. Hosting fees incurred under these arrangements aggregated approximately $1.3 million and $1.2 million for the three months ended June 30, 2013 and 2014, respectively, and $2.3 million and $2.4 million for the six months ended June 30, 2013 and 2014, respectively.

Future minimum lease payments under non-cancelable operating leases including one year commitments associated with the Company’s hosting services arrangements are approximately as follows at June 30, 2014 (in thousands):


Years Ending December 31
2014 (Six months ending December 31)	$	4,959
2015		7,377
2016		6,083
2017		5,629
2018		5,930
Thereafter		21,494


Total minimum lease payments	$	51,472

Litigation — On September 8, 2010, 01 Communique Laboratory, Inc., or 01, filed a complaint that named the Company as a defendant in a lawsuit in the U.S. District Court for the Eastern District of Virginia (Civil Action No. 1:10cv1007) alleging that the Company infringed U.S. Patent No. 6,928,479, or the ‘479 Patent, which is owned by 01 and has claims directed to a particular application or system for providing a private communication portal from one computer to a second computer. The complaint sought damages in an unspecified amount and injunctive relief. On April 1, 2011, the U.S. District Court for the Eastern District of Virginia granted the Company’s motion for summary judgment of non-infringement. The court issued a written order regarding this decision on May 4, 2011. On May 13, 2011, 01 filed a notice of appeal appealing the court’s ruling granting summary judgment. On July 31, 2012, the U.S. Court of Appeals for the Federal Circuit vacated the lower court’s summary judgment of non-infringement ruling and remanded the case back to the U.S. District Court for the Eastern District of Virginia with revised claim construction. The trial commenced on March 18, 2013 and on March 26, 2013, a jury in the Eastern District of Virginia found that the Company’s products do not infringe the ‘479 Patent as previously asserted by 01. The court issued a written order regarding this decision on April 2, 2013. On June 26, 2013, the court issued a written opinion denying all pending post-trial motions, thereby preserving the jury’s non-infringement verdict. On June 26, 2013, 01 filed a notice of appeal seeking to appeal the jury’s non-infringement verdict and on July 18, 2013, the Company filed a notice of cross appeal seeking to appeal the jury’s decisions regarding invalidity and inequitable conduct. Oral arguments were heard on June 3, 2014 and on June 9, 2014, the U.S Court of Appeals for the Federal Circuit affirmed the jury’s non-infringement verdict. At this time the Company does not believe that a loss is probable and remains unable to reasonably estimate a possible loss or range of loss associated with this litigation.

On November 21, 2012, the Company filed suit against Pragmatus Telecom LLC, or Pragmatus, in the U.S. District Court for the District of Delaware (Civil Action No. 12-1507) seeking a declaratory judgment that the Company’s products do not infringe three patents allegedly owned by Pragmatus after certain of the Company’s customers received letters from Pragmatus claiming that their use of certain LogMeIn services infringed upon those patents. On March 29, 2013, the Company and Pragmatus entered into a License Agreement, which granted the Company a fully-paid license covering the patents at issue. The Company paid Pragmatus a one-time license fee in connection with the License Agreement in April 2013. As a result, the Company’s declaratory judgment action was dismissed by the court on May 3, 2013.

The Company is from time to time subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. The Company routinely assesses its current litigation and/or threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where the Company assesses the likelihood of loss as probable. While the outcome of these other claims cannot be predicted with certainty, management does not believe that the outcome of any of these other legal matters will have a material adverse effect on the Company’s condensed consolidated financial statements.