Commitments and contingencies

12 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Operating leases

Our primary facilities located in Santa Clara and Culver City, California, Shanghai and Xi’an, China, and Cluj, Romania, as well as certain other facilities in various locations in the United States, Germany and Japan, are leased under noncancelable operating lease arrangements.

In August 2017, we terminated our sublease with Avaya Inc. for our Santa Clara, California headquarters facility and signed a new direct lease agreement, effective in September 2017, for this same facility. The new lease term is six years, expiring in September 2023. We have a one-time option to extend the new facility lease for an additional three years at the prevailing market rate, as defined in the lease agreement.

In connection with the sublease termination agreement, we recorded the following amounts during fiscal 2018: i) the reversal of $538,000 of deferred rent related to the sublease, with an offsetting credit to rent expense, as amortization of this deferred rent liability is no longer required, and ii) the recognition of $582,000 of tenant improvement allowance related to the sublease, with an offsetting credit to depreciation expense, as amortization of this allowance is no longer required.

As of June 30, 2019, future minimum operating lease payments by fiscal year were as follows (in thousands):



Fiscal Year Ending June 30,
2020	$	4,504
2021	3,542
2022	2,986
2023	2,201
2024	526
Thereafter	—
Total minimum lease payments	$	13,759

Rent expense was $4.4 million, $4.5 million and $4.1 million for fiscal 2019, 2018 and 2017, respectively.

Purchase obligations

As of June 30, 2019, in addition to our lease obligations, we had an aggregate of $10.6 million of future minimum noncancelable financial commitments primarily related to license fees due to certain of our third party content providers. The aggregate of $10.6 million of future minimum commitments is comprised of $8.1 million due in fiscal 2020, $709,000 due in fiscal 2021, $599,000 due in fiscal 2022, $415,000 due in fiscal 2023, $311,000 due in fiscal 2024 and $520,000 due thereafter. The above commitment amounts exclude amounts already recorded on the consolidated balance sheet.

Contingencies

From time to time, we may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. When we believe a loss or a cost of indemnification is probable and can be reasonably estimated, we accrue the estimated loss or cost of indemnification in our consolidated financial statements. Where the outcome of these matters is not determinable, we do not make a provision in our financial statements until the loss or cost of indemnification, if any, is probable and can be reasonably estimated or the outcome becomes known. We expense legal fees related to these matters as they are incurred.

On December 31, 2009, Vehicle IP, LLC, or Vehicle IP, filed a patent infringement lawsuit against us in the U.S. District Court for the District of Delaware, seeking monetary damages, fees and expenses and other relief. Verizon Wireless, or Verizon, was named as a co-defendant in the Vehicle IP litigation based on the VZ Navigator product and has demanded that we indemnify and defend Verizon against Vehicle IP. We have not agreed to defend or indemnify Verizon. AT&T was also named as a co-defendant in the Vehicle IP litigation based on the AT&T Navigator and Telenav Track products. AT&T tendered the defense of the litigation to us and we defended the case on behalf of AT&T. During fiscal 2016, we accrued $850,000 related to this litigation. On January 12, 2017, we entered into a settlement and license agreement with Vehicle IP. In connection with the agreement, we made a one-time payment of $8.0 million and recorded $7.2 million of this amount as legal settlement and contingencies expense in our consolidated statement of operations in fiscal 2017. On January 31, 2017, Vehicle IP's claims against Telenav and AT&T were dismissed. We are not obligated to make any future payments with respect to the settlement or license. We also have no further obligation to indemnify AT&T with respect to the case.

On July 28, 2016, Nathan Gergetz filed a putative class action complaint in the U.S. District Court for the Northern District of California, alleging that Telenav violated the Telephone Consumer Protection Act, or TCPA. The complaint purported to be filed on behalf of a class, and it alleged that Telenav caused unsolicited text messages to be sent to the plaintiff from July 6, 2016 to July 26, 2016. The plaintiff sought statutory and actual damages under the TCPA, attorneys’ fees and costs of the action, and an injunction to prevent any future violations. A settlement was subsequently reached, and the plaintiff filed a motion for preliminary approval of class action settlement on March 5, 2018. The court granted preliminary approval of the class action settlement on April 30, 2018 and final approval of the settlement on September 27, 2018. The settlement became effective on October 30, 2018 and was paid by our technology errors and omissions liability insurance policy, after payment of our deductible of $250,000. We accrued the $250,000 deductible payment in fiscal 2018. We expect the matter to be finally concluded in or around November 2019.

In addition, we have received, and expect to continue to receive, demands for indemnification from our customers, which demands can be very expensive to settle or defend, and we have in the past offered to contribute to settlement amounts and incurred legal fees in connection with certain of these indemnity demands. A number of these indemnity demands, including demands relating to pending litigation, remain outstanding and unresolved as of the date of this Form 10-K. Furthermore, in response to these demands we may be required to assume control of and bear all costs associated with the defense of our customers in compliance with our contractual commitments. At this time, we are not a party to the following cases; however, our customers have requested that we indemnify them in connection with such cases.

In August 2017, AT&T Mobility LLC (AT&T) and Sprint Spectrum L.P. (Sprint) sent Telenav indemnification requests relating to patent infringement lawsuits brought by Location Based Services LLC, alleging patent infringement by the AT&T Navigator system and App for iOS and Android, and the Sprint Scout System and the Sprint Scout App for iOS and Android. Location Based Services LLC filed separate lawsuits against AT&T and Sprint in the U.S. District Court for the Eastern District of Texas, asserting five U.S. patents. Telenav agreed to indemnify and defend AT&T and Sprint in connection with these matters. On November 22, 2017, Location Based Services LLC entered into a Settlement and License Agreement with Telenav for the patents in suit and 15 other patents assigned to Location Based Services LLP. We incurred $250,000 related to these matters in fiscal 2018, and recorded this amount as legal settlement and contingencies expense in our consolidated statement of operations.

In November 2017, Traxcell Technologies, LLC, or Traxcell, filed patent infringement lawsuits against AT&T and Sprint in the U.S. District Court for the Eastern District of Texas. On November 9, 2017, AT&T tendered control of the defense of one of the patents alleged to be infringed upon in the case and sought indemnification for the entire amount of litigation expenses related to the patent and Telenav’s products, including discovery, defensive intellectual property rights and any judgment rendered in, or settlement of, the lawsuit. Telenav did not accept tender of the defense but did agree to indemnify AT&T to the extent that the claims relate to the ordinary use of Telenav products.

On June 15, 2018, Telenav filed a complaint against Traxcell seeking a declaratory judgment of non-infringement against the plaintiff.

On December 26, 2018, Telenav and Traxcell entered into a Settlement Agreement. Traxcell granted Telenav and its customers and end users a license to the patent at issue and certain other related patents, and agreed to withdraw its claims of patent infringement against Telenav’s products. Telenav agreed to make a one-time payment to Traxcell and to dismiss without prejudice all claims pending in the declaratory judgment matter. On January 10, 2019, the court dismissed without prejudice all claims pending in the declaratory judgment matter.

Following the Traxcell settlement, AT&T sought reimbursement from Telenav of its litigation expenses incurred in connection with the Traxcell lawsuits. On July 11, 2019, Telenav and AT&T entered into a settlement agreement resolving all claims for indemnification in connection with the Traxcell lawsuits.

In fiscal 2019, Telenav expensed an aggregate of $700,000 relating to the two settlement agreements, which amount was recorded as legal settlements and contingencies expense in our consolidated statement of operations.

In connection with our resolution of certain indemnification disputes with AT&T in January 2017, we reversed a total accrued liability of $726,000 previously expensed for these and other contingencies.

Legal proceedings are subject to inherent uncertainties. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on our business, financial position, cash flows or overall trends in results of operations.