Groupon 2011 Annual Report Download - page 88

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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Purchase Obligations
The Company entered into non-
cancelable service contracts primarily covering sales force and information technology services which expire beginning in
the year ended December 31, 2012. As of December 31, 2011, future payments under these contractual obligations were as follows (in thousands):
Legal Matters
From time to time, the Company may become party to litigation incident to the ordinary course of business. For example, the Company is currently
involved in proceedings by former employees, intellectual property infringement suits (as discussed below) and suits by customers (individually or as class
actions) alleging, among other things, violation of the Credit Card Accountability, Responsibility and Disclosure Act and state laws governing gift cards, stored
value cards and coupons.
In addition, third parties have from time to time claimed, and others may claim in the future, that the Company has infringed their intellectual property
rights. The Company is subject to intellectual property disputes, and expects that it will increasingly be subject to intellectual property infringement claims as its
services expand in scope and complexity. The Company has in the past been forced to litigate such claims. The Company may also become more vulnerable to
third-
party claims as laws such as the Digital Millennium Copyright Act are interpreted by the courts, and as the Company becomes subject to laws in
jurisdictions where the underlying laws with respect to the potential liability of online intermediaries are either unclear or less favorable. The Company believes
that additional lawsuits alleging that it has violated patent, copyright or trademark laws will be filed against it. Intellectual property claims, whether meritorious
or not, are time consuming and costly to resolve, could require expensive changes in the Company's methods of doing business, or could require it to enter into
costly royalty or licensing agreements.
The Company is also subject to, or in the future may become subject to, a variety of regulatory inquiries across the jurisdictions where the Company
conducts its business, including for example consumer protection, marketing practices, tax and privacy rules and regulations. Any regulatory actions against the
Company, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, injunctive relief or increased costs of doing business
through adverse judgment or settlement, require the Company to change its business practices in expensive ways, require significant amounts of management
time, result in the diversion of significant operational resources or otherwise harm the Company's business.
The Company assesses the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency
assessments
on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In
addition, the Company considers other
relevant factors that could impact its ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is
made after analyzing each matter. The Company's reserves may change in the future due to new developments or changes in strategy in handling these matters.
Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters
will not have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. Regardless of the outcome, litigation
can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
Indemnifications
In the normal course of business to facilitate transactions related to its operations, the Company indemnifies certain parties, including lessors and from time
to time merchants with respect to certain matters. The Company has agreed to hold certain parties
82
2012
$
15,734
2013
12,571
2014
168
2015
—
2016
—
Thereafter
—
$
28,473