TiVo 2013 Annual Report Download - page 88

Table of Contents
sale of its securities and the Company provides indemnification for its directors and officers in accordance with Delaware law. The Company
has also undertaken to indemnify certain customers and business partners for, among other things, the licensing of its products, the sale of
its DVRs, and the provision of engineering and consulting services. Pursuant to these agreements, the Company may indemnify the other
party for certain losses suffered or incurred by the indemnified party in connection with various types of claims, which may include, without
limitation, intellectual property infringement, advertising and consumer disclosure laws, certain tax liabilities, negligence and intentional acts
in the performance of services and violations of laws, including certain violations of securities laws with respect to underwriters and
investors. The term of these indemnification obligations is generally perpetual. The Company’s obligation to provide indemnification under
its agreements with customer and business partners would arise in the event that a third party filed a claim against one of the parties that
was covered by the Company’s indemnification obligation. As an example, if a third party sued a customer for intellectual property
infringement and the Company agreed to indemnify that customer against such claims, its obligation would be triggered.
The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to its indemnification
obligations, if any. Variables affecting any such assessment include but are not limited to: the nature of the claim asserted; the relative merits
of the claim; the financial ability of the party suing the indemnified party to engage in protracted litigation; the number of parties seeking
indemnification; the nature and amount of damages claimed by the party suing the indemnified party; and the willingness of such party to
engage in settlement negotiations. Due to the nature of the Company’s potential indemnity liability, its indemnification obligations could
range from immaterial to having a material adverse impact on its financial position and its ability to continue operation in the ordinary course
of business.
Under certain circumstances, the Company may have recourse through its insurance policies that would enable it to recover from its
insurance company some or all amounts paid pursuant to its indemnification obligations. The Company does not have any assets held
either as collateral or by third parties that, upon the occurrence of an event requiring it to indemnify a customer, the Company could obtain
and liquidate to recover all or a portion of the amounts paid pursuant to its indemnification obligations.
Legal Matters
From time to time, the Company is involved in numerous lawsuits as well as subject to various legal proceedings, claims, threats of
litigation, and investigations in the ordinary course of business, including claims of alleged infringement of third-party patents and other
intellectual property rights, commercial, employment and other matters. The Company assesses potential liabilities in connection with each
lawsuit and threatened lawsuits and accrues an estimated loss for these loss contingencies if both of the following conditions are met:
information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of
the financial statements and the amount of loss can be reasonably estimated. While certain matters to which the Company is a party specify
the damages claimed, such claims may not represent reasonably possible losses. Given the inherent uncertainties of the litigation, the
ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably
estimated. As of January 31, 2014, the Company has not accrued any pre-judgment liability for any lawsuits filed against the Company, as
the Company has neither determined that it is probable that a liability has been incurred at the date of the financial statements nor that the
amount of any loss can be reasonably estimated. The Company has accrued $4.7 million, including accrued interest, for arbitration
proceedings related to a contractual dispute. The Company is currently appealing an unfavorable decision in the initial arbitration proceeding.
The Company expenses legal costs as they are incurred.
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The Company leases its corporate headquarters, located in San Jose, California, comprising a total of 176,254 square feet of office
space. The corporate headquarters houses its administrative, sales and marketing, customer service, and product development activities,
under a lease that expires on January 31, 2017. The Company also has operating leases for sales and administrative office space in New
York City, New York, Chicago, Illinois, and Maynard, Massachusetts. The leases generally provide for base monthly payments with built-in
base rent escalations periodically throughout the lease term. All the Company's property leases are deemed operating leases.
Rent expense is recognized using the straight-line method over the lease term and for fiscal years ended January 31, 2014, 2013, and
2012 was $3.2 million, $3.2 million, and $2.6 million, respectively. Operating lease cash payments for the fiscal years ended January 31,
2014, 2013, and 2012 were $3.7 million, $3.9 million, and $3.8 million, respectively. Future minimum operating lease payments as of
January 31, 2014, are as follows:
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