8x8 2014 Annual Report Download - page 72

Capital Leases
The Company has non-cancelable capital lease agreements for office equipment bearing interest at various rates. At March 31, 2014, future
minimum annual lease payments under non-cancelable capital leases were as follows (in thousands):
Capital leases included in office equipment were $607,000 and $110,000 at March 31, 2014 and 2013, respectively. Total accumulated
amortization was $355,000 and $69,000 at March 31, 2014 and 2013, respectively. Amortization expense for assets recorded under capital leases
is included in depreciation expense.
Minimum Third Party Customer Support Commitments
In the third quarter of 2010, the Company amended its contract with one of its third party customer support vendors containing a minimum
monthly commitment of approximately $430,000 effective April 1, 2010. The agreement requires a 150-day notice to terminate. At March 31,
2014, the total remaining obligation under the contract was $2.2 million.
Minimum Third Party Network Service Provider Commitments
The Company entered into contracts with multiple vendors for third party network service providers which expire on various dates in fiscal 2015
through 2016. At March 31, 2014, future minimum annual payments under these third party network service contracts were as follows (in
thousands):
Legal Proceedings
The Company, from time to time, is involved in various legal claims or litigation, including patent infringement claims that can arise in the
normal course of the Company's operations. Pending or future litigation could be costly, could cause the diversion of management's attention and
could upon resolution, have a material adverse effect on the Company's business, results of operations, financial condition and cash flows.
On February 22, 2011, the Company was named a defendant in a lawsuit, Bear Creek Technologies, Inc. v. 8x8, Inc. et al. , along with 20 other
defendants. On August 17, 2011, the Company was dismissed without prejudice from this lawsuit under Rule 21 of the Federal Rules of Civil
Procedure. On August 17, 2011, the Company was sued again by Bear Creek Technologies, Inc. in the United States District Court for the
District of Delaware. The Company believes it has factual and legal defenses to these claims and is presenting a vigorous defense. Further, on
November 28, 2012, the U.S. Patent & Trademark Office initiated a Reexamination proceeding with a Reexamination Declaration explaining
that there is a substantial new question of patentability, based on four separate grounds and affecting each claim of the patent which is the basis
for the complaint filed against the Company. On March 26, 2013, the USPTO issued a first Office Action in the Reexamination, with all claims
of the '722 patent being rejected on each of the four separate grounds raised in the Request for Reexamination. On July 10, 2013, the Company
filed an informational pleading in support of and joining a motion to stay the proceeding in the District Court; the District Court granted the
motion on July 17, 2013, based on the possibility that at least one of the USPTO rejections will be upheld and considering the USPTO's
conclusion that Bear Creek's patent suffers from a defective claim for priority. On March 24, 2014, the USPTO issued another Office Action in
which the rejections of the claims are maintained. The Company cannot estimate potential liability in this case at this early stage of litigation.
67
Year ending March 31:
2015
$
139
2016
40
Total minimum payments
179
Less: Amount representing interest
(2)
177
Less: Short-term portion of capital lease obligations
(137)
Long-term portion of capital lease obligations
$
40
Year ending March 31:
2015
$
1,809
2016
52
Total minimum payments
$
1,861