Adobe 2015 Annual Report Download - page 97

Table of Contents
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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The following table summarizes our non-cancellable unconditional purchase obligations and operating leases for each of
the next five years and thereafter as of November 27, 2015 (in thousands):
Operating Leases
Fiscal Year Purchase Obligations
Future
Minimum
Lease
Payments
Future
Minimum
Sublease
Income
2016 $ 341,288 $ 41,192 $ 1,678
2017 62,915 32,138 1,579
2018 11,730 27,795 1,257
2019 3,795 24,437 1,309
2020 59 21,416 1,345
Thereafter — 46,569 1,198
Total $ 419,787 $ 193,547 $ 8,366
The table above includes operating lease commitments related to our restructured facilities. See Note 10 for information
regarding our restructuring charges.
Royalties
We have royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally
based on a dollar amount per unit shipped or a percentage of the underlying revenue. Royalty expense, which was recorded under
our cost of revenue on our Consolidated Statements of Income, was approximately $62.3 million, $45.2 million and $40.2 million
in fiscal 2015, 2014 and 2013, respectively.
Indemnifications
In the ordinary course of business, we provide indemnifications of varying scope to customers against claims of intellectual
property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims
by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not
been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future
results of operations.
To the extent permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for
certain events or occurrences while the officer or director is or was serving at our request in such capacity. The indemnification
period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of
future payments we could be required to make under these indemnification agreements is unlimited; however, we have director
and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We
believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.
Legal Proceedings
In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights, including
patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation.
Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the
attention and energies of management and key technical personnel. Although we have successfully defended or resolved past
litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes
could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent
us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products
or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification
commitments with our customers including contractual provisions under various license arrangements and service agreements.