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As of December 31, 2010, intangible assets subject to amortization relate primarily to the following (in thousands):
Expected amortization expense for intangible assets subject to amortization at December 31, 2011, are as follows (in thousands):
In June 2009, j2 Global sold certain non-core intellectual property to a third-
party for approximately $1.5 million (net of selling and
earn-
out costs of approximately $0.5 million). Accordingly, the net proceeds in excess of net book value of the patent assets sold were recorded
as other revenue in the amount of approximately $0.7 million within the consolidated statement of operations for the year ended December 31,
2009. As part of this transaction, j2 Global also obtained a fully paid up, perpetual license for use of the related patents through their remaining
life.
Amortization expense was $13.4 million, $8.8 million and $8.0 million for the years ended December 31, 2011, 2010 and 2009,
respectively.
8. Commitments and Contingencies
Litigation
From time-to-
time, j2 Global is involved in litigation and other disputes or regulatory inquiries that arise in the ordinary course of its
business. Many of these actions involve or are filed in response to patent actions filed by j2 Global against others. The number and significance
of these disputes and inquiries has increased as our business has expanded and j2 Global has grown. Any claims or regulatory actions against j2
Global, whether meritorious or not, could be time-
consuming, result in costly litigation, require significant management time and result in
diversion of significant operational resources.
As part of the Company’
s continuing effort to prevent the unauthorized use of its intellectual property, j2 Global has initiated litigation
against several companies for infringing its patents relating to online fax, voice and other messaging technologies, including, but not limited to
Open Text Corporation and its Captaris business (“Open Text”), EasyLink Services International Corporation (“EasyLink”)
and RingCentral,
Inc. (“RingCentral”).
Three of the patents at issue in some of these lawsuits have been reaffirmed through reexamination proceedings with the
United States Patent and Trademark Office (the “USPTO”).
j2 Global’
s ongoing patent infringement cases involving U.S. Patent Nos. 6,208,638, 6,350,066 6,597,688 and 7,020,132 against Open
Text and EasyLink are being litigated in the United States District Court for the Central District of California before the same judge. Discovery
in the cases is underway. In both cases we are seeking a permanent injunction against continued infringement, a finding of willfulness,
compensatory and treble damages, attorneys’
fees, interest and costs. Both defendants filed counterclaims against the Company, including
seeking declaratory judgments of non-
infringement, invalidity and unenforceability of the patents asserted. Open Text also asserted
counterclaims purporting to allege violations of federal and state antitrust laws, but Open Text dismissed those claims on September 14,
2011. The Court completed Part One of the Markman hearing, covering two of the patents asserted, on October 15, 2010, and issued a related
Markman Order on March 4, 2011. Open Text’
s motion for reconsideration of certain portions of the Markman Order was denied on July 2011.
The Court completed Part Two of the Markman Hearing covering the two other patents asserted on July 29, 2011, and issued a related Markman
Order on October 20, 2011. In both Markman Orders, the Court adopted a claim construction either identical to or consistent with j2 Global’
s
proposed construction for every disputed claim term in all four patents asserted. Trial is currently scheduled to begin on November 13, 2012.
On June 1, 2011, j2 Global and one of its affiliates filed suit against RingCentral in the United States District Court for the Central
District of California. The complaint alleges infringement of U.S. Patent Numbers 6,208,638, 6,350,066 and 7,020,132. j2 Global and its affiliate
are seeking a permanent injunction against continued infringement, a finding of willfulness, compensatory and treble damages, attorneys’
fees,
interest and costs. On October 11, 2011, RingCentral filed an answer and counterclaims, alleging infringement of U.S. Patent Number 7,702,699
and unfair competition in violation of California’s Business & Professions Code § 17200 et. seq.; and seeking declaratory judgment of non-
infringement and invalidity and requesting damages, injunctive relief, interest and attorneys’
fees and costs. On December 8, 2011, j2 Global
submitted a request to the USPTO to put RingCentral’s U.S. Patent No. 7,702,669 (the “’669 patent”)
into reexamination proceedings. On
January 25, 2012, the USPTO accepted the reexamination request and rejected all claims of the
’
669 patent. Discovery has not yet commenced.
Weighted
-
Average
Amortization
Period
Historical
Cost
Accumulated
Amortization
Net
Tradenames
13.7 years
$
9,154
$
3,177
$
5,977
Patent and patent licenses
8.6 years
35,548
17,446
18,102
Customer relationships
6.7 years
43,372
6,698
36,674
Other purchased intangibles 4.7 years
11,238
4,447
6,791
Total
$
99,312
$
31,768
$
67,544
Fiscal Year:
2012
$
12,724
2013
12,079
2014
11,193
2015
10,451
2016
8,770
Thereafter
9,279
Total expected amortization expense
$
64,496