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Legal Proceedings and Other Matters | 6 Months Ended
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Jan. 31, 2017
Commitments and Contingencies Disclosure [Abstract] |
Legal Proceedings and Other Matters | Legal Proceedings and Other Matters Settlement of Certain TCS Intellectual Property Matters On January 30, 2017, we entered into a final settlement of a legacy TCS patent infringement litigation matter which resulted in a lower loss than originally estimated. The settlement resolved litigation in the U.S. District Court for the Eastern District of Texas (“Eastern District Court”) in which TracBeam, LLC ("TracBeam") asserted a patent infringement claim and sought monetary damages, fees and expenses and other relief from, among others, TCS’s customers T-Mobile US, Inc. and T-Mobile USA, Inc. (together, "T-Mobile"), based on the defendants’ E911 service and locator products. TCS was defending T-Mobile against TracBeam. We made an initial cash payment pursuant to the TracBeam settlement during our third quarter of fiscal 2017, and will make a final payment during our fourth quarter of fiscal 2017. In addition, during our third quarter of fiscal 2017, TCS settled its claims against a prior owner of the TCS assets that were the subject of the TracBeam infringement claim and we received cash settlement proceeds. Our total net cash outflow related to these two matters is immaterial and, on a GAAP basis, the resolution resulted in a favorable $9,979,000 contribution, net of estimated legal fees, to operating income for the second quarter of fiscal 2017. Settlement of Mississippi Lawsuit A family in Mississippi sued Verizon Wireless in June 2016 and TCS in July 2016 in the U.S. District Court for the Southern District of Mississippi, for compensatory and punitive damages resulting from the family’s allegations that their 911 calls were improperly routed during an emergency. Both TCS and Verizon denied the allegations in the plaintiffs’ complaint and, during the three months ended January 31, 2017, the case was settled on terms that had no material impact on our condensed consolidated financial statements. Since the plaintiffs include a minor child, certain terms of the settlement are subject to court approval, which approval, final settlement documentation and case dismissal are pending. Other Pre-Acquisition Contingencies Related to TCS Intellectual Property Vehicle IP Matter In December 2009, Vehicle IP, LLC ("Vehicle IP") filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware, seeking monetary damages, fees and expenses and other relief from, among others, our customer Verizon Wireless ("Verizon"), based on the VZ Navigator product, and TCS is defending Verizon against Vehicle IP. In 2013, the District Court granted the defendants’ motion for summary judgment on the basis that the products in question did not infringe plaintiff’s patent. Plaintiff appealed that decision and, in 2014, the U.S. Court of Appeals for the Federal Circuit reversed the District Court's claim construction, overturned the District Court's grant of summary judgment of noninfringement, and remanded the case for further proceedings. Fact discovery and expert discovery has closed. Substantive settlement conversations have occurred but to date, the parties have been unable to reach a settlement. Trial regarding the validity of Vehicle IP's patent and Vehicle IP's claims of infringement is scheduled to begin in July 2017. CallWave Matter In 2012, CallWave Communication LLC ("CallWave") brought a patent infringement lawsuit in the U.S. District Court for the District of Delaware seeking monetary damages, fees and expenses and other relief from, among others, Verizon Wireless and certain of its affiliates (collectively, "Verizon"), based on Verizon's VZ Family Locator and VZ Navigator products, and TCS has agreed to indemnify Verizon with respect to one of the asserted patents of plaintiff that implicates a TCS product. In August 2016, the court agreed to stay the proceedings of the case against Verizon in connection with the one asserted patent, pending negotiation of a settlement agreement among TCS, Verizon and CallWave. On September 15, 2016, the court granted a motion for judgment on the pleadings, finding that the asserted claims of the patent are invalid because they relate to unpatentable subject matter. On February 13, 2017, the court granted CallWave's motion to enforce an alleged settlement agreement between TCS and CallWave. As a result of the court's decision, we are currently negotiating a final settlement between TCS and CallWave which is likely to result in two small immaterial payments to CallWave during the next six months. Other Matters In October 2014, we disclosed to the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) that we learned during a self-assessment of our export transactions that a shipment of modems sent to a Canadian customer by Comtech EF Data was incorporated into a communication system, the ultimate end user of which was the Sudan Civil Aviation Authority. The sales value of this equipment was approximately $288,000. OFAC regulations prohibit U.S. persons from doing business directly or indirectly with Sudan. In late 2015, OFAC issued an administrative subpoena seeking further information about the disclosed transaction. We have responded to the subpoena, including alerting OFAC to Comtech’s repair of three modems for a customer in Lebanon who may have rerouted the modems from Lebanon to Sudan without the required U.S. licensing authorization. We are not able to predict when OFAC will complete its review, nor whether it will take any action against us, which could include civil and criminal penalties. If OFAC determines that we have violated U.S. trade sanctions, we may suffer reputational harm. Even though we take precautions to avoid engaging in transactions that may violate U.S. trade sanctions, those measures may not be effective in every instance. There are certain other pending and threatened legal actions which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these other pending and threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations.

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