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Commitments and Contingencies | 12 Months Ended
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Jan. 31, 2016
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Note 7. Commitments and Contingencies Letters of Credit At January 31, 2016 and 2015, we had letters of credit in the amount of $27.0 million and $27.0 million, respectively, in connection with our facility leases. These letters of credit mature at various dates through December 1, 2018. At January 31, 2016 and 2015, certain letters of credit are collateralized by certificates of deposit held by us in the amount of $27.0 million and $2.0 million, respectively. Refer to Note 8 for additional details. Leases We have entered into various non-cancellable operating lease agreements for certain of our offices and datacenters with lease periods expiring between fiscal 2017 and 2029. Certain of these arrangements have free or escalating rent payment provisions and optional renewal clauses. We are also committed to pay a portion of the actual operating expenses under certain of these lease agreements. These operating expenses are not included in the table below. During the years ended January 31, 2016 and 2015, we entered into various capital lease arrangements to obtain servers for our operations. These agreements are typically for three years. The leases are secured by the underlying leased servers. For years ended January 31, 2016 and 2015, we recorded $198,000 and $7,000, respectively, of interest expense in relation to these capital lease arrangements. In September 2014, we entered into a lease for approximately 340,000 square feet of office space in Redwood City, California, which we now use as our new corporate headquarters. The lease expires in fiscal 2029 unless we exercise our renewal options under the lease, and non-cancellable lease payments of $258.0 million are included under Operating Leases in the table below. In addition, we are still entitled to receive $3.0 million of tenant incentives under the lease. As of January 31, 2016, future minimum lease payments under non-cancellable capital and operating leases are as follows (in thousands):
Years ending January 31: |  | Capital Leases |  |  | Operating Leases, net of Sublease Income |
2017 |  | $ | 4,977 |  |  | $ | 14,190 |
2018 |  |  | 4,901 |  |  |  | 19,344 |
2019 |  |  | 2,582 |  |  |  | 20,866 |
2020 |  |  | — |  |  |  | 23,795 |
2021 |  |  | — |  |  |  | 24,109 |
Thereafter |  |  | — |  |  |  | 169,463 |
Total minimum lease payments |  | $ | 12,460 |  |  | $ | 271,767 |
Less: amount representing interest |  |  | (446 | ) |  |  |  |
Present value of minimum lease payments |  | $ | 12,014 |  |  |  |  |
In March, April and November 2015, we signed subleases for certain floors of our new headquarters. These subleases have terms ranging from 18 to 36 months that will expire in fiscal 2018 and 2019. Non-cancellable sublease proceeds for the years ending January 31, 2017, 2018 and 2019 of $6.5 million, $4.4 million and $2.8 million, respectively, are included in the table above. We recognize rent expense under our operating leases on a straight-line basis. Rent expense totaled $20.9 million, $5.6 million and $5.3 million, net of sublease income of $1.3 million, $1.8 million and $1.1 million for the years ended January 31, 2016, 2015 and 2014, respectively. Purchase Obligations As of January 31, 2016, future payments under non-cancellable contractual purchases, which relate primarily to datacenter operations and sales and marketing activities, are as follows (in thousands):
Years ending January 31: |  |  |  |
2017 |  | $ | 14,517 |
2018 |  |  | 5,208 |
2019 |  |  | 954 |
|  | $ | 20,679 |
Legal Matters On June 5, 2013, Open Text S.A. (Open Text) filed a lawsuit against us in the U.S. District Court, Eastern District of Virginia, alleging that our core cloud software and Box Edit application infringe 12 patents of Open Text. Open Text sought preliminary and permanent injunctions against infringement, treble damages, and attorneys’ fees. This case was subsequently transferred to the U.S. District Court for the Northern District of California. On September 13, 2013, Open Text filed a motion for preliminary injunction seeking to enjoin us from providing our Box Edit feature to companies with more than 100 users. On April 9, 2014, the California court denied Open Text’s motion for preliminary injunction, finding that (1) Open Text failed to meet its burden to show irreparable harm, (2) Open Text failed to show a reasonable likelihood of success on the merits of its case, and (3) we have raised a substantial question as to the validity of the patents asserted during the preliminary injunction proceedings. On September 19, 2014, in a related action, Open Text S.A. v. Alfresco Software Ltd., et al., Case No. 13-cv-04843-JD, the Court granted the Alfresco Defendants’ motion to dismiss with prejudice the asserted claims of the Dialog Patents, finding the asserted claims of the Dialog Patents patent ineligible under 35 U.S.C. § 101. On January 20, 2015, the Court entered an Order granting our motion for judgment on the pleadings as to the asserted patent claims of the Groupware Patents. The Court found that the asserted patent claims of the Groupware Patents are invalid because they claim non-patentable subject matter. As a result of the Court’s January 20, 2015 order and other pretrial orders, the lawsuit was narrowed to four total claims across the three remaining File Synchronization Patents accusing the Company’s Box Edit feature and Box Android application. Trial commenced on February 2, 2015. On February 13, 2015, the jury returned a verdict, finding the asserted claims of the File Synchronization patents infringed and were not invalid. The jury awarded damages in favor of Open Text in a lump sum and fully paid-up royalty in the amount of $4.9 million. The Court found no willful infringement of the asserted claims and foreclosed Open Text’s request for a permanent injunction since the jury returned a lump-sum award. On February 19, 2015, Open Text filed a notice of appeal to the United States Court of Appeals for the Federal Circuit from the Court’s Order granting our motion for judgment of invalidity of the Groupware Patents. On March 9, 2015, Open Text filed a first amended notice of appeal from additional orders by the Court. On August 19, 2015, following a July 1, 2015 hearing in which portions of the jury’s verdict were challenged, the Court entered judgment in favor of Open Text with respect to infringement of the asserted claims of the File Synchronization patents in the amount of approximately $4.9 million plus pre-judgment interest, and with respect to validity of the asserted claims of the File Synchronization patents. The Court also entered judgment in our favor with respect to invalidity of the asserted claims of the Groupware Patents, and no willful infringement with respect to the asserted claims of the File Synchronization patents. We filed a notice of appeal on August 28, 2015, challenging a number of findings in the final judgment entered on August 19, 2015, including the jury’s finding that the Synchronization Patents were infringed and not invalid. While we intend to continue to defend the lawsuit vigorously and continue to believe we have valid defense to Open Text’s claims, we considered the issuance of the verdict a recognized subsequent event that provided additional evidence about conditions existed as of January 31, 2015. Accordingly, we accrued $4.9 million of settlement payment as of January 31, 2015, and recorded an expense in the amount of $3.9 million for the year ended January 31, 2015, in relation to the portion of the settlement amount attributable to prior periods. The portion of the settlement amount attributable to future periods is recorded as an asset as of January 31, 2015. This asset is being amortized over an estimated useful life of 14 months, and the amortization expense was $855,000 for the year ended January 31, 2016. In addition, as a result of the July 1, 2015 hearing, we deemed the claim for interest on the legal verdict amount to be probable and estimable for the first time. As such, we accrued additional expenses in the aggregate amount of $659,000 during the year ended January 31, 2016, in relation to the interest on the legal verdict amount. In addition to the litigation discussed above, from time to time, we are a party to litigation and subject to claims that arise in the ordinary course of business. We investigate these claims as they arise, and accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Although the results of litigation and claims cannot be predicted with certainty, we believe there was not at least a reasonable possibility that we had incurred a material loss with respect to such loss contingencies as of January 31, 2016 and 2015. Indemnification We include service level commitments to our customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those levels. In addition, our customer contracts often include (i) specific obligations that we maintain the availability of the customer’s data through our service and that we secure customer content against unauthorized access or loss, and (ii) indemnity provisions whereby we indemnify our customers for third-party claims asserted against them that result from our failure to maintain the availability of their content or securing the same from unauthorized access or loss. To date, we have not incurred any material costs as a result of such commitments. Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

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