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Commitments and Contingencies
 12 Months Ended
Dec. 31, 2012
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

5. Commitments and Contingencies

Contractual Obligations

The Company has entered into obligations under operating leases with initial non-cancelable terms in excess of one year for office space, telephone, and data services. Expenses recorded under these agreements for the years ended December 31, 2012, 2011, and 2010 were approximately $1,338, $1,046 and $1,015, respectively.

 

Future minimum lease payments with respect to non-cancelable operating leases at December 31, 2012 are approximately as follows:

 

         

2013

   $ 1,391  

2014

     162  

2015

     31  

2016 and thereafter

     3  
   

 

 

  

Total

   $ 1,587  
   

 

 

  

The Company’s office lease expires in January 2014. The Company has begun the search for new office space.

Letter of Credit

The Company collateralizes its office lease space through a standby letter of credit held as an investment in debt securities, which was included in investments on the consolidated balance sheets at December 31, 2011 in the amount of $700. Pursuant to the terms of the lease agreement in 2012, the Company decreased its standby letter of credit to $419 and replaced its investments in debt securities with cash.

Contingencies

The Company is subject to various routine regulatory reviews and inspections by the SEC as well as legal proceedings arising in the ordinary course of business. The Company is not currently party to any litigation or other legal proceedings that are expected to have a material impact on our business, financial position or results of operations.

On December 1, 2011, Research Affiliates, LLC filed a complaint in the United States District Court for the Central District of California, (Research Affiliates, LLC v. WisdomTree Investments, Inc., et. al., Case No. SACV11-01846 DOC (ANx)), naming the Company and our subsidiaries, as well as WisdomTree Trust, Mellon Capital Management Corporation and ALPS Distributors, Inc., as defendants. In the complaint, plaintiff alleged that the fundamentally weighted investment methodology we employ for the ETFs using our indexes infringed three of plaintiff’s patents and sought both unspecified monetary damages to be determined and an injunction to prevent further infringement.

On November 7, 2012, Research Affiliates, LLC agreed to withdraw its patent infringement suit against the Company and the Company agreed to withdraw its counterclaims and entered into a settlement agreement. Under the settlement, all parties exchanged releases for all existing claims. The other material terms of the settlement are as follows:

 

  •  

Research Affiliates agreed not to sue the Company for any future claims arising under any current patents held by Research Affiliates, as well as any future patents relating to fundamentally-weighted indexes and strategies that may issue under existing or future patent applications that may be filed by Research Affiliates within the next eight years, subject to reduction by up to three years if Research Affiliates is acquired. The covenant not to sue extends to the Company’s service providers and customers in connection with its products and services.

 

  •  

The Company has agreed not to sue Research Affiliates for any future claims arising under any current patents held the Company, as well as any future patents relating to fundamentally-weighted indexes and strategies that may issue under existing or future patent applications that may be filed by the Company within the next eight years, subject to reduction by up to three years if the Company is acquired. The covenant not to sue extends to service providers and customers of Research Affiliates in connection with Research Affiliates’ products and services.

 

  •  

Research Affiliates and the Company agreed that the covenants not to sue do not include a right under each party’s patents to copy the other party’s methodologies. Research Affiliates and the Company have further agreed that it is not copying if Research Affiliates introduces an index or strategy that uses at least three fundamental factors to weight its indexes and they are not predominantly dividend- or earnings weighted, or the Company introduces an index or strategy that is weighted by less than three fundamental factors.

 

  •  

The parties also agreed not to challenge the other party’s patents or patent applications.

 

  •  

Research Affiliates agreed to a one-time payment of $0.7 million to WisdomTree. WisdomTree and the other defendants were not required to make any current or future payments to Research Affiliates.

All other terms of the settlement are confidential.

The Company’s insurance carrier funded a significant majority of the cost of defending this patent infringement lawsuit. During 2012, the Company incurred $3.4 million of legal defense and other associated costs and its insurance carrier has agreed to reimburse $2.5 million. In addition the Company received $0.7 million settlement payment from Research Affiliates leading to a net amount of $0.2 million in net costs the Company incurred for the year ended December 31, 2012. During 2011 the Company incurred $0.2 million in litigation expenses.