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Commitments and Contingencies | 6 Months Ended
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Apr. 02, 2022
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | 7. Commitments and Contingencies Legal proceedings From time to time, the Company is involved in legal proceedings in the ordinary course of business, including claims relating to employee relations, business practices, and patent infringement. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations. On January 7, 2020, the Company filed a complaint with the U.S. International Trade Commission ("ITC") against Alphabet Inc. ("Alphabet") and Google LLC ("Google") and a lawsuit in the U.S. District Court for the Central District of California against Google. The complaint and lawsuit each allege infringement by Alphabet and Google of certain Sonos patents related to its smart speakers and related technology. On February 6, 2020, the ITC initiated a formal investigation into the Company’s claims. Google and Alphabet filed an initial answer in the ITC action on February 27, 2020, and an amended answer on April 3, 2020, denying infringement and alleging that the asserted patents are invalid. On August 13, 2021, an administrative law judge at the ITC issued an initial determination finding all five of Sonos' asserted patents to be valid and infringed by Google. The judge also ruled that certain proposed redesigns of Google products, one specific redesign per patent, would qualify as non-infringing alternatives to Google's current product designs. On January 6, 2022, the ITC ratified the conclusions of the administrative law judge and issued a limited exclusion order and a cease and desist order with respect to a wide range of accused Google products, including Google media players and computer devices configured to control these media players, such as Pixel phones and tablets. On March 4, 2020, the California District Court stayed the district court proceeding pending resolution of the ITC investigation and corresponding appeals. On March 11, 2020, Google filed an answer in the California District Court, denying infringement and alleging that the asserted patents are invalid. On September 28, 2020, Google filed for a declaratory judgement of non-infringement in the U.S. District Court for the Northern District of California related to five different Sonos patents. On September 29, 2020, the Company filed a lawsuit against Google in the U.S. District Court for Western District of Texas, alleging infringement of those five Sonos patents and seeking monetary damages and other non-monetary relief. This dispute over venue has now been resolved, with the case proceeding in the Northern District of California, where the judge has bifurcated the case, scheduling early disposition of two representative claims in mid-2022 and trial on all other claims in May 2023. On January 21, 2022, the judge permitted Google to amend its declaratory judgement claim to include claims for breach of contract and conversion against the Company in connection with one of the asserted patents regarding Google and the Company’s collaboration in 2013. The Company disputes the claims and intends to defend these claims during the case. On December 1, 2020, the Company filed a lawsuit against two Google foreign subsidiaries in the regional court of Hamburg, Germany, alleging infringement of a Sonos patent related to control of playback of media by mobile and playback devices and seeking non-monetary relief. Sonos has chosen to withdraw these preliminary injunction actions after having received some preliminary relief. On June 11, 2020, Google filed a lawsuit in the U.S. District Court for the Northern District of California against the Company, alleging infringement of five Google patents generally related to noise cancellation, digital rights management, media search, modifying favorite items and wireless relays, and seeking monetary damages and other non-monetary relief. On November 2, 2020, the California District Court granted Sonos’ motion to dismiss Google’s allegation of infringement of one of these five Google patents, specifically a patent generally related to media search, finding that the invention at issue is patent ineligible. On June 4, 2021, the California District Court granted a stipulation to dismiss Google's allegation of infringement of another asserted patent involving noise cancellation. In May 2021, the Company filed petitions for review at the United States Patent and Trademark Office ("USPTO") of two Google patents asserted against the Company in this matter, specifically the patents related to modifying favorite items and wireless relays. In October and November 2021, the USPTO instituted review of these patents, with a final decision expected in late 2022. In January 2022, the California District Court judge stayed the litigation against the Company with respect to all common issues. On June 12, 2020, Google filed lawsuits in District Court Munich I against Sonos Europe B.V. and Sonos, Inc., alleging infringement of two Google patents generally related to digital rights management and search notifications, and seeking monetary damages and an injunction preventing sales of any infringing Sonos products. On January 14, 2021, Google amended its infringement complaint related to the search notifications patent to relate to a limited version of the claims, in view of prior art cited by the Company. On March 3, 2021, the District Court Munich stayed a case for infringement of the search notifications patent pending the outcome of a nullity action based on doubt as to the validity of the patent. On June 23, 2021, the Munich court issued a decision dismissing Google's complaint related to the digital rights management patent for lack of infringement of at least two claim features. On August 30, 2021, Google appealed the Munich court's ruling, which appeal is still pending. On August 21, 2020, Google filed a lawsuit against Sonos, Inc. in Canada, alleging infringement of one Google patent generally related to noise cancellation technology. On August 21, 2020, Google filed a lawsuit against Sonos Europe B.V. and Sonos, Inc. in France, alleging infringement of two Google patents generally related to digital rights management and search notifications, and seeking monetary damages and an injunction preventing sales of any infringing Sonos products. On February 8, 2021, Google withdrew its infringement allegations regarding the search notifications patent in view of prior art brought to the attention of the court by the Company. On March 8, 2022, the French trial court ruled for Sonos on Google's digital rights management infringement claim. Google has appealed the French trial court's ruling, which appeal is pending. In August 2020, Google filed a lawsuit against Sonos Europe B.V. and Sonos, Inc. in the Netherlands alleging infringement of a Google patent related to search notifications, and seeking monetary damages and an injunction preventing sales of any infringing Sonos products. In September 2020, Google filed a lawsuit against Sonos Europe B.V. in the Netherlands, alleging infringement of a Google patent related to digital rights management, and seeking monetary damages and enforcement of an injunction preventing sales of any infringing Sonos products, which was transferred to the Midden-Netherlands court on March 22, 2021, following the grant of the Company's challenge to improper jurisdiction. On February 9, 2022, the Midden-Netherlands court rejected Google's claims related to the digital rights management patent. On March 22, 2022, Google appealed the Midden-Netherlands' court decision, which is still pending. A range of loss, if any, associated with these matters is not probable or reasonably estimable as of April 2, 2022. On March 10, 2017, Implicit, LLC (“Implicit”) filed a patent infringement action in the United States District Court, District of Delaware against the Company. Implicit is asserting that the Company infringed on two patents in this case. The Company denies the allegations. There is no assurance of a favorable outcome and the Company’s business could be adversely affected as a result of a finding that the Company patents-in-suit are invalid and/or unenforceable. A range of loss, if any, associated with this matter is not probable or reasonably estimable as of April 2, 2022. The Company is involved in certain other litigation matters not listed above but does not consider these matters to be material either individually or in the aggregate at this time. The Company’s view of the matters not listed may change in the future as the litigation and events related thereto unfold. On May 13, 2020, the Company was granted a temporary exclusion from the August 2019 Section 301 Tariff Action (List 4A) ("Section 301 tariffs") for its component products. On July 23, 2020, the Company was granted a temporary exclusion from Section 301 tariffs for its core speaker products. These exclusions eliminated the tariffs on the Company's component and core speaker products imported from China until August 31, 2020, and entitled the Company to a refund for the tariffs paid since September 2019, the date the Section 301 tariffs were imposed. On August 28, 2020, the United States Trade Representative granted an extension through December 31, 2020, of the exclusion for the Company’s core speaker products, with the Section 301 tariffs for our core speaker products automatically reinstated on January 1, 2021. The exclusion for the Company’s component products was not extended past August 31, 2020, with the Section 301 tariffs for our component products automatically reinstated on September 1, 2020. Tariff refund claims are subject to review and approval by U.S. Customs and Border Protection. For the three and six months ended April 2, 2022, the Company recognized $2.9 million and $4.7 million, respectively, in refunds based upon acceptance of the Company's refund request, recognized as a reduction to cost of revenue. The remaining outstanding tariff refund the Company expects to recover is approximately $9.5 million. The Company did not record these potential refunds due to uncertainty of the timing of acceptance of approval, but such refunds will be recognized as a reduction to cost of revenue if and when acceptance occurs. In March 2022, the Company was granted an exclusion extension from the Section 301 tariffs for its core speaker products, including certain new product introductions. This exclusion extension eliminates the tariffs on the Company's core speaker products imported from China from April 13, 2022 to December 31, 2022, and entitles the Company to an estimated refund of $10.0 million for the tariffs paid from October 12, 2021 to April 12, 2022. The Company did not record these potential refunds due to uncertainty of the timing of acceptance of approval, but such refunds will be recognized as a reduction to cost of revenue if and when acceptance occurs.

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