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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Operating Leases Acacia leases certain office space under various operating lease agreements expiring at various dates from 2015 through 2020. Minimum annual rental commitments for operating leases of continuing operations having initial or remaining noncancellable lease terms in excess of one year are as follows (in thousands):
Years ending December 31, |
2015 | $ | 1,564 |
2016 | 1,595 |
2017 | 1,557 |
2018 | 1,612 |
2019 | 1,669 |
Thereafter | 166 |
Total minimum lease payments | $ | 8,163 |
Rent expense for the years ended December 31, 2014, 2013 and 2012 approximated $1,523,000, $1,312,000 and $898,000, respectively. Rental payments are expensed in the statements of operations in the period to which they relate. Scheduled rent increases are amortized on a straight-line basis over the lease term. Inventor Royalties and Contingent Legal Expenses In connection with the investment in certain patents and patent rights, certain of Acacia’s operating subsidiaries executed related agreements which grant to the former owners of the respective patents or patent rights, the right to receive inventor royalties based on future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios. Acacia’s operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid on a scaled percentage of any negotiated fees, settlements or judgments awarded based on how and when the fees, settlements or judgments are obtained. The economic terms of the inventor agreements, operating agreements and contingent legal fee arrangements associated with the patent portfolios owned or controlled by Acacia’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor royalties, payments to noncontrolling interests and contingent legal fees expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor royalties and contingent legal fees expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors. During the years ended December 31, 2012, Acacia entered into significant agreements with unrelated third-parties resolving pending patent matters that resulted in the grant of certain intellectual property rights and recognition of revenues, portions of which were not subject to inventor royalty and contingent legal fee arrangements, as well as the grant of licenses from certain of Acacia’s operating subsidiaries and recognition of revenues that were subject to inventor royalties and contingent legal fee arrangements. Certain revenues recognized subject to inventor royalties and contingent legal fees are based on a determination by the respective operating subsidiaries. Patent Enforcement and Other Litigation Acacia is subject to claims, counterclaims and legal actions that arise in the ordinary course of business. Management believes that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on Acacia’s consolidated financial position, results of operations or cash flows. Certain of Acacia’s operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights. In connection with any of Acacia’s operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against Acacia or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material, and if required to be paid by Acacia or its operating subsidiaries, could materially harm the Company’s operating results and financial position. During fiscal year 2014, a federal court held that a lawsuit initiated in 2010 was exceptional. Additionally, in a separate matter, a federal court held that a lawsuit initiated in 2011 was exceptional. The total amount requested by these two defendants in these two matters was $2,800,000. The respective operating subsidiaries have filed notices of appeal. Operating expenses for the year ended December 31, 2014 included an accrual for these matters totaling $1,548,000. Operating expenses for the year ended December 31, 2013 included a one-time, non-recurring charge related to the resolution of a dispute concerning legal fees associated with a prior matter totaling $3,506,000. Guarantees and Indemnifications Certain of Acacia’s operating subsidiaries have made guarantees and indemnities under which they may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions, including revenue transactions in the ordinary course of business. In connection with certain facility leases, Acacia and certain of its operating subsidiaries have indemnified lessors for certain claims arising from the facilities or the leases. Acacia indemnifies its directors and officers to the maximum extent permitted under the laws of the State of Delaware. However, Acacia has a directors and officers insurance policy that may reduce its exposure in certain circumstances and may enable it to recover a portion of future amounts that may be payable, if any. The duration of the guarantees and indemnities varies and, in many cases is indefinite but subject to statute of limitations. The majority of guarantees and indemnities do not provide any limitations of the maximum potential future payments that Acacia could be obligated to make. To date, Acacia has made no payments related to these guarantees and indemnities. Acacia estimates the fair value of its indemnification obligations to be insignificant based on this history and therefore, have not recorded any liability for these guarantees and indemnities in the accompanying consolidated balance sheets. Additionally, no events or transactions have occurred that would result in a material liability at December 31, 2014. Other In August 2010, a wholly owned subsidiary of Acacia became the general partner of the Acacia IP Fund, which was formed in August 2010. The Acacia IP Fund is authorized to raise up to $250,000,000. The Acacia IP Fund invests in, licenses and enforces intellectual property consisting primarily of patents, patent rights, and patented technologies. Refer to Note 2 to these notes to consolidated financial statements for information regarding the consolidation of majority-owned subsidiaries and the presentation of related noncontrolling interests. At December 31, 2014 and 2013, the Acacia IP Fund net assets and net loss were primarily comprised of the following (in thousands):
|  | 2014 |  | 2013
Cash and other assets |  | $ | 2,823 |  |  | $ | 2,927 |
Patents, net of accumulated amortization |  | 967 |  |  | 1,373 |
Investments - noncurrent |  | 8,281 |  |  | 11,120 |
Total assets |  | $ | 12,071 |  |  | $ | 15,420 |
Accrued expenses and contributions |  | $ | 1,876 |  |  | $ | 2,437 |
Total liabilities |  | 1,876 |  |  | 2,437 |
Net assets |  | $ | 10,195 |  |  | $ | 12,983 |
|  | 2014 |  | 2013
Revenues |  | $ | 1,560 |  |  | $ | 1,448 |
Operating expenses |  | 1,724 |  |  | 6,907 |
Gain from operations |  | (164 | ) |  | (5,459 | )
Net loss in equity method investments |  | (1,807 | ) |  | (542 | )
Net loss |  | $ | (1,971 | ) |  | $ | (6,001 | )

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