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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2013
Commitments and Contingencies [Abstract] |
Commitments and Contingencies | 7. Commitments and Contingencies Legal Matters -From August 2005 until May 2013, the Company was involved in lawsuits in various foreign jurisdictions against the European Central Bank ("ECB") alleging patent infringement by the ECB and claimed unspecified damages (the "ECB Litigation"). The Company brought the suit in the European Court of First Instance in Luxembourg. The Company alleged that all Euro banknotes in circulation infringed the Company's European Patent 0 455 750B1 (the "Patent") which covered a method of incorporating an anti-counterfeiting feature into banknotes or similar security documents to protect against forgeries by digital scanning and copying devices. The ECB then filed claims against the Company in eight Euro pean countries seeking to invalidate the patents. During the course of the ECB Litigation, the losing party, in certain jurisdictions, was responsible for the prevailing party's legal fees and disbursements. As of September 30, 2013, pursuant to foreign judgments for costs and fees, the Company has recorded as accrued liabilities approximately €264,000 ($356,000) for such fees. In February 2013, the ECB filed an action in the United States District Court, Western District of New York to domesticate the amounts due under a foreign judgment issued in Germany, included in the amount above. In addition, the ECB formally requested the Company to pay attorneys and court fees for the Court of First Instance case in Luxembourg which amounts to €93,752 ($127,000) as of September 30, 2013, which, unless the amount is settled, will be subject to an assessment procedure that has not been initiated. The Company will accrue the assessed amount, if any, as soon as it is reasonably estimable. On August 20, 2008, the Company entered into an agreement (the "Trebuchet Agreement") with Trebuchet Capital Partners, LLC ("Trebuchet") under which Trebuchet agreed to pay substantially all of the litigation costs associated with validity proceedings in eight European countries relating to the ECB Litigation, and the Company provided Trebuchet with the sole and exclusive right to manage infringement litigation relating to the Patent in Europe, including the right to initiate litigation in the name of the Company, Trebuchet or both, and to choose whom and where to sue, subject to certain limitations set forth in the Trebuchet Agreement. On February 18, 2010, Trebuchet, on behalf of the Company, filed an infringement suit in The Netherlands against the ECB and two security printing entities with manufacturing operations in The Netherlands.. The Netherlands Court determined in December 2010 that the patent was invalid in The Netherlands, and the infringement case was terminated by Trebuchet. Trebuchet was responsible for cost and fee reimbursements associated with the case which Trebuchet paid in February 2012. On July 7, 2011, Trebuchet and the Company entered into a series of related agreements and general releases wherein Trebuchet effectively ended its ongoing participation in the ECB Litigation. On October 24, 2011 the Company initiated a law suit against Coupons.com Incorporated ("Coupons.com"). The suit was filed in the United States District Court, Western District of New York, located in Rochester, New York. Coupons.com is a Delaware corporation having its principal place of business located in Mountain View, California. In the Coupons.com suit, the Company alleged breach of contract, misappropriation of trade secrets, unfair competition and unjust enrichment, and is seeking in excess of $10 million in money damages from Coupons.com for those claims. The Company's breach of contract claim remains intact as of the date of this report. On October 3, 2012, DSS Technology Management's subsidiary, Bascom Research, LLC, commenced legal proceedings against five companies, including Facebook, Inc. and LinkedIn Corporation, pursuant to which Bascom Research, LLC alleges that such companies infringe on one or more of its patents. The Company anticipates that these legal proceedings may continue for several years and may require significant expenditures for legal fees and other expenses. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, the Company may be forced to litigate against others to enforce or defend Bascom Research's intellectual property rights or to determine the validity and scope of other parties' proprietary rights. The defendants or other third parties involved in the lawsuits in which the Company is involved may allege defenses and/or file counterclaims in an effort to avoid or limit liability and damages for patent infringement. If such defenses or counterclaims are successful, they may have a material adverse effect on the value of the patents and preclude the Company's ability to derive licensing revenue from the patents, or any revenue. The Company estimates that its legal fees and expenses to pursue the Bascom case to trial will be approximately $2,000,000. This estimate depends on several variables, including the cost of retaining experts, actions taken by defendants in the litigation, and any potential proceedings with the USPTO. Expenses thereafter are dependent on the outcome of the litigation; in the event the case is appealed, legal fees and expenses through appeal over the course of the subsequent twelve months could range from $250,000 to over $750,000. The Company expects it will receive between 45 to 60% of the total consideration (including cash payments, equity, assets, or any other form of consideration) received from any license, settlement, judgment or other award relating to the Bascom Research patents, depending on the total amount of consideration earned and the stage of the case in which consideration is earned. In addition to the foregoing, we are subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurance in this regard, in the opinion of management, none of the legal proceedings to which we are a party, whether discussed herein or otherwise, will have a material adverse effect on our results of operations, cash flows or our financial condition. Contingent Litigation Payments - The Company has a legal fee agreement with Niro, Haller & Niro in connection with its law suit against Coupons.com. Under the agreement, the Company would pay Niro, Haller & Niro 33% of any settlements or damages awards collected from Coupons.com in connection with the suit. Under the agreement, the Company is responsible for payment of out-of-pocket charges and disbursements of Niro, Haller & Niro necessarily accrued during the prosecution of the suit. This fee agreement replaced an agreement the Company had with Nixon Peabody LLP, the Company's former legal counsel in the Coupons.com litigation. The Company retains the services of professional service providers, including law firms that specialize in intellectual property licensing, enforcement and patent law. These service providers are often retained on an hourly, monthly, project, contingent or a blended fee basis. In contingency fee arrangements, a portion of the legal fee is based on predetermined milestones or the Company's actual collection of funds. The Company accrues contingent fees when it is probable that the milestones will be achieved and the fees can be reasonably estimated. Contingent Purchase Price -In December, 2008, the Company acquired substantially all of the assets of DPI of Rochester, LLC in which the Company guaranteed up to $50,000 to certain parties depending on whether certain conditions occurred within five years of the acquisition. As of September 30, 2013, the Company considers the likelihood that the payment will be required as remote. Related Party Consulting Payments - The Company has a consulting agreement with Patrick White, its former CEO. During the nine months ended September 30, 2013, the Company paid approximately $139,000 to Mr. White and expects to pay approximately $220,000 in future monthly payments through the expiration of the agreement in March 2015. Employment Agreements -On July 1, 2013, the Company assumed all of the duties, obligations and liabilities of DSS Technology Management under (i) the employment agreement with Jeffrey Ronaldi, dated November 20, 2012 (the "Ronaldi Agreement"), and (ii) the amended employment agreement with Peter Hardigan, dated November 20, 2012 (the "Hardigan Agreement"). The Ronaldi Agreement has an initial term of three years, commencing on November 9, 2012, and is automatically renewable for additional consecutive one year terms, unless at least ninety days written notice is given by either the Company or Mr. Ronaldi prior to the commencement of the next renewal term. The Ronaldi Agreement provides for an annual base salary of $350,000 and an annual discretionary bonus based upon Mr. Ronaldi's and the Company's achievement of annual performance objectives, as determined by the Board. The Company also assumed the non-statutory option to purchase shares of DSSTM's common stock previously granted to Mr. Ronaldi. The Ronaldi Agreement also provides for Mr. Ronaldi's participation in all benefit programs the Company establishes and makes available to its executive employees, and for reimbursement to Mr. Ronaldi for reasonable travel, entertainment, mileage and other business expenses. The Ronaldi Agreement is terminable by the Company for cause or upon thirty days prior written notice without cause, and terminable at Mr. Ronaldi's election upon thirty days prior written notice. If the Company terminates Mr. Ronaldi without cause, then the Company will pay Mr. Ronaldi: (i) a lump sum amount equal to his base salary for the balance of the then-remaining term of the Ronaldi Agreement, but no less than six months' base salary (ii) the Company's share of the cost of health insurance coverage pursuant to COBRA for the then-remaining term of the Ronaldi Agreement and (iii) reimbursement of business expenses incurred by Mr. Ronaldi prior to termination. The Ronaldi Agreement also includes certain confidentiality, non-compete and non-solicitation provisions effective for a period of twelve months following the termination of Mr. Ronaldi's employment with the Company. The Hardigan Agreement has an initial term of one year, commencing on August 1, 2012, and is automatically renewable for additional consecutive one year terms, unless at least ninety days written notice is given by either the Company or Mr. Hardigan prior to the commencement of the next renewal term. The Hardigan Agreement provides for an annual base salary of $250,000, effective August 1, 2012, and an annual discretionary bonus based upon Mr. Hardigan's and the Company's achievement of annual performance objectives, as determined by the Board. The Company also assumed the non-statutory option to purchase shares of DSSTM's common stock previously granted to Mr. Hardigan. The Hardigan Agreement also provides for Mr. Hardigan's participation in all benefit programs the Company establishes and makes available to its executive employees, and for reimbursement to Mr. Hardigan for reasonable travel, entertainment, mileage and other business expenses. The Hardigan Agreement is terminable by the Company for cause or upon thirty days prior written notice without cause, and terminable at Mr. Hardigan's election upon thirty days prior written notice. If the Company terminates Mr. Hardigan without cause, then the Company will pay Mr. Hardigan: (i) a lump sum amount equal to his base salary for the balance of the then-remaining term of the Hardigan Agreement, but no less than six months' base salary, (ii) the Company's share of the cost of health insurance coverage pursuant to COBRA for the then-remaining term of the Hardigan Agreement and (iii) reimbursement of business expenses incurred by Mr. Hardigan prior to termination. The Hardigan Agreement also includes certain confidentiality, non-compete and non-solicitation provisions effective for a period of twelve months following the termination of Mr. Hardigan's employment with the Company.

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