Contingencies	9 Months Ended
Sep. 28, 2014
Contingencies	Note 11 – Contingencies Litigation. From time to time, the company is involved in legal proceedings in the ordinary course of business. The company analyzes potential outcomes from current and potential litigation as loss contingencies in accordance with the Contingency Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). Since most potential claims against the company may involve the enforcement of complex intellectual property rights or complicated damages calculations, the company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, related to each pending matter may be. In accordance with applicable accounting guidance, the company establishes an accrued liability for litigation when the matter presents a loss contingency that is both probable and estimable. As the litigation matter develops, the company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Even when the company establishes an accrued liability, there may be exposures to loss in excess of any amounts accrued. The amount reserved is based upon assessments of the potential liabilities using analysis of claims and historical experience in defending and resolving such claims. When a loss contingency is not both probable and estimable, the company does not establish an accrued liability. If, at the time of the evaluation, the loss contingency related to a litigation matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. For a limited number of matters disclosed in this note for which a loss, whether in excess of a related accrued liability or where there is no accrued liability, is reasonably possible in future periods, the company is able to estimate a range of possible loss. In determining whether it is possible to estimate a range of possible loss, the company reviews and evaluates its material litigation on an ongoing basis in light of potentially relevant factual and legal developments. These may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, and other rulings by courts, arbitrators or others. If the company possesses sufficient information to develop an estimate of loss or range of possible loss, that estimate is disclosed either individually or in the aggregate. Finally, for loss contingencies for which the company believes the possibility of loss is remote, the company does not record a reserve or assess the range of possible losses. Based on current knowledge, management does not believe that loss contingencies arising from pending matters will have a material adverse effect on our business, financial condition, results of operations or cash flows. However, in light of the inherent uncertainties involved in these matters, some of which are beyond the company’s control, an adverse outcome in one or more of these matters could be material to the company’s results of operations or cash flows for any particular reporting period. Patent Litigation with Power Integrations, Inc. There are five outstanding proceedings with Power Integrations. POWI 1: On October 20, 2004, the company and its wholly owned subsidiary, Fairchild Semiconductor Corporation, were sued by Power Integrations, Inc. in the U.S. District Court for the District of Delaware. Power Integrations alleged that certain of the company’s pulse width modulation (PWM) integrated circuit products infringed four Power Integrations U.S. patents, and sought a permanent injunction preventing the company from manufacturing, selling or offering the products for sale in the U.S., or from importing the products into the U.S., as well as money damages for past infringement. The trial in the case was divided into three phases. In the first phase of the trial that occurred in October of 2006, a jury returned a verdict finding that thirty-three of the company’s PWM products willfully infringed one or more of seven claims asserted in the four patents and assessed damages against the company. The company voluntarily stopped U.S. sales and importation of those products in 2007 and have been offering replacement products since 2006. Subsequent phases of the trial conducted during 2007 and 2008 focused on the validity and enforceability of the patents. In December of 2008, the judge overseeing the case reduced the jury’s 2006 damages award from $34 million to approximately $6.1 million and ordered a new trial on the issue of willfulness. Following the new trial held in June of 2009, the court found the company’s infringement to have been willful, and in January 2011 the court awarded Power Integrations final damages in the amount of $12.2 million. The company appealed the final damages award, willfulness finding, and other issues to the U.S. Court of Appeals for the Federal Circuit. On March 26, 2013, the court of appeals vacated almost the entire damages award, ruling that there was no basis upon which a reasonable jury could find the company liable for induced infringement. The court also vacated the earlier ruling of willful patent infringement by the company. The full court of appeals and the Supreme Court of the United States have since denied Power Integrations’ request to review the appeals court ruling. Although the appeals court instructed the lower court to conduct further proceedings to determine damages based upon approximately $500,000 to $750,000 worth of sales and imports of affected products, the company believes that damages on the basis of that level of infringing activity would not be material. Accordingly, the company released $12.6 million from its reserves relating to this case during the first quarter of 2013. POWI 2: On May 23, 2008, Power Integrations filed another lawsuit against the company, Fairchild Semiconductor Corporation and its wholly owned subsidiary System General Corporation in the U.S. District Court for the District of Delaware, alleging infringement of three patents. Of the three patents asserted in that lawsuit, two were asserted against the company and Fairchild Semiconductor Corporation in the October 2004 lawsuit described above. In 2011, Power Integrations added a fourth patent to this case. On October 14, 2008, Fairchild Semiconductor Corporation and System General Corporation filed a patent infringement lawsuit against Power Integrations in the U.S. District Court for the District of Delaware, alleging that certain PWM integrated circuit products infringe one or more claims of two U.S. patents owned by System General. The lawsuit seeks monetary damages and an injunction preventing the manufacture, use, sale, offer for sale or importation of Power Integrations products found to infringe the asserted patents. Both lawsuits were consolidated and heard together in a jury trial in April of 2012. On April 27, 2012, the jury found that Power Integrations infringed one of the two U.S. patents owned by System General and upheld the validity of both System General patents. In the same verdict, the jury found that the company infringed two of four U.S. patents asserted by Power Integrations and that the company had induced its customers to infringe the asserted patents. The jury also upheld the validity of the asserted Power Integrations patents. The verdict concluded the first phase of trial in the litigation. On June 30, 2014, the court issued an order enjoining Fairchild from making, using, selling, offering to sell or importing into the United States the products found to infringe the Power Integrations patents in the case as well as certain products that were similar to the products found to infringe. Willfulness and damages in the case will be determined in a second phase, which has yet to be scheduled and may occur after appeals of the first phase. POWI 3: On November 4, 2009, Power Integrations filed a complaint for patent infringement against the company and two of its subsidiaries in the U.S. District Court for the Northern District of California alleging that several of its products infringe three of Power Integrations’ patents. Fairchild filed counterclaims asserting that Power Integrations infringed two Fairchild patents. A trial was held from February 10-27, 2014 on two Power Integrations’ patents and one Fairchild patent. On March 4, 2014, the jury returned a verdict finding that Fairchild willfully infringed both Power Integrations patents, awarding Power Integrations $105 million in damages, and finding that Power Integrations did not infringe the Fairchild patent. Both parties filed various post-trial motions to the verdict which were denied by the court with the exception of Fairchild’s motion to set aside the jury’s determination that it acted willfully. On September 9, 2014, the court granted the company’s motion and determined that, as a matter of law, its actions were not willful. As a result of the reversal of the original willfulness finding, the jury verdict will not be enhanced by the trial court. The company will continue to challenge several aspects of the verdict during post-trial review and if necessary on appeal. The company believes the infringement findings were in error and failed to account for differences in the accused products. The company will also challenge the damages award, including with respect to the sufficiency of the damages evidence and Power Integrations’ unique damages theory. The company believes the damages award includes legal and evidentiary defects, some of which are similar to those that were the basis for a 2013 ruling by the U.S. Court of Appeals for the Federal Circuit, described above, in which the court of appeals vacated almost the entire amount of the damages award in the POWI 1 litigation. Although the company intends to vigorously contest the recent verdict, the facts and the evidence in this case are different from past cases and, as in all litigation, results are inherently uncertain. No assurance can be given that the company will achieve the same or a similar result following post-trial review and any appeal of this verdict as the company did following post-trial review and appeal of the POWI 1 verdict. POWI 4: On February 10, 2010, Fairchild and System General filed a lawsuit in Suzhou, China against four Power Integrations entities and seven vendors. The lawsuit claims that Power Integrations violates certain Fairchild/System General patents. Fairchild is seeking an injunction against the Power Integrations products and over $17.0 million in damages. Hearings comparable to a trial in U.S. litigation were held in January, May and July 2012. In December of 2012, the Suzhou court ruled in favor of Power Integrations and denied the company’s claims. The company is appealing the trial court’s judgment to the appeals court in Nanjing, China. POWI 5: On May 1, 2012, the company sued Power Integrations in U.S. District Court for the District of Delaware. The lawsuit accuses Power Integration’s LinkSwitch-PH LED power conversion products of violating three of the company’s patents. Power Integrations has filed counterclaims of patent infringement against the company asserting five Power Integrations patents. Trial is currently expected to be in May of 2015. Other Legal Claims. From time to time the company is involved in legal proceedings in the ordinary course of business. The company believes it has valid defenses with respect to matters currently pending against it and intends to defend itself vigorously. For example, in December 2013, a customer of one of the company’s distributors filed suit against the company claiming damages of $30 million arising out of the purchase of $20,000 of the company’s products. The company is contesting that claim vigorously. The company believes that there is no such ordinary-course pending litigation that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, results of operations, or cash flows. For matters where an estimate of the range of possible loss is possible, management currently estimates the aggregate range of reasonably possible loss, in excess of amounts accrued for outstanding matters is $2.5 million to $18.9 million. The estimated range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. Those matters for which an estimate is not possible are not included within this estimated range. Therefore, this estimated range of possible loss represents what the company believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the company’s maximum exposure.

Note 11 – Contingencies

Litigation. From time to time, the company is involved in legal proceedings in the ordinary course of business. The company analyzes potential outcomes from current and potential litigation as loss contingencies in accordance with the Contingency Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). Since most potential claims against the company may involve the enforcement of complex intellectual property rights or complicated damages calculations, the company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, related to each pending matter may be.

In accordance with applicable accounting guidance, the company establishes an accrued liability for litigation when the matter presents a loss contingency that is both probable and estimable. As the litigation matter develops, the company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Even when the company establishes an accrued liability, there may be exposures to loss in excess of any amounts accrued. The amount reserved is based upon assessments of the potential liabilities using analysis of claims and historical experience in defending and resolving such claims.

When a loss contingency is not both probable and estimable, the company does not establish an accrued liability. If, at the time of the evaluation, the loss contingency related to a litigation matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. For a limited number of matters disclosed in this note for which a loss, whether in excess of a related accrued liability or where there is no accrued liability, is reasonably possible in future periods, the company is able to estimate a range of possible loss. In determining whether it is possible to estimate a range of possible loss, the company reviews and evaluates its material litigation on an ongoing basis in light of potentially relevant factual and legal developments. These may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, and other rulings by courts, arbitrators or others. If the company possesses sufficient information to develop an estimate of loss or range of possible loss, that estimate is disclosed either individually or in the aggregate. Finally, for loss contingencies for which the company believes the possibility of loss is remote, the company does not record a reserve or assess the range of possible losses.

Based on current knowledge, management does not believe that loss contingencies arising from pending matters will have a material adverse effect on our business, financial condition, results of operations or cash flows. However, in light of the inherent uncertainties involved in these matters, some of which are beyond the company’s control, an adverse outcome in one or more of these matters could be material to the company’s results of operations or cash flows for any particular reporting period.

Patent Litigation with Power Integrations, Inc. There are five outstanding proceedings with Power Integrations.

POWI 1: On October 20, 2004, the company and its wholly owned subsidiary, Fairchild Semiconductor Corporation, were sued by Power Integrations, Inc. in the U.S. District Court for the District of Delaware. Power Integrations alleged that certain of the company’s pulse width modulation (PWM) integrated circuit products infringed four Power Integrations U.S. patents, and sought a permanent injunction preventing the company from manufacturing, selling or offering the products for sale in the U.S., or from importing the products into the U.S., as well as money damages for past infringement.

The trial in the case was divided into three phases. In the first phase of the trial that occurred in October of 2006, a jury returned a verdict finding that thirty-three of the company’s PWM products willfully infringed one or more of seven claims asserted in the four patents and assessed damages against the company. The company voluntarily stopped U.S. sales and importation of those products in 2007 and have been offering replacement products since 2006. Subsequent phases of the trial conducted during 2007 and 2008 focused on the validity and enforceability of the patents. In December of 2008, the judge overseeing the case reduced the jury’s 2006 damages award from $34 million to approximately $6.1 million and ordered a new trial on the issue of willfulness. Following the new trial held in June of 2009, the court found the company’s infringement to have been willful, and in January 2011 the court awarded Power Integrations final damages in the amount of $12.2 million. The company appealed the final damages award, willfulness finding, and other issues to the U.S. Court of Appeals for the Federal Circuit. On March 26, 2013, the court of appeals vacated almost the entire damages award, ruling that there was no basis upon which a reasonable jury could find the company liable for induced infringement. The court also vacated the earlier ruling of willful patent infringement by the company. The full court of appeals and the Supreme Court of the United States have since denied Power Integrations’ request to review the appeals court ruling. Although the appeals court instructed the lower court to conduct further proceedings to determine damages based upon approximately $500,000 to $750,000 worth of sales and imports of affected products, the company believes that damages on the basis of that level of infringing activity would not be material. Accordingly, the company released $12.6 million from its reserves relating to this case during the first quarter of 2013.

POWI 2: On May 23, 2008, Power Integrations filed another lawsuit against the company, Fairchild Semiconductor Corporation and its wholly owned subsidiary System General Corporation in the U.S. District Court for the District of Delaware, alleging infringement of three patents. Of the three patents asserted in that lawsuit, two were asserted against the company and Fairchild Semiconductor Corporation in the October 2004 lawsuit described above. In 2011, Power Integrations added a fourth patent to this case.

On October 14, 2008, Fairchild Semiconductor Corporation and System General Corporation filed a patent infringement lawsuit against Power Integrations in the U.S. District Court for the District of Delaware, alleging that certain PWM integrated circuit products infringe one or more claims of two U.S. patents owned by System General. The lawsuit seeks monetary damages and an injunction preventing the manufacture, use, sale, offer for sale or importation of Power Integrations products found to infringe the asserted patents.

Both lawsuits were consolidated and heard together in a jury trial in April of 2012. On April 27, 2012, the jury found that Power Integrations infringed one of the two U.S. patents owned by System General and upheld the validity of both System General patents. In the same verdict, the jury found that the company infringed two of four U.S. patents asserted by Power Integrations and that the company had induced its customers to infringe the asserted patents. The jury also upheld the validity of the asserted Power Integrations patents. The verdict concluded the first phase of trial in the litigation. On June 30, 2014, the court issued an order enjoining Fairchild from making, using, selling, offering to sell or importing into the United States the products found to infringe the Power Integrations patents in the case as well as certain products that were similar to the products found to infringe. Willfulness and damages in the case will be determined in a second phase, which has yet to be scheduled and may occur after appeals of the first phase.

POWI 3: On November 4, 2009, Power Integrations filed a complaint for patent infringement against the company and two of its subsidiaries in the U.S. District Court for the Northern District of California alleging that several of its products infringe three of Power Integrations’ patents. Fairchild filed counterclaims asserting that Power Integrations infringed two Fairchild patents. A trial was held from February 10-27, 2014 on two Power Integrations’ patents and one Fairchild patent. On March 4, 2014, the jury returned a verdict finding that Fairchild willfully infringed both Power Integrations patents, awarding Power Integrations $105 million in damages, and finding that Power Integrations did not infringe the Fairchild patent. Both parties filed various post-trial motions to the verdict which were denied by the court with the exception of Fairchild’s motion to set aside the jury’s determination that it acted willfully. On September 9, 2014, the court granted the company’s motion and determined that, as a matter of law, its actions were not willful. As a result of the reversal of the original willfulness finding, the jury verdict will not be enhanced by the trial court.

The company will continue to challenge several aspects of the verdict during post-trial review and if necessary on appeal. The company believes the infringement findings were in error and failed to account for differences in the accused products. The company will also challenge the damages award, including with respect to the sufficiency of the damages evidence and Power Integrations’ unique damages theory. The company believes the damages award includes legal and evidentiary defects, some of which are similar to those that were the basis for a 2013 ruling by the U.S. Court of Appeals for the Federal Circuit, described above, in which the court of appeals vacated almost the entire amount of the damages award in the POWI 1 litigation. Although the company intends to vigorously contest the recent verdict, the facts and the evidence in this case are different from past cases and, as in all litigation, results are inherently uncertain. No assurance can be given that the company will achieve the same or a similar result following post-trial review and any appeal of this verdict as the company did following post-trial review and appeal of the POWI 1 verdict.

POWI 4: On February 10, 2010, Fairchild and System General filed a lawsuit in Suzhou, China against four Power Integrations entities and seven vendors. The lawsuit claims that Power Integrations violates certain Fairchild/System General patents. Fairchild is seeking an injunction against the Power Integrations products and over $17.0 million in damages. Hearings comparable to a trial in U.S. litigation were held in January, May and July 2012. In December of 2012, the Suzhou court ruled in favor of Power Integrations and denied the company’s claims. The company is appealing the trial court’s judgment to the appeals court in Nanjing, China.

POWI 5: On May 1, 2012, the company sued Power Integrations in U.S. District Court for the District of Delaware. The lawsuit accuses Power Integration’s LinkSwitch-PH LED power conversion products of violating three of the company’s patents. Power Integrations has filed counterclaims of patent infringement against the company asserting five Power Integrations patents. Trial is currently expected to be in May of 2015.

Other Legal Claims. From time to time the company is involved in legal proceedings in the ordinary course of business. The company believes it has valid defenses with respect to matters currently pending against it and intends to defend itself vigorously. For example, in December 2013, a customer of one of the company’s distributors filed suit against the company claiming damages of $30 million arising out of the purchase of $20,000 of the company’s products. The company is contesting that claim vigorously. The company believes that there is no such ordinary-course pending litigation that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, results of operations, or cash flows.

For matters where an estimate of the range of possible loss is possible, management currently estimates the aggregate range of reasonably possible loss, in excess of amounts accrued for outstanding matters is $2.5 million to $18.9 million. The estimated range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. Those matters for which an estimate is not possible are not included within this estimated range. Therefore, this estimated range of possible loss represents what the company believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the company’s maximum exposure.