
19.	Commitments and Contingencies

We have a letter of credit sub-facility of $25.0 million under our $150.0 million senior secured revolving credit facility that matures in June 2017. As of December 31, 2013, we had $0.3 million of standby letters of credit outstanding and had an additional $24.7 million available for letters of credit. Such standby letters of credit are used in the ordinary course of our business and are collateralized by our cash balances.

We generally warrant that our services will be performed in a professional and workmanlike manner and in compliance with our customers’ specifications. We accrue costs for known warranty issues. Historically, our warranty costs have been immaterial.

Legal Proceedings

We are involved in claims and legal proceedings and may become involved in other legal matters arising in the ordinary course of our business. We evaluate these claims and legal matters on a case-by-case basis to make a determination as to the impact, if any, on our business, liquidity, results of operations, financial condition or cash flows. Except as indicated below, we believe that the ultimate outcome of these claims and proceedings, individually and in the aggregate, will not have a material adverse impact to us. Our evaluation of the potential impact of these claims and legal proceedings on our business, liquidity, results of operations, financial condition or cash flows could change in the future.

Proceedings with Tessera, Inc.

Since March 2006, we have been involved in several proceedings with Tessera, Inc. (“Tessera”) related to a license agreement (the “License Agreement”) entered into in 1996 between Tessera and our predecessor. The proceedings generally involve disputes about whether or not Amkor owes Tessera royalties under the License Agreement with respect to certain packages and the termination of the License Agreement. The main proceeding that is pending is with the International Court of Arbitration of the International Chamber of Commerce (the “ICC”) captioned Amkor Technology, Inc. v. Tessera, Inc. (the “2009 Arbitration”), which we initiated in August 2009. In that proceeding, the ICC arbitration panel issued partial awards and interim orders finding that royalties are due to Tessera with respect to certain asserted patents and packages and that the License Agreement was terminated by Tessera as of February 17, 2011. The arbitration panel reserved for later decision the issues of the amount of royalties and pre-judgment interest due, and the allocation of costs. The other pending arbitration proceedings with Tessera include a request for arbitration by Tessera filed in May 2011 seeking undisclosed damages and a declaration that the License Agreement had been terminated, and a proceeding initiated in July 2012 with respect to claims related to three additional U.S. patents.

In July 2012, Tessera filed a complaint in the U.S. District Court for the District of Delaware. The complaint seeks injunctive relief and damages with respect to Amkor's alleged infringement of one of the U.S. patents (U.S. Patent No. 6,046,076, the "'076 patent") that the arbitration panel found to be royalty bearing in the 2009 Arbitration. In November 2013, the parties agreed to stay the Delaware litigation pending certain determinations in the 2009 Arbitration.

In February 2013, Tessera publicly announced its intention to seek an amount in excess of $150 million in the 2009 Arbitration. That same month, we filed a petition in the Superior Court for San Francisco County (the "California Action") to vacate or correct a portion of the arbitration panel’s interim order relating to the panel’s authority to award royalties for the period after the termination of the License Agreement. The Superior Court has denied our request and we have appealed that decision to the California First District Court of Appeal.

In April 2013, we initiated an inter partes review (the “IPR”) proceeding with the Patent Trial and Appeal Board at the United States Patent and Trademark Office (“U.S. PTO”), requesting it to find certain claims of the ‘076 patent unpatentable, including the claim we were found to infringe during the arbitration. In October 2013, the U.S. PTO determined that there is a reasonable likelihood that we will prevail in challenging that claim and certain others.

In November 2013, Tessera filed a motion to terminate the IPR proceeding on procedural grounds. In January 2014, the U.S. PTO denied Tessera’s motion and the proceeding is scheduled to go forward on the merits with a hearing in May 2014.

In October 2013 and January 2014, the arbitration panel issued additional interim orders which included, among other things, some substantive findings concerning the calculation of royalties under the License Agreement. In February 2014, Tessera filed a motion with the arbitration panel to enjoin us from proceeding with the IPR. We have filed a response with the arbitration panel requesting it to deny Tessera's motion and to stay a portion of the 2009 Arbitration pending final resolution of the IPR proceeding.

As a result of the latest interim order, we estimate the possible range of royalties due to Tessera in the 2009 Arbitration to be from $60 million to $135 million (excluding interest). Because we believe that no amount in the range constitutes a better estimate than any other amount within that range, we have recorded an aggregate charge to cost of goods sold of $60 million ($10.0 million in 2013 and $50.0 million in 2012), representing our estimate of the low end of the range of possible royalties owed to Tessera in respect of the 2009 Arbitration. Of the $60 million of charges we have recognized for royalties, we paid $16.7 million to Tessera in August 2012, plus related interest. As of December 31, 2013, our accrual for royalties for the 2009 Arbitration was $43.3 million, and our estimate of the possible range of royalties due to Tessera in respect of the 2009 Arbitration (net of the royalties paid in August 2012) is from $43.3 million to $118.3 million.

The ultimate amount of damages and interest we may owe to Tessera in connection with the several pending proceedings could be more or less than our estimate of the possible range of royalties due in the 2009 Arbitration. The final outcome of our litigation with Tessera depends upon a number of complex factors, including the panel's determination of which package families the patents apply to, whether those packages meet criteria previously laid out by the panel, overlaps among the packages, the final date through which royalties are applicable, whether we receive a favorable ruling in the California Action or IPR proceeding and other factors. We may adjust our accrual as information develops or upon the issuance of new rulings. We expect to record our estimate of interest accruing with the passage of time.

We strongly dispute Tessera's claims in these proceedings and intend to vigorously defend against them. However, the final outcome of these matters is uncertain, and an adverse result could have a material adverse effect on our results of operations, financial condition and cash flows.

Amkor Technology, Inc. v. Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc.

Since November 2003, we have been involved in several proceedings against Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc. (collectively “Carsem”) in which we allege that with its Carsem Dual and Quad Flat No-Lead Packages, Carsem has infringed on one or more of our MicroLeadFrame packaging technology patent claims. We initiated the action with the U.S International Trade Commission (the “ITC”) in Washington, D.C. seeking, under Section 337 of the Tariff Act of 1930, an exclusion order barring the importation by Carsem of infringing products. We also filed a complaint against Carsem in the U.S. District Court for the Northern District of California, alleging patent infringement and seeking an injunction, damages and costs. This District Court action has been stayed pending resolution of the ITC case.

The ITC determined that certain Carsem Dual and Quad Flat No-Lead Packages infringe some patent claims of Amkor's U.S. Patent No. 6,433,277 (the "277 Patent") but that these infringed claims are invalid and, as a result, there is no violation of the Tariff Act. We appealed the ITC's ruling of invalidity for the claims of the 277 Patent to the U.S. Court of Appeals for the Federal Circuit (the "Federal Circuit").

In 2012, the Federal Circuit reversed the ITC's determination of invalidity on the 277 Patent, denied Carsem's petition for a rehearing and remanded the matter to the ITC for further proceedings consistent with its ruling.

In January 2013, in response to Carsem, Inc.’s requests for reexamination of the 277 Patent, the U.S. PTO issued an Office Action rejecting all of the 277 Patent claims as invalid. Amkor believes that all of the 277 Patent claims are valid and filed a response to the Office Action in March 2013 contesting this finding. In January 2014, the U.S. PTO issued an Office Action maintaining the rejection of all claims of the 277 Patent as invalid. Amkor continues to believe its claims are valid and will respond to the Office Action accordingly.

Leases

Future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year are:



	Lease Payments
	(In thousands)
2014	$	23,380
2015	14,937
2016	4,116
2017	4,060
2018	4,031
Thereafter	6,445
Total	$	56,969

Rent expense amounted to $23.8 million, $13.2 million and $15.1 million for 2013, 2012 and 2011, respectively.

In order to provide packaging and test services, we purchase materials under various long-term supply contracts. Future minimum payments to be made under these contracts for the period 2014 through 2025 are $24.0 million.