COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is a party or subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to intellectual-property matters. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized or reserved, if any.

Indemnification

The Company indemnifies certain customers, distributors, suppliers and subcontractors for attorney fees and damages and costs awarded against such parties in certain circumstances in which the Company’s products are alleged to infringe third party intellectual property rights, including patents, registered trademarks or copyrights. The terms of the Company’s indemnification obligations are generally perpetual from the effective date of the agreement. In certain cases, there are limits on and exceptions to the Company’s potential liability for indemnification relating to intellectual property infringement claims.

Pursuant to the Company’s charter documents and separate written indemnification agreements, the Company has certain indemnification obligations to its current officers, employees and directors, as well as certain former officers and directors.

Product Warranty

The Company generally warrants its products for one year from the date of shipment against defects in materials, workmanship and material non-conformance to the Company’s specifications. The general warranty policy provides for the repair or replacement of defective products or a credit to the customer’s account. In limited circumstances, the term of product warranty may extend beyond one year and may include financial responsibility beyond repairing or replacing the product or crediting the customer’s account. In addition, we may also consider the Company’s relationship with its customer when assessing product claims. Warranty expense has historically been immaterial to the Company's consolidated financial statements. However, included within the results of operations for the three months ended December 28, 2013 is a charge of $18.1 million primarily related to a product claim with a major customer. This charge includes product replacement and the cost to remove and install replacement product. Additionally, the Company assumed from its recent acquisition of Volterra Corporation $13.9 million of warranty claims.

Accruals are based on specifically identified claims and on the estimated, undiscounted cost of incurred-but-not-reported claims. If there is a material increase in the rate of customer claims compared with our historical experience or if the Company's estimates of probable losses relating to specifically identified warranty exposures require revision, the Company may record a charge against future cost of sales. Product warranty liability is included within the balance sheet caption “Accrued Expenses” in the accompanying Condensed Consolidated Balance Sheets.

The changes in Maxim Integrated's aggregate product warranty liabilities for the six months ended December 28, 2013 were as follows:



	(in thousands)
Product warranty liability at June 29, 2013	$	3,075
Accruals assumed from acquisition	13,911
Accruals for warranties issued	18,274
Payments	(8,759		)
Changes in estimate	(67		)
Product warranty liability at December 28, 2013	$	26,434