The Company leases its domestic and foreign sales offices under non-cancelable operating leases. These leases contain various expiration dates and renewal options. The Company also leases certain manufacturing equipment and software rights under operating leases. Total rental expense for the years ended December 31, 2011, 2010 and 2009 was $20.1 million, $19.7 million and $19.9 million, respectively.

On August 30, 2011, the Company completed the sale of its San Jose corporate headquarters and adjacent parcels of land to Ellis Partners LLC for an aggregate sale price of $48.5 million. Concurrent with the sale, the Company is leasing back its corporate headquarters facility for a term of seven months at a rate of $0.2 million per month with two three-month renewal options (see Note 15).

On August 30, 2011, the Company entered into a ten year lease of approximately $52.6 million for a new corporate headquarters located at 1600 Technology Drive in San Jose, California (the "Technology Drive Lease"). The Company expects to commence occupancy of the premises in the second quarter of 2012 (See Note 15).

Aggregate non-cancelable future minimum rental payments under operating leases are as follows:

Years Ending December 31:	Operating Leases

	(In thousands)
2012	$	3,453
2013		6,671
2014		6,394
2015		5,926
2016		5,983
Thereafter		34,514

	$	62,941

As is customary in the Company's industry, the Company's standard contracts provide remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of the Company's products. From time to time, the Company will indemnify customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of the Company's products and services, usually up to a specified maximum amount. In addition, as permitted under state laws in the United States, the Company has entered into indemnification agreements with its officers and directors and certain employees, and the Company's bylaws permit the indemnification of the Company's agents. In the Company's experience, the estimated fair value of the liability is not material.

At December 31, 2011, the Company had certain commitments which were not included on the consolidated balance sheet at that date. These include outstanding capital purchase commitments of $3.4 million and wafer purchase commitments of approximately $216.7 million from the Company's manufacturing service agreement with LFoundry Rousset (See Note 15). The wafer purchase commitment with Telefunken Semiconductors GmbH & Co. KG concluded as of December 31, 2011.

The Company is party to various legal proceedings. Management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on its financial position, results of operations and statement of cash flows. If, however, an unfavorable ruling were to occur in any of the legal proceedings described below, there exists the possibility of a material adverse effect on the Company's financial position, results of operations and cash flows. The Company has accrued for losses related to the litigation described below that it considers probable and for which the loss can be reasonably estimated. In the event that a probable loss cannot be reasonably estimated, it has not accrued for such losses. The Company continues to monitor these matters; its determination could change, however, and the Company may decide, at some future date, to establish an appropriate reserve. With respect to each of the matters below, except where noted otherwise, management has determined a potential loss is not probable at this time and, accordingly, no amount has been accrued at December 31, 2011. Management makes a determination as to when a potential loss is reasonably possible based on relevant accounting literature and then includes appropriate disclosure of the contingency. Except as otherwise noted, management does not believe that the amount of loss or a range of possible losses is reasonably estimable.

Matheson Litigation. On September 28, 2007, Matheson Tri-Gas ("MTG") filed suit against the Company in Texas state court in Dallas County. Plaintiff alleged claims for: (1) breach of contract for the Company's alleged failure to pay minimum payments under a purchase requirements contract; (2) breach of contract under a product supply agreement; and (3) breach of contract for failure to execute a process gas agreement. MTG sought unspecified damages, pre- and post-judgment interest, attorneys' fees and costs. In late November 2007, the Company filed its answer denying liability. In July 2008, the Company filed an amended answer, counterclaim and cross claim seeking among other things a declaratory judgment that a termination agreement cut off any claim by MTG for additional payments. In an Order entered on June 26, 2009, the Court granted the Company's motion for partial summary judgment dismissing MTG's breach of contract claims relating to the requirements contract and the product supply agreement. The parties dismissed the remaining claims and, on August 26, 2009, the Court entered a Summary Judgment Order and Final Judgment. MTG filed a Motion to Modify Judgment and Notice of Appeal on September 24, 2009. On July 27, 2011, the Texas Court of Appeals affirmed the trial court's judgment. After the Court of Appeals denied MTG's motion for a rehearing, MTG declined to appeal the decision to the Supreme Court of Texas and the Company has determined that this matter has concluded.

Distributor Litigation. On June 3, 2009, the Company filed an action in Santa Clara County Superior Court against three of the Company's now-terminated Asia-based distributors, NEL Group Ltd. ("NEL"), Nucleus Electronics (Hong Kong) Ltd. ("NEHK") and TLG Electronics Ltd. ("TLG"). The Company sought, among other things, to recover $8.5 million owed, plus applicable interest and attorneys fees. On June 9, 2009, NEHK separately sued the Company in Santa Clara County Superior Court, alleging that the Company's suspension of shipments to NEHK on September 23, 2008 — one day after TLG appeared on the Department of Commerce, Bureau of Industry and Security's Entity List — breached the parties' International Distributor Agreement. NEHK also alleged that the Company libeled it, intentionally interfered with contractual relations and/or prospective business advantage, and violated California Business and Professions Code Sections 17200 et seq. and 17500 et seq. Both matters were then consolidated. On July 29, 2009, NEL also filed a cross-complaint against the Company that alleged claims virtually identical to those NEHK had alleged. NEL and NEHK sought damages of up to $50.0 million. Because TLG did not answer the Company's complaint, on November 23, 2009, the Court entered a default judgment against TLG of $2.7 million. The litigation against NEHK and NEL proceeded. On March 28, 2011, the Court entered an order requiring that NEL (and/or certain of its subsidiaries, including NEHK) deposit $2.9 million in a court-administered account until final disposition of the litigation or a further court order. The Court ordered these funds to be deposited after it found this amount to be the current "gain" realized from certain restructuring transactions NEL and NEHK completed in violation of the Court's October 22, 2009 preliminary injunction prohibiting such restructuring. Despite the Court order, no funds ever were deposited with the Court. On June 3, 2011, NEL and NEHK's counsel withdrew from the case and never were replaced. Accordingly, on December 22, 2011, the Court dismissed NEL's and NEHK's claims with prejudice, and, on February 8, 2012, entered a default judgment holding each jointly and severally liable to the Company for $8.6 million. The default judgment also held NEL jointly and severally liable with TLG for the full amount of the default judgment entered against TLG in November 2009. With accrued interest, that judgment now totals $3.3 million. NEL thus has been adjudged liable to the Company for $11.9 million in total.

French Labor Litigation. On July 24, 2009, 56 former employees of the Company's Nantes facility filed claims in the First Instance labor court, Nantes, France against the Company and MHS Electronics claiming that (1) the Company's sale of the Nantes facility to MHS (XbyBus SAS) in 2005 did not result in the transfer of their labor agreements to MHS, and (2) these employees should still be considered Company employees, with the right to claim related benefits from the Company. Alternatively, each employee seeks damages of at least 45.0 thousand Euros and court costs. Five of the original 56 plaintiffs later dropped out of the case — leaving 51 remaining plaintiffs. On November 30, 2011, the Court rejected plaintiffs' claims. Two plaintiffs have appealed the Court's decision. These claims are similar to those filed in the First Instance labor court in October 2006 by 47 other former employees of the Company's Nantes facility (MHS was not named a defendant in the earlier claims). On July 24, 2008, the judge hearing the earlier claims issued an oral ruling in favor of the Company, finding that there was no jurisdiction for those claims by certain "protected employees," and denying the claims as to all other employees. Forty of those earlier plaintiffs appealed, and on February 11, 2010, the Court of Appeal of Rennes, France affirmed the lower court's ruling. Plaintiffs' time to appeal expired and the earlier litigation now is concluded.

Azure Litigation. On December 22, 2010, Azure Networks, LLC, a non-practicing entity, and Tri-County Excelsior Foundation, a non-profit organization, sued the Company and several other semiconductor companies for patent infringement in the United States District Court for the Eastern District of Texas. In a First Amended Complaint filed on April 18, 2011, Plaintiffs alleged that the Company makes, uses, offers for sale, sells, and/or imports into or within the United States RF transceivers that, when integrated with certain Zigbee-compliant software that the Company provides, allegedly induced the infringement of United States Patent Number 7,020,501 (entitled "Energy Efficient Forwarding in Ad-Hoc Wireless Networks"). On May 5, 2011, the Company filed counterclaims seeking a declaration that the '501 patent is invalid and not infringed. On July 11, 2011, the Court granted the Company and plaintiffs' joint motion to dismiss without prejudice all claims and counterclaims, resulting in the conclusion of this matter.

Infineon Litigation. On April 11, 2011, Infineon Technologies A.G. and Infineon Technologies North America Corporation (collectively, "Infineon") filed a patent infringement lawsuit against the Company in the United States District Court for the District of Delaware. Infineon alleges that the Company is infringing 11 Infineon patents and seeks a declaration that three of the Company's patents are either invalid or not infringed. On July 5, 2011, the Company answered Infineon's complaint, and filed counterclaims seeking a declaration that each of the 11 asserted Infineon patents is invalid and not infringed. The Company also counterclaimed for infringement of six of the Company's patents and breach of contract related to Infineon's breach of a confidentiality agreement. On July 29, 2011, Infineon answered these counterclaim and sought a declaration that the Company's newly-asserted patents were either invalid or not infringed. On January 31, 2012, the Company filed a motion for leave to amend its counterclaims to allege Infineon's infringement of four additional Atmel patents. The Company intends to prosecute its claims and defend vigorously against Infineon's claims.

From time to time, the Company is notified of claims that its products may infringe patents, or other intellectual property, issued to other parties. The Company periodically receives demands for indemnification from its customers with respect to intellectual property matters. The Company also periodically receives claims relating to the quality of its products, including claims for additional labor costs, costs for replacing defective parts, reimbursement to customers for damages incurred in correcting their defective products, costs for product recalls or other damages. Receipt of these claims and requests occurs in the ordinary course of the Company's business, and the Company responds based on the specific circumstances of each event. The Company undertakes an accrual for losses relating to those types of claims when it considers those losses "probable" and when a reasonable estimate of loss can be determined.

In October 2008, officials of the European Union Commission (the "Commission") conducted an inspection at the offices of one of the Company's French subsidiaries. The Company was informed that the Commission was seeking evidence of potential violations by Atmel or its subsidiaries of the European Union's competition laws in connection with the Commission's investigation of suppliers of integrated circuits for smart cards. On September 21, 2009 and October 27, 2009, the Commission requested additional information from the Company, and the Company responded to the Commission's requests. The Company continues to cooperate with the Commission's investigation and has not received any specific findings, monetary demand or judgment through the date of filing this Form 10-K. As a result, the Company has not recorded any provision in its financial statements related to this matter.

The Company accrues for warranty costs based on historical trends of product failure rates and the expected material and labor costs to provide warranty services. The Company's products are generally covered by a warranty typically ranging from 30 days to two years.

The following table summarizes the activity related to the product warranty liability for the years ended December 31, 2011, 2010 and 2009.

	Years Ended

	December 31, 2011			December 31, 2010			December 31, 2009
	(In thousands)
Balance at beginning of period	$	4,019		$	4,225		$	5,579
Accrual for warranties during the period		7,383			3,779			3,190
Actual costs incurred		(5,656	)		(3,985	)		(4,544	)

Balance at end of period	$	5,746		$	4,019		$	4,225

Product warranty liability is included in accrued and other liabilities on the consolidated balance sheets.

During the ordinary course of business, the Company provides standby letters of credit or other guarantee instruments to certain parties as required for certain transactions initiated by either the Company or its subsidiaries. As of December 31, 2011, the maximum potential amount of future payments that the Company could be required to make under these guarantee agreements was $1.9 million. The Company has not recorded any liability in connection with these guarantee arrangements. Based on historical experience and information currently available, the Company believes it will not be required to make any payments under these guarantee arrangements.