COMMITMENTS AND CONTINGENCIES

Commitments

We lease our facilities and certain equipment under operating leases. Some of our regional office leases began to expire in 2011. The Company either extended the leases through clauses in the initial lease or negotiated new terms for the lease. The leases for our headquarters and manufacturing operations contain a five-year renewal option subject to a fair market value pricing adjustment. Certain of our leasing arrangements subject us to letter of credit requirements to provide a $2.4 million bank letter of credit as security to the landlord. In addition, certain of our leases require us to restore the facilities back to the original condition at the end of lease terms. As such, we recorded asset retirement obligations related to remediation costs as disclosed in Note 10 herein.

In September 2007, we sublet a portion of our facilities in San Jose, California and accounted for it as an operating lease. This sublease expired in January 2010. In July 2007, we capitalized a five-year lease agreement for a new phone system recorded as office equipment. The implied interest rate for this capital lease is 6.4%. The amortization of this phone system is included with depreciation expense.

In August 2008 and December 2009, we entered into agreements with a leasing company for the sale and leaseback of certain assets over initial terms of four years. The sales price of the assets was $6.8 million and $5.4 million for the sales in 2008 and 2009, respectively. There was no gain or loss from these transactions. Under the sale-leaseback arrangement, we have an option to purchase the assets back at the future current fair market value upon the expiration of the leases in 2012 and 2013, respectively. The leases are classified as operating leases in accordance with ASC Topic 840, Leases. As of December 31, 2011, the minimum future lease payments to be made were $1.9 million.

In October 2009, we entered into two lease amendments for our facilities in San Jose, California. The first lease amendment is to extend one of the building leases for five years. This lease extension will expire in January 2016. We account for this lease as an operating lease; any improvements to the leased property are capitalized and classified as leasehold improvements. Pursuant to the terms of the second lease amendment, in consideration for the waiver of certain surrender obligations set forth in the original lease of a separate building, we paid the landlord $0.6 million and surrendered possession of the premises in March 2010.

As of December 31, 2011, future minimum lease payments were as follows:



In thousands	Capital Leases			Operating Leases
For the years:
2012	$	181		$	2,272
2013	—			1,907
2014	—			1,762
2015	—			1,757
2016	—			147
Thereafter	—			—
Total minimum lease payments	181			$	7,845
Interest component	(5		)
Present value of lease payments - current	$	176

Rent expense was approximately $2.4 million, $2.7 million and $3.4 million for the years ended December 31, 2011, 2010 and 2009, respectively. We had no sublease income in 2011 and 2010, and $0.7 million in 2009.

Our open purchase order commitments, which primarily relate to purchases of inventories, equipment and leasehold improvements were approximately $73.0 million as of December 31, 2011.

Legal Proceedings

On July 11, 2003, we filed a lawsuit against a Southern California company asserting infringement of certain claims related to U.S. patent No. 5,621,813 in the U.S. District Court in and for the Northern District of California. On May 17, 2005, the court found the subject patent to be invalid. We appealed this decision. The defendant subsequently brought a motion for reimbursement of its attorneys’ fees and costs in a total asserted amount of approximately $2 million. We opposed this motion, and on October 12, 2005, the District Court denied the defendant’s request for attorneys’ fees in its entirety. The defendant appealed that decision. On November 3, 2005, the defendant filed a notice of appeal with respect to the court’s ruling on its motion for attorneys’ fees. In March 2006, the Federal Circuit court upheld the district court’s ruling that the subject patent is invalid. On August 8, 2006, the Federal Circuit court upheld the District Court’s denial of attorneys’ fees. Neither side appealed the rulings by the Federal Circuit.

In May 2006, the same company filed a state court lawsuit against us for malicious prosecution and abuse of process claiming that attorney’s fees, costs and other damages were due based on the outcome of the federal patent litigation suit described above. We do not believe this action has merit, particularly given the denial by the federal court of that company’s request to be awarded attorneys’ fees payable by us in the patent litigation and the subsequent federal appellate court’s affirmation of the order denying any such award. We filed a motion to have the state court complaint dismissed under California’s anti-strategic lawsuit against public participation (“anti-SLAPP”) and demurrer statutes. The anti-SLAPP statute is aimed at striking lawsuits that are brought in order to quash an individual’s constitutional rights to free speech or seeking redress of grievances (i.e., filing suit). The state court granted the anti-SLAPP motion as to the abuse of process claim, but denied it as to the malicious prosecution claim. Our subsequent appeals to the appellate court and California Supreme Court were unsuccessful, and the matter has returned to Riverside County Superior Court. We moved for summary judgment on the matter based on federal preemption, but the Superior Court denied the motion. A subsequent writ of mandamus filed by us was also not successful.

On April 19, 2011, the Riverside County Superior Court ruled in our favor with respect to the malicious prosecution claim. Judgment was formally entered in our favor on September 27, 2011 in the amount of $0.3 million. The opposing company has filed a notice of appeal of the judgment. In view of the court's ruling, we concluded that the likelihood of a loss with respect to this matter is less than reasonably possible and therefore, a range of loss cannot be provided.