Commitments and Contingencies

12 Months Ended

Dec. 28, 2019

Commitments and Contingencies Disclosure [Abstract]

Operating Leases

The Company leases facilities under non-cancelable operating lease agreements. These leases have varying terms that range from one to 11 years. The Company has contractual commitments to remove leasehold improvements and return certain properties to a specified condition when the leases terminate. At the inception of a lease with such conditions, the Company records an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. Asset retirement obligations were $4.7 million and $5.4 million as of December 28, 2019 and December 29, 2018, respectively. These obligations are classified as other long-term liabilities on the accompanying consolidated balance sheets.

Future annual minimum operating lease payments at December 28, 2019 were as follows (in thousands):



	2020		2021		2022		2023		2024		Thereafter		Total
Operating lease payments	$	24,717	$	18,265	$	15,488	$	12,208	$	10,212	$	36,124	$	117,014

In the fourth quarter of 2017, the Company implemented the 2017 Restructuring Plan, which included cease-use of certain leased facilities. See Note 10, "Restructuring and Other Related Costs" to the Notes to Consolidated Financial Statements for more information.

In the fourth quarter of 2018, the Company implemented the 2018 Restructuring Plan, which included vacating certain leased facilities. See Note 10, "Restructuring and Other Related Costs" to the Notes to Consolidated Financial Statements for more information.

Financing Lease Obligations

The Company has two finance leases for manufacturing and other equipment. See Note 9, "Balance Sheet Details" to the Notes to Consolidated Financial Statements for more information.

Future annual minimum financing lease payments at December 28, 2019 were as follows (in thousands):



	2020		2021		2022		2023		2024		Thereafter		Total
Financing lease obligations	$	1,563	$	1,204	$	936	$	406	$	—	$	—	$	4,109

Purchase Commitments

The Company has agreements with its major production suppliers, where the Company is committed to purchase certain parts. As of December 28, 2019, December 29, 2018 and December 30, 2017, these non-cancelable purchase commitments were $258.2 million, $203.5 million and $96.1 million, respectively. The significant increase of purchase commitments in 2018 was due to the Acquisition.

Future purchase commitments at December 29, 2018 were as follows (in thousands):



	2020		2021		2022		2023		2024		Thereafter		Total
Purchase obligations	$	255,427	$	1,553	$	1,154	$	43	$	—	$	—	$	258,177

The contractual obligation tables above exclude tax liabilities of $4.1 million related to uncertain tax positions because the Company cannot reliably estimate the timing and amount of future payments, if any.

Convertible Senior Notes 2024

The future interest and principal payments related to the 2024 Notes are as follows as of December 28, 2019:



	2020		2021		2022		2023		2024		Thereafter		Total
Convertible senior notes, including interest	$	8,553	$	8,553	$	8,553	$	8,553	$	411,053	$	—	$	445,265

Mortgage Payable

The future interest and principal payments related to the Mortgage are as follows as of December 28, 2019:



	2020		2021		2022		2023		2024		Thereafter		Total
Mortgage payable, including interest	$	841	$	842	$	841	$	841	$	6,725	$	—	$	10,090

Finance Assistance Agreement

The future interest and principal payments related to the Financing assistance agreement are as follows as of December 28, 2019:



	2020		2021		2022		2023		2024		Thereafter		Total
Finance assistance agreement	$	31,809	$	—	$	—	$	—	$	—	$	—	$	31,809

Asset-backed Loan

The future interest and principal payments related to the Credit Facility are as follows as of December 28, 2019:



	2020		2021		2022		2023		2024		Thereafter		Total
Asset backed loan	$	525	$	—	$	—	$	—	$	30,000	$	—	$	30,525

Legal Matters

Oyster Optics LLC I

On November 23, 2016, Oyster Optics, LLP (“Oyster Optics”) filed a complaint against the Company in the United States District Court for the Eastern District of Texas. The complaint asserts infringement of U.S. Patent Nos. 6,469,816, 6,476,952, 6,594,055, 7,099,592, 7,620,327 (the “’327 patent”), 8,374,511 (the “’511 patent”) and 8,913,898 (the “’898 patent”). Collectively, the asserted patents are referred to herein as the “Oyster Optics patents in suit.” The complaint seeks unspecified damages and a permanent injunction. The Company filed its answer to Oyster Optics’ complaint on February 3, 2017. The Company filed two petitions for Inter Partes Review (“IPR”) of the ‘898 patent with the U.S. Patent and Trademark Office (“USPTO”). Other defendants have filed IPR petitions in connection with the remaining Oyster Optics patents in suit. The USPTO instituted two IPRs of the ‘511 patent and two IPRs of the ‘898 patent but denied IPR petitions in connection with the ‘327 patent.

A first Markman decision issued on December 5, 2017 and fact discovery closed on December 22, 2017. Oyster Optics dropped the ‘511 and ‘898 patents, leaving only a few claims in the ‘327 patent at issue in the case.

Oyster Optics LLC II

On May 15, 2018, Oyster Optics filed a new patent infringement complaint in the United States District Court for the Eastern District of Texas, naming the Company as a defendant. In its new complaint, Oyster Optics alleges infringement of the ‘327 patent, ‘898 patent and U.S. Patent No. 9,749,040. On June 8, 2018, the court granted the parties’ joint motion to sever and consolidate the first-filed lawsuit with the later filed case. The Company filed its answer to the new complaint on July 16, 2018. On October 26, 2018, the Company filed an amended answer to include a license defense based on a license agreement dated June 28, 2018 by and between Oyster Optics and several subsidiaries of Coriant (now one of the Company’s affiliated subsidiaries). The Company also filed a motion for summary judgment based on the license defense on November 29, 2018. On June 25, 2019, the Court granted the Company’s motion for summary judgment and on June 28, 2019, the court entered a final judgment for the Company. On July 22, 2019, Oyster Optics filed an appeal of the court’s decision with the Court of Appeals for the Federal Circuit. The Company believes that it does not infringe any valid and enforceable claim of the Oyster Optics patents in suit and intend to defend this action vigorously. The Company is currently unable to predict the outcome of this litigation at this time and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

Oyster Optics LLC III

On July 29, 2019, Oyster Optics filed a third complaint against the Company, Coriant (USA) Inc., Coriant North America, LLC and Coriant Operations, Inc. in the United States District Court for the Eastern District of Texas. The complaint asserts infringement of U.S. Patent No. 6,665,500 (the “Oyster III patent in suit”). The complaint seeks unspecified damages and a permanent injunction. On October 7, 2019, the Company filed its answer to the complaint asserting among other things, counterclaims and defenses based on non-infringement, invalidity, and a license to the Oyster III patent in suit. On October 28, 2019, Oyster filed an amended complaint. On December 3, 2019, the Company filed a motion to dismiss certain claims based on certain allegations made by Oyster in their amended complaint. On December 27, 2019, the Company filed petitions IPR petitions with the USPTO, in which the Company requested the USPTO to invalidate the asserted claims of the Oyster III patent in suit. The Company believes that it does not infringe any valid and enforceable claim of the Oyster III patent in suit and intend to defend this action vigorously. The Company is unable to predict the outcome of this litigation at this time and therefore cannot reasonably estimate the possible loss or range of loss, if any, arising from this matter.

Oyster Optics LLC IV

On August 26, 2019, Oyster Optics filed a fourth complaint against the Company in the Superior Court of California, Santa Clara County (“Oyster IV”). On November 5, 2019, the Oyster IV lawsuit was dismissed.

Civil Investigative Demand

On June 8, 2017, a Civil Investigative Demand was issued to Coriant pursuant to a False Claims Act investigation by the U.S. government as to whether there has been any violation of 31 U.S.C. §3729. Coriant provided documents and other responses to the U.S. government, and the Company will continue to cooperate in the ongoing investigation.

In addition to the matters described above, the Company is subject to various legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material effect on its consolidated financial position, results of operations or cash flows.

Loss Contingencies

The Company is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. In the preparation of its quarterly and annual financial statements, the Company considers the likelihood of loss or the incurrence of a liability, including whether it is probable, reasonably possible or remote that a liability has been incurred, as well as the Company’s ability to reasonably estimate the amount of loss, in determining loss contingencies. In accordance with U.S. GAAP, an estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information to determine whether any accruals should be adjusted and whether new accruals are required. As of December 28, 2019 and December 29, 2018, the Company has accrued the estimated liabilities associated with certain loss contingencies.

Indemnification Obligations

From time to time, the Company enters into certain types of contracts that contingently require it to indemnify parties against third-party claims. The terms of such indemnification obligations vary. These contracts may relate to: (i) certain real estate leases under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises; and (ii) certain agreements with the Company’s officers, directors and certain key employees, under which the Company may be required to indemnify such persons for liabilities.

In addition, the Company has agreed to indemnify certain customers for claims made against the Company’s products, where such claims allege infringement of third-party intellectual property rights, including, but not limited to, patents, registered trademarks, and/or copyrights. Under the aforementioned intellectual property indemnification clauses, the Company may be obligated to defend the customer and pay for the damages awarded against the customer under an infringement claim as well as the customer’s attorneys’ fees and costs. These indemnification obligations generally do not expire after termination or expiration of the agreement containing the indemnification obligation. In certain cases, there are limits on and exceptions to the Company’s potential liability for indemnification. The Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements. The maximum potential amount of any future payments that the Company could be required to make under these indemnification obligations could be significant.

As permitted under Delaware law and the Company’s charter and bylaws, the Company has agreements whereby it indemnifies certain of its officers and each of its directors. The term of the indemnification period is for the officer’s or director’s lifetime for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements could be significant; however, the Company has a director and officer insurance policy that may reduce its exposure and enable it to recover all or a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal.