Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies

19. Commitments and Contingencies

Leases and Royalties

The Company is obligated to pay certain minimum royalties in connection with license agreements to which it is a party. Royalty expense was $13,874, $18,625 and $15,711 for the three years ended December 31, 2011, 2010 and 2009, respectively.

The Company leases its facilities under operating leases that expire at various dates through 2016. Rent expense related to facilities for general administration and operations is charged to operating expenses in the statement of operations and totaled $2,377, $2,480 and $2,497 for the three years ended December 31, 2011, 2010 and 2009, respectively. Rent expense related to warehouse facilities is charged to cost of sales in the statement of operations and totaled $1,211, $1,856 and $2,694 for the three years ended December 31, 2011, 2010 and 2009, respectively.

Minimum rent commitments under all non-cancelable operating leases and minimum royalty commitments are set forth in the following table:

	Operating
Years Ended December 31,	Leases		Royalties		Total
2012	$	5,084	$	881	$	5,965
2013		4,554		477		5,031
2014		4,561		-		4,561
2015		3,021		-		3,021
2016		735		-		735
Total	$	17,955	$	1,358	$	19,313

The Company accounts for total rent expense under the leases on a straight-line basis over the lease terms. The Company had a deferred rent liability relating to rent escalation costs net of tenant incentives for its Emeryville, California headquarters. In December 2010, the Company early terminated its lease of one of the remaining three suites in its Emeryville, California headquarters. As a result, the Company reduced its deferred rent liability by $428 and credited against its rent expenses. At December 31, 2011 and 2010, the deferred rent liability was $1,843 and $1,571, respectively. Deferred rent is included in long-term liabilities.

Legal Proceedings

Although the Company is not currently party to any material pending legal proceedings, from time to time, third parties assert patent infringement claims against the Company. Currently, the Company is engaged in lawsuits regarding patent issues, and the Company also is occasionally notified of other potential patent disputes. In addition, from time to time, the Company is subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of other intellectual property rights, claims related to breach of contract, employment matters and a variety of other claims. Unsettled matters are in various stages of litigation and their outcome is currently not determinable. However, in the opinion of management, based on current knowledge, there is not at least a reasonable possibility that any of the foregoing legal proceedings or claims may have a material adverse effect on the Company’s financial position, results of operations or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors. In addition, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in the same reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements of a particular reporting period could be materially adversely affected.