COMMITMENTS AND CONTINGENCIES

The Company has entered into non-cancelable operating leases for facilities and certain equipment. These leases are primarily for office space, which includes the Company’s corporate headquarters located in Provo, Utah and office space located in San Francisco, California. Rent expense for operating leases with escalating lease payment terms and rent holidays is recognized on a straight-line basis over the lives of the related leases. Rental expense for operating leases was approximately $6.3 million, $6.2 million, and $5.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. The Company also entered into a build-to-suit lease arrangement for a new corporate headquarters in January 2015. See Note 4 for further information regarding this arrangement.

The following is a schedule by year of future minimum lease payments of for the Company's lease obligations at December 31, 2015 (in thousands):



Years Ending December 31,	Operating Leases		Build-to-Suit Lease Obligation		Total Lease Obligations
2016	$	4,475	$	—	$	4,475
2017	3,440		3,354		$	6,794
2018	3,934		3,438		$	7,372
2019	1,953		3,525		$	5,478
2020	679		3,613		$	4,292
Thereafter	1,466		23,655		25,121
Total minimum lease payments	$	15,947	$	37,585	$	53,532

The Company is required to make escalating minimum annual royalty payments per a 10-year content digitization and publication agreement. As of December 31, 2015, the Company had obligations totaling $20.0 million remaining under the terms of this contract.

General Legal Proceedings

On May 4, 2015, DNA Genotek Inc. (“Genotek”) filed a complaint against Ancestry.com DNA, LLC (“Ancestry DNA”) in the United States District Court for the District of Delaware (Case No. 1:15-cv-00355-SLR). Genotek later filed an amended complaint on July 24, 2015 that asserts causes of action for (1) infringement of U.S. Patent No. 8,221,381; (2) breach of contract for allegedly breaching the Terms and Conditions that governed Ancestry DNA’s purchase of Genotek Saliva Collection Products; (3) conversion; (4) trespass to chattel; and (5) action to quiet title. Ancestry DNA filed a motion to dismiss Genotek’s willful infringement, conversion, trespass to chattel, and action to quiet title claims on August 10, 2015. Genotek responded to the motion to dismiss on September 3, 2015, and Ancestry DNA filed its reply brief on September 18, 2015. As of February 19, 2016, the Court has not yet ruled on this motion. On January 22, 2016, Genotek filed a second amended complaint that adds a false advertising and a false designation of origin claim. Ancestry DNA’s response to the second amended complaint is due on February 19, 2016. Genotek seeks preliminary and permanent injunctive relief, unspecified monetary damages, an award of Ancestry’s profits, and an award of Genotek’s costs and attorneys’ fees incurred in connection with this action. On October 20, 2015, AncestryDNA filed an Inter Partes Review Petition (IPR2016-00060) with the United States Patent and Trademark Office, challenging the validity of claims 1-20, 39-41, 43-47, and 49 of U.S. Patent No. 8,221,381. AncestryDNA intends to defend the litigation vigorously. While no assurances can be given as to outcomes or liability, if any, the Company does not believe that this litigation will be resolved in a manner that would have a material adverse effect on its financial statements.

On July 30, 2015 DNA Genotek, Inc. (“Genotek”) filed a complaint in the United States District Court for the District of Delaware against Spectrum DNA, Spectrum Solutions L.L.C., and Spectrum Packaging L.L.C. (collectively “Spectrum”) (Case No. 1:15-cv-00661-SLR). The complaint alleges that Spectrum’s sale of the saliva collection device created by AncestryDNA.com, LLC constitutes infringement of U.S. Patent No. 8,221,381. On January 22, 2016, Genotek filed a first amended complaint that added causes of action for false advertising and false designation of origin. While Ancestry is not a party to this lawsuit, Ancestry has agreed to indemnify Spectrum against Genotek’s patent infringement claims. On August 24, 2015, Genotek filed a preliminary injunction motion seeking to enjoin Spectrum’s sales of saliva collection devices to parties other than Ancestry DNA.com, LLC. On September 4, 2015, Spectrum filed a motion to dismiss for lack of personal jurisdiction. On February 4, 2016, the Court issued an order denying both motions without prejudice and authorizing Genotek to pursue jurisdictional discovery. AncestryDNA intends to defend the litigation vigorously. While no assurances can be given as to outcomes or liability, if any, the Company does not believe that this litigation will be resolved in a manner that would have a material adverse effect on its financial statements. The outcome of either of these Genotek matters is uncertain and cannot be predicted with any certainty.

On November, 16, 2015, Ancestry.com Operations Inc. and Ancestry.com DNA, LLC (collectively “Ancestry”) filed a complaint against DNA Diagnostic Center, Inc. (“DDC”) in the United States District Court for the Southern District of Ohio for trademark infringement, unfair competition, false advertising, and breach of contract (Case No. 1:15-cv-00737-SSB-SKB). Ancestry’s claims relate to DDC’s unauthorized use of Ancestry’s registered Ancestry and AncestryDNA trademarks in its advertisements for a competing product and its use of close variations of Ancestry’s registered trademarks, which Ancestry contends has created consumer confusion. Ancestry’s claims are also based upon DDC’s breach of a prior agreement with Ancestry that it would cease the allegedly infringing conduct and false advertising. On January 19, 2016, DDC filed its Answer to Ancestry’s Complaint and filed several Counterclaims, including Counterclaims for trademark infringement, unfair competition, and for cancellation of Ancestry’s registered AncestryDNA trademark. DDC’s Counterclaims are based upon its use and registration of the mark AncestryByDNA, notwithstanding Ancestry’s prior use of the Ancestry trademark since 1983. Ancestry has also filed a motion for a preliminary injunction on its claims, the preliminary injunction hearing was held on January 29, 2016, and DDC has filed an opposition to the motion. On February 16, the Magistrate Judge granted Ancestry’s motion in part, enjoining DDC from using the trademarks “Ancestry,” “Ancestry DNA” and/or “DNA Ancestry.” Both parties have the right to appeal the decision to the District Judge. While the Company cannot assure the ultimate outcome of this litigation, it does not believe it will be resolved in a manner that would have a material adverse effect on its business.

As part of the acquisition of Archives.com from Inflection LLC, completed in August 2012, a Marketing Agreement between Inflection LLC and Z-CORP dba OneGreatFamily.com (“OGF”) was assigned to Ancestry.com Operations Inc. In 2014 OGF expressed concerns it was owed monies and demanded an accounting, which the Company offered. After refusing the Company’s offer to provide an accounting under the Marketing Agreement, on or about October 10, 2014, OGF initiated a lawsuit in the Fourth Judicial District Court of the State of Utah against Ancestry.com Inc. and Ancestry.com Operations Inc. The suit is captioned Z-CORP et al. v. Ancestry.com Inc. et al. (Civil No. 140401466), claiming alleged breach of contract, breach of implied covenant of good faith and fair dealing, conversion and intentional interference with prospective economic relations. OGF alleged damages totaling over $30 million plus punitive damages in an unspecified amount. On or about November 13, 2014 Ancestry.com filed a motion to dismiss the complaint in its entirety, for failing to state claims upon which relief may be granted. The Court heard oral arguments on the motion to dismiss on March 9, 2015. At the hearing, OGF conceded the law had changed regarding its intentional interference claim and it was dismissed without prejudice by consent of both parties. On April 1, 2015, the court issued a ruling granting the motion to dismiss as to the remaining claims, with prejudice and on the merits. On May 13, 2015, OGF appealed the court’s ruling to the Utah Supreme Court, which subsequently assigned the appeal to the Utah Court of Appeals. OGF submitted their initial brief on September 4, 2015, and the Company filed its initial brief seeking to affirm the trial court on November 6, 2015. OGF filed a reply brief on January 8, 2016. OGF is appealing only the trial court’s dismissal of OGF’s claims for breach of contract, breach of implied covenant of good faith and fair dealing, and punitive damages. The Utah Court of Appeals has not ruled on the appeal, but oral arguments have been scheduled for May 31, 2016. While the Company cannot assure the ultimate outcome of this matter, the Company does not believe that it will be resolved in a manner that would have a material adverse effect on its business.

The Company has and may become party to various other legal proceedings and other claims that arise in the ordinary course of business or otherwise in the future. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. While the Company cannot assure the ultimate outcome of any legal proceeding or contingency in which it is or may become involved, the Company does not believe that any pending legal claim or proceeding arising in the ordinary course will be resolved in a manner that would have a material adverse effect on its business. Although the Company considers the likelihood of such an outcome to be remote, if one or more of these legal matters resulted in an adverse money judgment against the Company, such a judgment could have a material adverse effect on its operating results and financial conditions and may result in the Company being required to pay significant monetary damages.

Appraisal Litigation (In re: Appraisal of Ancestry.com Inc.)

On October 21, 2012, the Company’s predecessor entered into a definitive merger agreement with Global Generations Merger Sub Inc. and its parent company, Ancestry US Holdings Inc., to acquire the Company’s predecessor entity for $32 per share of common stock (the “Merger”). Following the consummation of the Merger on December 28, 2012, three former shareholders, who, combined, owned approximately 1.4 million shares of the predecessor entity’s common stock, instituted two separate appraisal proceedings against Ancestry.com Inc. in the Court of Chancery of the State of Delaware pursuant to Del. C. § 262: Merion Capital, L.P. v. Ancestry.com, Inc. (C.A. No. 8173) and Merlin Partners LP et al. v. Ancestry.com Inc. (C.A. No. 8175). The two appraisal petitions alleged that the $32 per share price paid to the predecessor entity’s shareholders in the Merger did not represent the fair value of the Company on the date the Merger was consummated. On June 24, 2013, the Court consolidated the two pending appraisal proceedings as In re: Appraisal of Ancestry.com Inc. On February 9, 2015, the Court issued an order directing the Company to pay the fair value of $32 per share plus interest from the closing of the Merger through the date of payment. Therefore, on February 9, 2015, the Company paid a total of $51.1 million, which included releasing $45.3 million of restricted cash for the fair value of $32 per share plus $5.8 million for accrued interest.