Commitments And Contingencies

9 Months Ended

Sep. 30, 2012

Commitments And Contingencies [Abstract]

Commitments And Contingencies

(15)  Commitments and Contingencies

The Company leases office space under various non-cancelable operating leases. Rent expense under operating leases was $1,217 and $3,553 for the quarter and nine months ended September 30, 2012, respectively, compared to $652 and $1,921 for the quarter and nine months ended September 30, 2011, respectively.

As of September 30, 2012, the Companyhas supply commitments with third party assemblers for printer assembly at September 30, 2012 that total $13,062, compared to $9,146 at September 30, 2011.

For certain of the acquisitions, the Company is obligated for deferred purchase price commitments totaling $1,885, which are due in 2012 and 2013. Certain of our recent acquisitions contain earnout provisions under which the sellers of the acquired businesses can earn additional amounts.  The total liabilities recorded for these earnouts as of September 30, 2012 was $6,143.  As of September 30, 2011, the Company had recorded $5,158 of liabilities for earnouts related to acquisitions.  See Note 2 for details of acquisitions and related commitments. 

Litigation

The Company had  been pursuing patent infringement litigation against EnvisionTEC, Inc. and certain of its related companies since 2005.  During the third quarter of 2012, the parties settled the dispute and the litigation has been dismissed.

In 2010, MSK K.K., a Japanese company, filed a complaint against the Company’s Japanese subsidiary in the Tokyo District Court asserting, among other things, various contract claims associated with two laser sintering machines purchased from the Company’s Japanese subsidiary in 2007.  During the third quarter of 2012, the parties settled the dispute and the litigation has been dismissed.

In 2008, DSM Desotech Inc. filed a complaint, which it has subsequently amended, in an action titled DSM Desotech Inc. v. 3D Systems Corporation and 3D Systems, Inc. in the United States District Court for the Northern District of Illinois (Eastern Division) asserting that the Company engaged in anticompetitive behavior with respect to resins used in certain of its stereolithography machines. The complaint further asserted that the Company is infringing upon two of DSM Desotech’s patents relating to stereolithography machines.

The Company filed answers to DSM Desotech’s complaint in which, among other things, the Company denied the material allegations of DSM Desotech’s complaint. In 2010, the Court issued a decision relating to the construction of the claims of the patents-in-suit following a Markman hearing held in 2009.  In that decision, the Court generally adopted the claim constructions that the Company proposed. 

Fact discovery, including expert discovery, regarding the claims pending in this case concluded in 2011. The Company filed motions for summary judgment in December 2011 that seek rulings in its favor on all of DSM Desotech’s claims in the litigation.  As of the date of this Form 10-Q, the Court had ruled on only one of the four motions, denying the Company’s motion.

The Company understands that DSM Desotech estimates the damages associated with its claims to be in excess of $40,000. The Company intends to continue to vigorously contest all the claims asserted by DSM Desotech.

The Company is also involved in various other legal matters incidental to its business. The Company believes, after consulting with counsel, that the disposition of these other legal matters will not have a material effect on our consolidated results of operations or consolidated financial position.

Indemnification

In the normal course of business the Company periodically enters into agreements to indemnify customers or suppliers against claims of intellectual property infringement made by third parties arising from the use of the Company’s products. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.

To the extent permitted under Delaware law, the Company indemnifies directors and officers for certain events or occurrences while the director or officer is, or was serving, at the Company’s request in such capacity, subject to limited exceptions. The maximum potential amount of future payments we could be required to make under these indemnification obligations is unlimited; however, the Companyhas directors and officers insurance coverage that may enable the Company to recover future amounts paid, subject to a deductible and the policy limits. There is no assurance that the policy limits will be sufficient to cover all damages, if any.