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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES The following table summarizes our future principal contractual obligations as of December 31, 2013 ($ amounts in 000's):
| Total |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | Thereafter
Operating lease commitments | 31,905 |  |  | 8,759 |  |  | 6,006 |  |  | 4,938 |  |  | 4,347 |  |  | 3,383 |  |  | 4,472 |
Less: Sublease rental income | 1,140 |  |  | 720 |  |  | 420 |  |  | — |  |  | — |  |  | — |  |  | — |
Operating lease commitments, net | 30,765 |  |  | 8,039 |  |  | 5,586 |  |  | 4,938 |  |  | 4,347 |  |  | 3,383 |  |  | 4,472 |
Purchase commitments | 37,794 |  |  | 37,794 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other contract commitments | 9,946 |  |  | 9,632 |  |  | 173 |  |  | 50 |  |  | 41 |  |  | 50 |  |  | — |
Total | 78,505 |  |  | 55,465 |  |  | 5,759 |  |  | 4,988 |  |  | 4,388 |  |  | 3,433 |  |  | 4,472 |
Operating Leases—We lease certain facilities under various non-cancelable operating leases, which expire through 2020. The terms of certain operating leases provide for renewal options. Future minimum payments under the non-cancelable operating leases totaled $31.9 million as of December 31, 2013. Rent expense was $9.8 million, $8.7 million and $8.2 million for fiscal 2013, 2012, and 2011, respectively. Rent expense and sublease rental income are recognized using the straight-line method over the term of the lease. Sublease rental income was $0.7 million, $0.8 million, and $0.7 million in fiscal 2013, 2012, and 2011, respectively. Contract Manufacturer and Other Commitments—Our independent contract manufacturers procure components and build our products based on our forecasts. These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and an analysis from our sales and marketing organizations, adjusted for overall market conditions. In order to reduce manufacturing lead times and plan for adequate component supply, we may issue purchase orders to some of our independent contract manufacturers which may not be cancelable. As of December 31, 2013, we had $37.8 million of open purchase orders with our independent contract manufacturers that may not be cancelable. In addition to commitments with contract manufacturers, we have open purchase orders and contractual obligations in the ordinary course of business for which we have not received goods or services. As of December 31, 2013, we had $9.9 million in other purchase commitments. Litigation—We are involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below. We are defending these litigation matters, and while there can be no assurances and the outcome of these matters is currently not determinable, we currently believe that there are no existing claims or proceedings that are likely to have a material adverse effect on our financial position. There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require us to make royalty payments, which could adversely affect our gross margins in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from our estimates, if any, which could result in the need to adjust the liability and record additional expenses. We have not: recorded any material accrual for loss contingencies associated with such legal proceedings; determined that an unfavorable outcome is probable or reasonably possible; or determined that the amount or range of any possible loss is reasonably estimable. In August 2009, Enhanced Security Research, LLC and Security Research Holdings LLC (collectively “ESR”), a non-practicing entity, filed a complaint against us in the United States District Court for the District of Delaware alleging infringement by us and other defendants of two patents. The plaintiffs were claiming unspecified damages and were requesting an injunction against the alleged infringement. In June 2010, the Court granted our motion to stay pending the outcome of reexamination proceedings in the U.S. Patent and Trademark Office (“PTO”) on both asserted patents. The PTO rejected all of the claims of the patents in the suit and ESR appealed this result to the Board of Patent Appeals and Interferences (“BPAI”). In August 2012, the BPAI completed its review of both reexamination proceedings, and, after the BPAI’s review, all claims of the asserted ESR patents remain rejected. In October 2012, ESR filed an additional appeal of the BPAI decision with the United States Court of Appeal for the Federal Circuit. That appeal is still pending. The litigation related to ESR is no longer estimated to be material to us. In July 2010, Network Protection Sciences, LLC (“NPS”), a non-practicing entity, filed a complaint in the United States District Court for the Eastern District of Texas alleging patent infringement by us and other defendants. In December 2011, the United States District Court for the Eastern District of Texas ordered the case to be transferred to the Northern District of California. In June 2012, the United States District Court for the Northern District of California dismissed the other defendants for misjoinder, and the case thereafter proceeded with Fortinet as the sole defendant. Between June and August 2013, we filed a number of pretrial motions with the Court. As a result of those motions, the Court found that NPS had engaged in litigation misconduct. The Court also granted our motion to strike NPS’s expert report on the issue of damages. Shortly thereafter, in September 2013, NPS agreed to abandon the case and we did not make any payments related to this case. NPS and its principals furthermore agreed not to sue us on related patents. The litigation related to NPS is no longer material to us. In June 2012, we received a letter from SRI International, (“SRI”) claiming that we infringed certain SRI patents. We settled this matter in December 2013. Indemnification—Under the indemnification provisions of our standard sales contracts, we agree to defend our customers against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks, or trade secrets, and to pay judgments entered on such claims. Our exposure under these indemnification provisions is generally limited by the terms of our contracts to the total amount paid by our customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement. To date, there have been no claims under such indemnification provisions.

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