Commitments and Contingencies	9 Months Ended
Sep. 30, 2019
Commitments and Contingencies
Commitments and Contingencies	Note 10. Commitments and Contingencies Legal Proceedings Patent Litigation On April 14, 2018, the Company filed a patent infringement lawsuit against Ivantis, Inc. (Ivantis) in the U.S. District Court for the Central District of California, Southern Division (the Court), alleging that Ivantis’ Hydrus^® Microstent device infringes the Company’s U.S. Patent Nos. 6,626,858 and 9,827,143. In August 2018, Ivantis filed counterclaims alleging that the Company’s iStent inject infringes three patents which Ivantis acquired after the start of the litigation (Acquired Patents). On March 18, 2019, the Court granted the Company’s early motion for summary judgment, finding that the Company does not infringe the Acquired Patents. Fact discovery on the Company’s claims against Ivantis closed in September 2019, with trial scheduled to begin on or around July 28, 2020. Additionally, in May 2018, Ivantis filed Inter Partes Review (IPR) petitions with the Patent Trial and Appeal Board (PTAB) on the patents the Company has asserted in the litigation. The PTAB denied institution of the petitions in December 2018, but Ivantis filed two additional IPR petitions shortly thereafter. The PTAB denied institution of the second round of petitions in July 2019. In April 2019, Ivantis filed an additional IPR petition, which the PTAB also denied in October 2019. Securities Litigation On October 1, 2019, an alleged Avedro stockholder filed a lawsuit challenging the Merger. Such lawsuit, a putative class action complaint, is captioned Kent v. Avedro, Inc., et. al, 1:19-cv-01845-MN (the Kent complaint), and was filed by Michael Kent in the United States District Court for the District of Delaware. The Kent complaint names as defendants Avedro and each member of the Avedro board of directors, including former directors Dr. Gilbert H. Kliman and Thomas W. Burns, as well as Glaukos and Merger Sub. The Kent complaint alleges violations of Section 14(a) and 20(a) of the Exchange Act, and Rule 14a-9. The plaintiff in this action generally alleges that the Registration Statement omits material information with respect to the Merger, which renders such Registration Statement false and misleading. The complaint seeks preliminary and permanent injunction of the Merger and, if the Merger is consummated, rescission or rescissory damages. The complaint also seeks the dissemination of a registration statement that discloses certain information requested by the plaintiff. In addition, the complaint seeks attorneys' and experts' fees. Three additional lawsuits challenging the Merger have also been filed by alleged Avedro stockholders. Those additional lawsuits allege similar causes of action, based on similar allegations, and seek similar relief to the Kent complaint. Two of those lawsuits, Payne v. Avedro, Inc. et. al, 1:19-cv-02019-CFC in the United States District Court for the District of Delaware and Bushansky v. Avedro, Inc. et. al, 1:19-cv-10015-LAP in the United States District Court for the Southern District of New York, name as defendants Avedro and each member of the Avedro board of directors but do not name former Avedro directors, Glaukos or Merger Sub as defendants. The final lawsuit, Thompson v. Avedro, Inc., et. al, 1:19-cv-02075-UNA in the United States District Court for the Southern District of Delaware names the same defendants as the Kent complaint. The Company believes that all four of these complaints are without merit. With respect to each of the matters described above in this Legal Proceedings section, the Company is currently unable to predict the ultimate outcome of these matters or reasonably estimate a possible loss or range of loss, and thus, no amounts have been accrued in the condensed consolidated financial statements. Secured letter of credit The Company had a bank issue a letter of credit in the amount of $8.8 million that is related to its Aliso Facility. The letter of credit is secured with an amount of cash held in a restricted account of approximately $8.9 million as of September 30, 2019. Beginning as of the first day of the thirty-seventh month of the lease term, and on each twelve month anniversary thereafter, the letter of credit will be reduced by 20% until the letter of credit amount has been reduced to $2.0 million. Regents of the University of California On December 30, 2014, the Company executed an agreement (the UC Agreement) with the Regents of the University of California (the University) to correct inventorship in connection with a group of the Company’s U.S. patents (the Patent Rights) and to obtain from the University a covenant that it did not and would not claim any right or title to the Patent Rights and will not challenge or assist any others in challenging the Patent Rights. In connection with the UC Agreement, Glaukos agreed to pay to the University a low single-digit percentage of worldwide net sales of certain current and future products, including the Company’s iStent products, with a required minimum annual payment of $0.5 million. This ongoing product payment terminates on the date that the last of the Patent Rights expires, which is currently expected to be in 2022. For the three months ended September 30, 2019 and September 30, 2018, the Company recorded approximately $1.5 million and $1.1 million, respectively, in cost of sales in connection with this product payment. For the nine months ended September 30, 2019 and September 30, 2018, the Company recorded approximately $4.2 million and $3.2 million, respectively, in cost of sales in connection with this product payment obligation. Executive Deferred Compensation Plan Pursuant to the Company’s deferred compensation plan (the Deferred Compensation Plan), eligible senior level employees are permitted to make elective deferrals of compensation to which he or she will become entitled in the future. The Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust consist of company-owned life insurance policies (COLIs). The fair value of the Deferred Compensation Plan liability, included in other liabilities on the condensed consolidated balance sheets, was approximately $3.2 million and $2.0 million as of September 30, 2019 and December, 31, 2018, respectively, and the cash surrender value of the COLIs, included in deposits and other assets on the condensed consolidated balance sheets, which reflects the underlying assets at fair value, was approximately $3.1 million and $1.9 million as of September 30, 2019 and December 31, 2018, respectively. Global enterprise systems implementation Beginning in the first quarter of 2019, the Company is implementing new enterprise systems and other technology optimizations and facilities infrastructure globally. As of September 30, 2019, the Company has firm purchase commitments related to software costs and these systems implementations of approximately $7.2 million.

Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Note 10. Commitments and Contingencies

Legal Proceedings

Patent Litigation

On April 14, 2018, the Company filed a patent infringement lawsuit against Ivantis, Inc. (Ivantis) in the U.S. District Court for the Central District of California, Southern Division (the Court), alleging that Ivantis’ Hydrus^® Microstent device infringes the Company’s U.S. Patent Nos. 6,626,858 and 9,827,143. In August 2018, Ivantis filed counterclaims alleging that the Company’s iStent inject infringes three patents which Ivantis acquired after the start of the litigation (Acquired Patents). On March 18, 2019, the Court granted the Company’s early motion for summary judgment, finding that the Company does not infringe the Acquired Patents. Fact discovery on the Company’s claims against Ivantis closed in September 2019, with trial scheduled to begin on or around July 28, 2020. Additionally, in May 2018, Ivantis filed Inter Partes Review (IPR) petitions with the Patent Trial and Appeal Board (PTAB) on the patents the Company has asserted in the litigation. The PTAB denied institution of the petitions in December 2018, but Ivantis filed two additional IPR petitions shortly thereafter. The PTAB denied institution of the second round of petitions in July 2019. In April 2019, Ivantis filed an additional IPR petition, which the PTAB also denied in October 2019.

Securities Litigation

On October 1, 2019, an alleged Avedro stockholder filed a lawsuit challenging the Merger. Such lawsuit, a putative class action complaint, is captioned Kent v. Avedro, Inc., et. al, 1:19-cv-01845-MN (the Kent complaint), and was filed by Michael Kent in the United States District Court for the District of Delaware. The Kent complaint names as defendants Avedro and each member of the Avedro board of directors, including former directors Dr. Gilbert H. Kliman and Thomas W. Burns, as well as Glaukos and Merger Sub. The Kent complaint alleges violations of Section 14(a) and 20(a) of the Exchange Act, and Rule 14a-9. The plaintiff in this action generally alleges that the Registration Statement omits material information with respect to the Merger, which renders such Registration Statement false and misleading. The complaint seeks preliminary and permanent injunction of the Merger and, if the Merger is consummated, rescission or rescissory damages. The complaint also seeks the dissemination of a registration statement that discloses certain information requested by the plaintiff. In addition, the complaint seeks attorneys' and experts' fees.

Three additional lawsuits challenging the Merger have also been filed by alleged Avedro stockholders. Those additional lawsuits allege similar causes of action, based on similar allegations, and seek similar relief to the Kent complaint. Two of those lawsuits, Payne v. Avedro, Inc. et. al, 1:19-cv-02019-CFC in the United States District Court for the District of Delaware and Bushansky v. Avedro, Inc. et. al, 1:19-cv-10015-LAP in the United States District Court for the Southern District of New York, name as defendants Avedro and each member of the Avedro board of directors but do not name former Avedro directors, Glaukos or Merger Sub as defendants. The final lawsuit, Thompson v. Avedro, Inc., et. al, 1:19-cv-02075-UNA in the United States District Court for the Southern District of Delaware names the same defendants as the Kent complaint. The Company believes that all four of these complaints are without merit.

With respect to each of the matters described above in this Legal Proceedings section, the Company is currently unable to predict the ultimate outcome of these matters or reasonably estimate a possible loss or range of loss, and thus, no amounts have been accrued in the condensed consolidated financial statements.

Secured letter of credit

The Company had a bank issue a letter of credit in the amount of $8.8 million that is related to its Aliso Facility. The letter of credit is secured with an amount of cash held in a restricted account of approximately $8.9 million as of September 30, 2019. Beginning as of the first day of the thirty-seventh month of the lease term, and on each twelve month anniversary thereafter, the letter of credit will be reduced by 20% until the letter of credit amount has been reduced to $2.0 million.

Regents of the University of California

On December 30, 2014, the Company executed an agreement (the UC Agreement) with the Regents of the University of California (the University) to correct inventorship in connection with a group of the Company’s U.S. patents (the Patent Rights) and to obtain from the University a covenant that it did not and would not claim any right or title to the Patent Rights and will not challenge or assist any others in challenging the Patent Rights. In connection with the UC Agreement, Glaukos agreed to pay to the University a low single-digit percentage of worldwide net sales of certain current and future products, including the Company’s iStent products, with a required minimum annual payment of $0.5 million. This ongoing product payment terminates on the date that the last of the Patent Rights expires, which is currently expected to be in 2022. For the three months ended September 30, 2019 and September 30, 2018, the Company recorded approximately $1.5 million and $1.1 million, respectively, in cost of sales in connection with this product payment. For the nine months ended September 30, 2019 and September 30, 2018, the Company recorded approximately $4.2 million and $3.2 million, respectively, in cost of sales in connection with this product payment obligation.

Executive Deferred Compensation Plan

Pursuant to the Company’s deferred compensation plan (the Deferred Compensation Plan), eligible senior level employees are permitted to make elective deferrals of compensation to which he or she will become entitled in the future. The Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust consist of company-owned life insurance policies (COLIs). The fair value of the Deferred Compensation Plan liability, included in other liabilities on the condensed consolidated balance sheets, was approximately $3.2 million and $2.0 million as of September 30, 2019 and December, 31, 2018, respectively, and the cash surrender value of the COLIs, included in deposits and other assets on the condensed consolidated balance sheets, which reflects the underlying assets at fair value, was approximately $3.1 million and $1.9 million as of September 30, 2019 and December 31, 2018, respectively.

Global enterprise systems implementation

Beginning in the first quarter of 2019, the Company is implementing new enterprise systems and other technology optimizations and facilities infrastructure globally. As of September 30, 2019, the Company has firm purchase commitments related to software costs and these systems implementations of approximately $7.2 million.