Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

15. COMMITMENTS AND CONTINGENCIES

The Company leases certain of its offices, manufacturing space, and several automobiles. The future minimum rental commitments under

non-

cancelable

operating leases with remaining terms in excess of one year are as follows (in thousands):

Year
2019	$	1,962
2020		1,502
2021		688
2022		447
2023 and thereafter		830

Rent expense for the Company’s leases was approximately

$2,102,000, $1,889,000 and $1,866,000 in 2018, 2017 and 2016, respectively. The Company also pays tenant-related executory costs such as taxes, maintenance, and insurance.

The Company is the defendant in a patent infringement lawsuit originally filed on January 28, 2011 by SynQor, Inc. (“SynQor”) in the U.S. District Court for the Eastern District of Texas (the “Texas Action”). The complaint, as amended in September 2011, alleges that the Company’s products, including but not limited to, unregulated bus converters used in intermediate bus architecture power supply systems, infringe SynQor’s U.S. patent numbers 7,072,190, 7,272,021, 7,564,702, and 8,023,290 (“the ‘190 patent”, “the ‘021 patent”, “the ‘702 patent”, and “the ‘290 patent”, respectively). SynQor’s complaint sought an injunction against further infringement and an award of unspecified compensatory and enhanced damages, interest, costs and attorney fees. The Company has denied that its products infringe any of the SynQor patents, asserted that the SynQor patents are invalid, and asserted that the ‘290 patent is unenforceable due to inequitable conduct by SynQor or its agents during the examination of the ‘290 patent at the United States Patent and Trademark Office (“USPTO”). The Company also asserted counterclaims seeking damages against SynQor for deceptive trade practices and tortious interference with prospective economic advantage arising from SynQor’s attempted enforcement of its patents against the Company. On May 23, 2016, after extensive discovery, the Texas Action was stayed by the court pending completion of certain inter partes reexamination proceedings at the USPTO (including any appeals from such proceedings to the Federal Circuit (as defined below)) concerning the SynQor patents, which are described below. On November 2, 2018, SynQor filed a motion to lift the stay of the Texas Action. On January 3, 2019, the Court denied the motion and reaffirmed its original decision that the stay should remain at least until the conclusion of all pending inter partes reexaminations and related appeals.

In 2011, in response to the filing of the Texas Action, the Company initiated inter partes reexamination proceedings at the USPTO challenging the validity of certain claims of the SynQor patents asserted in the Texas Action, including all claims that were asserted against the Company by SynQor. The current status of these proceedings is as follows. Regarding the ‘190 patent, the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”) issued a decision on March 13, 2015, determining that certain claims were invalid, remanding the matter to the Patent Trial and Appeal Board (“PTAB”) of the USPTO for further proceedings. On May 2, 2016, the PTAB issued a decision affirming the examiner’s original rejection of all but one of the remaining claims of the ‘190 patent, and identifying a new basis for rejecting the remaining claim (“claim 34”), which had been added by SynQor during the reexamination. SynQor then requested further examination of claim 34 by the examiner, pursuant to 37 C.F.R. § 41.77(b)(1). On June 22, 2017, the examiner issued a determination under 37 C.F.R. § 41.77(d), finding claim 34 was unpatentable. That decision is expected to be further reviewed by the PTAB pursuant to 37 C.F.R. § 41.77(f). After the PTAB reviews the examiner’s decision with respect to claim 34, it is expected that the PTAB’s decisions with respect to all of the challenged and still pending claims of the ‘190 patent will be subject to further review by the Federal Circuit. On May 2, 2016, the PTAB also issued decisions finding all challenged claims of SynQor’s ‘021 patent invalid and upholding the validity of all challenged claims of SynQor’s ‘702 and ‘290 patents. On August 30, 2017, the Federal Circuit issued rulings with regard to those decisions. With respect to the ‘021 patent, the Federal Circuit affirmed the PTAB’s determination that all of the challenged claims of the ‘021 patent were invalid. The Federal Circuit remanded the case to the PTAB for further consideration of the patentability of certain claims that had been added by amendment during the reexamination. With respect to the ‘702 patent, the Federal Circuit affirmed the PTAB’s determination that all of the challenged claims of the ‘702 patent were patentable. With respect to the ‘290 patent, the Federal Circuit vacated the PTAB’s decision upholding the patentability of the ‘290 patent claims, and remanded the case to the PTAB for further consideration. The PTAB has not issued any rulings with respect to the ‘290 patent after remand.

On October 31, 2017, the Company filed a request with the USPTO for

ex parte

reexamination of the asserted claims of the ‘702 patent, based on different prior art references than had been at issue in the previous

inter partes

reexamination of the ‘702 patent. On December 6, 2017, the USPTO issued a decision initiating

parte

reexamination of the ‘702 patent after finding that the Company’s request had raised a substantial new question of patentability of the challenged claims. On March 21, 2018, the examiner issued a non-final office action finding all of the challenged claims of the ‘702 patent to be unpatentable. On May 14, 2018, SynQor filed a petition requesting the USPTO to vacate its prior decision granting the Company’s request for

ex parte

reexamination. No action has been taken on the petition to date. On September 12, 2018, the examiner issued a final office action finding all of the challenged claims of the ‘702 patent to be unpatentable. On October 26, 2018, SynQor filed a notice of appeal appealing the examiner’s final rejection to the PTAB. On December 3, 2018, the USPTO denied SynQor’s petition to vacate the decision initiating the

ex parte

reexamination. The Company continues to monitor the progress of this proceeding.

On August 6, 2018, the Company filed a request with the USPTO for ex parte reexamination of the asserted claims of the ‘190 patent, based on different prior art references than had been at issue in the previous inter partes reexamination of the ‘190 patent. On September 11, 2018, SynQor filed a petition asking the USPTO to reject the Company’s request on the ground that it presented substantially the same prior art or arguments presented to the USPTO in the prior inter partes reexamination of the ‘190 patent. On December 3, 2018, the USPTO denied SynQor’s petition to reject the Company’s ex parte reexamination request. On December 4, 2018, the USPTO instituted ex parte reexamination of the ‘190 patent after finding that the Company’s request had raised a substantial new question affecting the patentability of the challenged claims.

On January 23, 2018, the 20-year terms of the ‘190 patent, the ‘021 patent and the ‘702 patent expired. The 20-year term of the ‘290 patent expired on July 16, 2018. As a consequence of these expirations, the Company cannot be liable under any of the SynQor patents for allegedly infringing activities occurring after the patents’ respective expiration dates.

The Company continues to believe none of its products, including its unregulated bus converters, infringe any valid claim of the asserted SynQor patents, either alone or when used in an intermediate bus architecture implementation. The Company believes SynQor’s claims lack merit and, therefore, it continues to vigorously defend itself against SynQor’s patent infringement allegations. The Company does not believe a loss is probable for this matter. If a loss were to be incurred, however, the Company cannot estimate the amount of possible loss or range of possible loss at this time.

In addition to the SynQor matter, the Company is involved in certain other litigation and claims incidental to the conduct of its business. While the outcome of lawsuits and claims against the Company cannot be predicted with certainty, management does not expect any current litigation or claims will have a material adverse impact on the Company’s financial position or results of operations.