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Legal Proceedings | 9 Months Ended
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Sep. 28, 2024
Commitments and Contingencies Disclosure [Abstract] |
Legal Proceedings | Legal Proceedings Lufthansa One of the Company’s subsidiaries is involved in numerous patent infringement actions brought by Lufthansa Technik AG (“Lufthansa”) in Germany, the United Kingdom (“UK”) and France. The Company is vigorously defending all such litigation and proceedings. Additional information about these legal proceedings can be found in Note 19 “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The reserve for the German indirect claim and interest was approximately $17.0 million on September 28, 2024 and $17.1 million on December 31, 2023. The Company currently believes it is unlikely that the damages in the German indirect proceedings and related interest will be paid within the next twelve months. Therefore, the liability related to this matter is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets on September 28, 2024 and December 31, 2023. In the matter before the UK High Court of Justice, Lufthansa has pleaded its case for monetary compensation at a separate trial which was conducted in October 2024. At this proceeding, Lufthansa elected to pursue a monetary claim based upon the defendants’ profits from their infringing activities. As of December 31, 2023, the Company had recorded a liability for the UK claim of $7.4 million, inclusive of interest, based on information available at the time. This amount was subject to change as additional data was received and evaluated, and as additional information regarding the nature of its claim was put forward by Lufthansa in advance of the damages trial. During the quarter ended September 28, 2024, both the Company and Lufthansa submitted to the UK High Court of Justice calculations of the estimated damages derived from the reports of the parties’ respective financial experts. The Company’s experts have calculated a range of loss of $7.4 million to $15.7 million (inclusive of interest), while Lufthansa has calculated a range of loss as up to approximately $107 million, excluding interest. The damages trial judgment is expected to be issued in late 2024 or early 2025. While the Company believes they have valid defenses such that the judgment should be at the low end of the range of exposure noted above, the outcome and the amount of any damages that come due and owing cannot be predicted. As of September 28, 2024, we have recognized a liability of $7.4 million associated with this claim, which represents the low end of the range of exposure described above. Additional interest will continue to accrue on damages that come due and owing until the final payment to Lufthansa. The Company is performing scenario planning to accommodate the range of potential outcomes. It is expected that the UK High Court of Justice will grant permission to appeal, though this is not assured under UK law. If an appeal is allowed, it is unclear whether payment of any imposed judgment would be due shortly after the ruling or deferred, in whole or in part, until the appeal is heard and adjudicated. The liability related to this matter is classified within Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Condensed Balance Sheets as of September 28, 2024. The liability related to this matter was classified within Other Liabilities (non-current) in the Company’s Consolidated Balance Sheets as of December 31, 2023. A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter was approximately $1.0 million and $0.7 million on September 28, 2024 and December 31, 2023, respectively, which is expected to be paid within the next twelve months and, as such, is classified in Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Condensed Balance Sheet as of September 28, 2024 and December 31, 2023. The Company expects additional amounts to be payable associated with Lufthansa’s legal fees incurred related to the damages proceedings, but is unable to estimate a range of exposure and as such has not recorded any additional liabilities at this time. With respect to the proceeding in France, as previously disclosed, on December 4, 2020, the French Court held the French patent invalid for all asserted claims. There can consequently be no finding of infringement on first instance. Lufthansa has appealed this judgment. The appeal hearing took place on December 8, 2022, and on February 24, 2023, the Court upheld the first instance judgment in favor of AES. Lufthansa lodged an appeal before the French Supreme Court; the French Supreme Court will review the Court of Appeal of Paris’ reasoning around the nullification of one of the claims of the patent. AES filed briefs with the French Supreme Court on January 22, 2024 and on September 11, 2024 in response to Lufthansa’s appeal. The closure of the written phase of the procedure is scheduled for December 3, 2024 and a decision from this Court is expected in late December 2024 or January 2025. As loss exposure is not probable and estimable at this time, the Company has not recorded any liability with respect to the French matter as of September 28, 2024 or December 31, 2023. There were no other significant developments in any of these matters during the nine months ended September 28, 2024. Other On March 23, 2020, Teradyne, Inc. filed a complaint against the Company and its subsidiary, Astronics Test Systems (“ATS”) (together, “the Defendants”) in the United States District Court for the Central District of California alleging patent and copyright infringement, and certain other related claims. The Defendants moved to dismiss certain claims from the case. On November 6, 2020, the Court dismissed the Company from the case, and also dismissed a number of claims, though the patent and copyright infringement claims remained. The case proceeded to discovery. In addition, on December 21, 2020, ATS filed a petition for inter partes review (“IPR”) with the US Patent Trial and Appeal Board (“PTAB”), seeking to invalidate the subject patent, and on July 21, 2021, the PTAB instituted IPR. The PTAB issued its decision on July 20, 2022, in which it invalidated all of Teradyne’s patent claims. Teradyne did not appeal the decision. On June 5, 2023, the parties attended a court-ordered mediation but did not reach a settlement. After the mediation, Teradyne agreed to drop its remaining state law claims in exchange for ATS dropping one of its defenses, leaving only its copyright claim. On December 7, 2023, the District Court granted ATS’s motion for summary judgment on its affirmative defense of fair use. The Court subsequently entered final judgment in favor of ATS on December 14, 2023. Teradyne filed a Notice of Appeal to the Ninth Circuit Court of Appeals on January 12, 2024. Teradyne’s opening brief on its appeal was filed on April 9, 2024. ATS’s answering brief was filed on June 10, 2024. Teradyne’s reply brief was filed on August 7, 2024. Oral argument on the appeal has not yet been scheduled. No amounts have been accrued for this matter in the September 28, 2024, or December 31, 2023 financial statements, as loss exposure was neither probable nor estimable at such times. Other than these proceedings, we are not party to any significant pending legal proceedings that management believes will result in a material adverse effect on our financial condition or results of operations.

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