Commitments and Contingencies

Warranties

The following table summarizes the changes in the Company's product warranty liabilities (in thousands):



Balance at June 26, 2011	$	2,235
Acquisition warranties beginning balance	2,600
Costs accrued for new warranty contracts	82
Changes in estimates for pre-existing warranties	(400		)
Expenditures	(657		)
Balance at September 25, 2011	$	3,860

Product warranties are provided for at the time the Company recognizes revenue. The warranty periods range from ninety (90) days to ten years. The Company estimates these warranty liabilities as a percentage of revenue, based on historical knowledge of warranty costs and expected future warranty costs. If actual product failure rates materially differ from these estimates, revisions to the estimated warranty liability would be required. The Company evaluates its warranty reserve on a quarterly basis.

Litigation

The Company is a party to various legal proceedings, including those described in our Annual Report on Form 10-K for the year ended June 26, 2011, as updated below, and the additional proceedings noted below. Unless otherwise indicated, the potential losses for claims against the Company in these matters are not reasonably estimable.

SemiLEDs Litigation

As previously reported, the Company is the plaintiff in an action against SemiLEDs Corporation and its subsidiaries, Helios Crew Corp. and SemiLEDs Optoelectronics Co., Ltd., commenced October 8, 2010 in the U.S. District Court for the District of Delaware. The complaint as amended seeks injunctive relief and damages and alleges that the defendants are infringing six U.S. patents owned by the Company relating to light-emitting diodes: No. 7,737,459, entitled "High Output Group III Nitride Light Emitting Diodes"; No. 7,211,833, entitled "Light Emitting Diodes Including Barrier Layers/Sublayers"; No. 7,611,915, entitled "Methods for Manufacturing Light Emitting Diodes Including Barrier Layers/Sublayers"; No. 6,657,236, entitled "Enhanced Light Extraction in LEDs Through the Use of Internal and External Optical Elements"; No. 7,795,623, entitled "Light Emitting Devices Having Current Reducing Structures and Methods of Forming Light Emitting Devices Having Current Reducing Structures"; and No. 7,557,380, entitled "Light Emitting Devices Having a Reflective Bond Pad and Methods of Fabricating Light Emitting Devices Having Reflective Bond Pads." The defendants have filed an answer and counterclaims in which they deny any infringement and seek a declaratory judgment that all of the patents are invalid and that one of the patents is unenforceable.

As also previously reported, SemiLEDs Corporation and SemiLEDs Optoelectronics Co., Ltd. filed a complaint against the Company in the U.S. District Court for the District of Delaware on August 15, 2011. The complaint seeks injunctive relief and damages for alleged infringement of three U.S. patents relating to light-emitting diodes: No. 7,615,789, entitled "Vertical Light Emitting Diode Device Structure"; No. 7,646,033, entitled "Systems and Methods for Producing White-Light Emitting Diodes"; and No. D580,888 entitled "Light Emitting Diode Device with Electrode." In October 2011, the Company filed an answer and counterclaims in which the Company denies any infringement and seeks a declaratory judgment that the asserted claims of the SemiLEDs patents are invalid. In addition, the Company asserted counterclaims against SemiLEDs Corporation and SemiLEDs Optoelectronics Co. seeking injunctive relief and damages for infringement of the following additional U.S. patents owned by the Company relating to light-emitting diodes: No. 6,958,497, entitled "Group III Nitride Based Light Emitting Diode Structures with a Quantum Well and Superlattice, Group III Nitride Based Quantum Well Structures and Group III Nitride Based Superlattice Structures"; and No. 6,515,313, entitled "Efficiency Light Emitters with Reduced Polarization-Induced Charges".

The Fox Group Litigation

As previously reported, The Fox Group, Inc. filed a complaint for patent infringement against the Company in the U.S. District Court for the Eastern District of Virginia on June 29, 2010. The complaint, which sought injunctive relief and damages, asserted that the Company was infringing two U.S. patents relating to high quality silicon carbide material: No. 6,534,026, entitled "Low Defect Density Silicon Carbide" (the "'026 patent"); and No. 6,562,130, entitled "Low Defect Axially Grown Single Crystal Silicon Carbide" (the "'130 patent"). The district court granted summary judgment in favor of the Company in August 2011. The court determined that the Company did not infringe the '026 patent and that the claims of the '130 patent asserted against the Company are invalid. The Fox Group has filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit.

Dow Corning Litigation

Dow Corning Compound Semiconductor Solutions, LLC filed a complaint against the Company in the U.S. District Court for the Eastern District of Michigan on September 27, 2011. The complaint, which was filed following the initiation of patent licensing discussions between the parties, seeks a declaratory judgment that the plaintiff does not infringe three U.S. patents owned by the Company relating to high quality silicon carbide materials and that the patents are invalid. The patents in suit are: No. 7,294,324, entitled “Low Basal Plane Dislocation Bulk Grown SiC Wafers”; No. 7,314,520, entitled “Low 1C Screw Dislocation 3 Inch Silicon Carbide Wafer”; and No. 7,314,521, entitled “Low Micropipe 100 MM Silicon Carbide Wafer.”

Osram Sylvania and Lighting Science Group Litigation

Ruud Lighting, Inc. filed a complaint for patent infringement against Osram Sylvania, Inc. in the U.S. District Court for the Eastern District of Wisconsin on April 2, 2010. The complaint, which seeks injunctive relief and damages, alleges that Osram Sylvania is infringing a U.S. patent owned by Ruud Lighting, No. 7,618,163, entitled "Light-Directing LED Apparatus." Lighting Science Group Corporation has intervened as a co-defendant in the action. Lighting Science Group asserted in its motion to intervene that the accused infringing product was developed jointly by Lighting Science Group and Osram Sylvania and that Lighting Science Group is obligated to defend and indemnify Osram Sylvania against the infringement claims. The defendants have filed an answer denying any infringement and Lighting Science Group has filed counterclaims seeking a declaratory judgment that the patent is invalid and unenforceable.

Cooper Lighting Litigation

Ruud Lighting, Inc. filed a complaint for patent infringement against Cooper Lighting, LLC in the U.S. District Court for the Eastern District of Wisconsin on April 2, 2010. The complaint as amended seeks injunctive relief and damages for infringement of two U.S. patents owned by Ruud Lighting: No. 7,686,469, entitled "LED Lighting Fixture"; and No. 7,891,835, entitled “Light-Directed Apparatus with Protected Reflector-Shield and Lighting Fixture Utilizing Same.” Cooper Lighting has filed an answer and counterclaims in which it denies any infringement and seeks a declaratory judgment that the asserted claims of the patents are invalid and that the claims of one of the patents are unenforceable.

Following the commencement of the suit against Cooper Lighting, Illumination Management Solutions, Inc., a California corporation acquired by Cooper Industries, LLC in March 2009, filed a complaint for patent infringement against Ruud Lighting in the U.S. District Court for the Eastern District of Texas on June 7, 2010. The complaint alleges that Ruud Lighting is infringing a U.S. patent owned by Illumination Management Solutions, No. 7,674,018, entitled "LED Device for Wide Beam Generation." It also alleges that Ruud Lighting and one of its founders, Alan Ruud, who served on the plaintiff's board of directors during 2006 and 2007, conspired to have Mr. Ruud breach fiduciary obligations by misusing information obtained from the plaintiff to file patent applications and obtain patents assigned to Ruud Lighting. The complaint seeks injunctive relief, damages and an order directing Ruud Lighting to transfer to the plaintiff any interest in patent applications and patents relating to the plaintiff's business that Mr. Ruud assigned to Ruud Lighting during or as a result of his fiduciary relationship with the plaintiff. In December 2010, the court ordered the action transferred to the U.S. District Court for the Eastern District of Wisconsin. In April 2011, the Wisconsin court stayed the case until a ruling was made in a related case, described below, on whether to retain the related case in the Eastern District of Wisconsin.

Illumination Management Solutions filed a complaint in the U.S. District Court for the Central District of California on June 8, 2010. As amended, the complaint names as defendants Ruud Lighting, Alan Ruud and his son Christopher Ruud. The complaint alleges that the individual defendants breached fiduciary duties to the plaintiff and that Ruud Lighting and the individual defendants conspired to breach these duties by misusing information obtained from the plaintiff to file patent applications and obtain patents assigned to Ruud Lighting. The complaint seeks damages and an order directing Ruud Lighting and Alan Ruud to transfer to the plaintiff any interest in patent applications and patents relating to the plaintiff's business that Mr. Ruud assigned to Ruud Lighting during or as a result of his fiduciary relationship with the plaintiff. In December 2010, the court ordered the action transferred to the U.S. District Court for the Eastern District of Wisconsin. The plaintiff subsequently filed a motion seeking to have the action re-transferred to California; the Wisconsin court denied the motion in September 2011.