Quarterly report pursuant to Section 13 or 15(d)

Legal Proceedings

Legal Proceedings
9 Months Ended
Oct. 01, 2022
Commitments and Contingencies Disclosure [Abstract]  
Legal Proceedings Legal Proceedings
One of the Company’s subsidiaries is involved in numerous patent infringement actions brought by Lufthansa Technik AG (“Lufthansa”) in Germany, 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, 2021. As previously disclosed, under English law, Lufthansa has the option of pursuing a claim in the UK matter in relation to the defendants’ profits from their infringing activities or pursuing a claim in relation to Lufthansa’s own lost profits. In September 2022, Lufthansa elected to claim damages based on defendants’ profits. The reserve for the German indirect claim and UK damages and interest was approximately $24.6 million at December 31, 2021 and $24.1 million at October 1, 2022, which included an additional $0.1 million and $0.5 million in interest accrued during the three and nine months ended October 1, 2022. The Company currently believes it is unlikely that the appeals process will be completed or the damages and related interest will be paid within the next twelve months. Therefore, the liability related to these matters is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets at October 1, 2022 and December 31, 2021. There were no other significant developments in any of these matters during the three and nine months ended October 1, 2022.
At December 31, 2021, we had recorded a liability of $1.0 million for reimbursement of Lufthansa’s legal expenses associated with the UK matter. During the nine months ended October 1, 2022, $0.3 million was paid. The remaining liability of $0.7 million 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 October 1, 2022.
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 remain. 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. ATS requested and, on August 26, 2021, the District Court granted, a stay of litigation during the IPR proceeding. Oral arguments on the IPR were held on April 21, 2022. The PTAB issued its decision on July 20, 2022, in which it invalidated all of Teradyne’s patent claims. The stay of litigation was lifted with respect to the remaining claims in August 2022 and discovery has resumed. No amounts have been accrued for this matter in the October 1, 2022 or December 31, 2021 financial statements, as loss exposure was neither probable nor estimable at such times.
In 2019, a former customer filed a lawsuit alleging damages associated with defective product. Mediation of the matter was held in November 2022. The Company agreed to make a payment of $2.0 million to settle the matter, and such amount has been reflected in the Selling, General and Administrative line in the three and nine month periods ended October 1, 2022. The Company expects to be indemnified by other parties for approximately $1.5 million and will record the gain as an offset to Selling, General and Administrative expense when received, likely in the fourth quarter of 2022.
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.