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Item 3. Legal Proceedings

2022-02-24 compared with 2021-02-25 · 51 added, 84 removed, 25 unchanged (84% of the section changed)

5 unchanged sentences

Among other things, we asserted defenses based on non-infringement and invalidity of the patents in question.

On August 19, 2016, the U.S.

District Court, District of Utah stayed the litigation pending inter partes review by the U.S.

Patent Trial and Appeal Board, or PTAB, of five of the patents in suit.

In March 2017, the PTAB issued final written decisions relating to two patents finding all challenged claims unpatentable.

In May 2017, the PTAB issued final written decisions relating to the remaining three patents that found certain claims unpatentable, while certain other claims were not found to be unpatentable.

Vivint appealed the decisions to the U.S.

Court of Appeals for the Federal Circuit, or the Federal Circuit, and we cross-appealed.

In July 2018, the Federal Circuit issued orders affirming the PTAB’s March 2017 decisions that invalidated all challenged claims of two patents.

District Court, District of Utah lifted the stay on the litigation on June 26, 2017, with Vivint proceeding with its case on four of the six patents in its complaint.

In 2017 and 2019, the U.S.

Patent Trial and Appeal Board, or PTAB, issued final written decisions in inter partes reviews finding all or some of the claims in five of the asserted patents unpatentable.

These decisions were affirmed on appeal.

Vivint is proceeding with its case on three patents.

Discovery closed on October 29, 2021.

Vivint has moved for partial summary judgment and Alarm.com has moved for summary judgment;

both motions are pending decision.

No trial date has been set.

In September 2017, the U.S.

Patent and Trademark Office, or PTO, ordered ex parte reexaminations of

certain claims of two of the remaining patents in suit, at our request.

On October 30, 2018 and November 5, 2018, the PTO issued final office actions in the pending reexaminations rejecting all claims being examined as unpatentable over the prior art.

Nine claims asserted in the litigation were found unpatentable in the PTO rejections.

Vivint appealed these rejections to the PTAB on March 29, 2019 and April 4, 2019.

The PTAB issued decisions affirming the rejections on February 28, 2020 and May 4, 2020.

Vivint appealed one of these decisions to the Federal Circuit on July 1, 2020, and requested rehearing from the PTAB on the other decision.

On December 20, 2018, the Federal Circuit issued an order regarding the inter partes review of three of the remaining patents in suit that vacated, reversed and remanded the PTAB’s ruling with regard to the construction of a term (“communication device identification code”) as requested by Alarm.com and affirmed the PTAB’s May 2017 rulings invalidating certain of the Vivint patents in all other respects.

On July 24, 2019, the PTAB issued further decisions with respect to two of the remaining patents in suit, finding additional claims unpatentable in view of the Federal Circuit’s December 20, 2018 decision.

One of the claims asserted in the litigation was found unpatentable in the July 14, 2019 decisions.

Vivint appealed the July 24, 2019 decisions to the Federal Circuit on September 25, 2019.

The appeal has been fully briefed and is now pending decision.

On February 12, 2021, we filed an action in U.S.

District Court, Eastern District of Virginia challenging the refusal by the PTO to proceed with additional reexaminations of the remaining patent claims asserted in the lawsuit.

The PTO has not yet responded to the complaint.

District Court, Eastern District of Virginia challenging the refusal by the U.S.

Patent and Trademark Office, or PTO, to proceed with ex parte reexaminations of the remaining patent claims asserted in the lawsuit.

District Court, Eastern District of Virginia granted the PTO’s motion to dismiss the case for lack of jurisdiction on June 22, 2021.

We appealed the dismissal to the Federal Circuit on June 24, 2021.

Should Vivint prevail in proving Alarm.com infringes one or more of its patent claims, we could be required to pay damages of Vivint’s lost profits and/or a reasonable royalty for sales of our solution.

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If securities analysts or investors regard these announcements as negative, the market price of our common stock may decline.

On October 22, 2019, EcoFactor, Inc., or EcoFactor, filed a complaint with the U.S.

International Trade Commission, or ITC, naming Alarm.com Incorporated and Alarm.com Holdings, Inc., among others, as proposed respondents.

The complaint alleges that Alarm.com’s smart thermostats infringe three U.S.

patents owned by EcoFactor.

EcoFactor is seeking a permanent limited exclusion order and permanent cease and desist order.

On November 22, 2019, the ITC instituted an investigation into EcoFactor’s allegations naming Alarm.com Incorporated, Alarm.com Holdings, Inc.

and others as respondents.

We answered the complaint on December 19, 2019.

Among other things, we asserted defenses based on non-infringement and invalidity of the patents in question.

An evidentiary hearing was held in November 2020.

The administrative law judge presiding over the investigation has set August 20, 2021 as the target date for completion of the investigation.

On November 11, 2019, EcoFactor filed a lawsuit against us in U.S.

District Court, District of Massachusetts, alleging infringement of the same three patents asserted against us in the ITC.

EcoFactor is seeking permanent injunctions, enhanced damages and attorneys' fees.

On December 26, 2019, the court issued an order staying the lawsuit pending the conclusion of the related ITC investigation.

On May 26, 2020, EcoFactor filed a second lawsuit against us in U.S.

District Court, District of Massachusetts, alleging Alarm.com’s products and services infringe four additional U.S.

On January 10, 2022, EcoFactor, Inc., or EcoFactor, filed a lawsuit against us in U.S.

District Court, District of Oregon, alleging Alarm.com’s products and services directly and indirectly infringe five U.S.

patents owned by EcoFactor.

EcoFactor is seeking permanent injunctions, enhanced damages and attorneys' fees.

On January 19, 2021, the court issued an order staying the lawsuit until May 19, 2021 in light of the related ITC investigation.

On February 12, 2021, Alarm.com requested the PTO reexamine the claims of one of the patents asserted in the lawsuit.

The request is pending with the PTO.

Should EcoFactor prevail in the ITC investigation, Alarm.com thermostats manufactured abroad could be excluded from importation into the United States.

Should EcoFactor prevail in its district court lawsuits we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

Our response to the complaint is due on March 28, 2022.

EcoFactor had previously asserted two of the same patents against us in an October 2019 complaint with the U.S.

International Trade Commission, or ITC.

In July 2021, the ITC found in favor of Alarm.com.

EcoFactor appealed the decision but withdrew its appeal in December 2021.

The other three asserted patents are currently in ex parte reexamination proceedings at the PTO, and one of them is also the subject of a pending inter partes review before the PTAB.

Should EcoFactor prevail in its lawsuit we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

While we believe we have valid defenses to EcoFactor’s claims, the outcome of these legal claims cannot be predicted with certainty and any of these outcomes could result in an adverse effect on our business.

On July 29, 2020, a putative class action was filed against Alarm.com Incorporated d/b/a ICN Acquisition, among other defendants, by Abante Rooter and Plumbing Inc.

and Sidney Naiman in the U.S.

District Court for the Northern District of California, alleging violations of the TCPA.

The complaint sought statutory damages under the TCPA, injunctive relief, and other relief.

The matter was resolved in December 2020.

On January 27, 2021, the Court entered an order dismissing the case.

On July 22, 2021, Causam Enterprises, Inc., or Causam, filed a lawsuit against us in U.S.

District Court, Western District of Texas, alleging that Alarm.com’s smart thermostats infringe four U.S.

patents owned by Causam.

Causam is seeking preliminary and permanent injunctions, enhanced damages and attorneys’ fees.

We have not yet responded to the complaint.

On September 3, 2021, the court issued an order staying the lawsuit until the ITC investigation described below is finally resolved.

On July 28, 2021, Causam filed a complaint with the ITC naming Alarm.com Incorporated, Alarm.com Holdings, Inc., and EnergyHub, Inc., among others, as proposed respondents.

The complaint alleges infringement of the same four patents Causam asserted in district court.

Causam is seeking a permanent limited exclusion order and permanent cease and desist order.

On August 27, 2021, the ITC instituted an investigation into Causam’s allegations naming Alarm.com Incorporated, Alarm.com Holdings, Inc., EnergyHub Inc.

and others as respondents.

We answered the complaint on October 4, 2021.

Among other things,

we asserted defenses based on non-infringement and invalidity of the patents in question.

The administrative law judge presiding over the hearing has scheduled an evidentiary hearing in the investigation to begin on June 29, 2022.

The target date for completion of the investigation is March 16, 2023.

Should Causam prevail in an ITC investigation, Alarm.com thermostats manufactured abroad could be excluded from importation into the United States.

Should Causam prevail in its district court lawsuit we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

While we believe we have valid defenses to Causam’s claims, the outcome of these legal claims cannot be predicted with certainty, and any of these outcomes could result in an adverse effect on our business.

In addition to the matters described above, we may be required to provide indemnification to certain of our service provider partners for certain claims regarding our solutions.

For example, we are incurring costs associated with the indemnification of our service provider ADT, LLC in ongoing patent infringement suits.

On July 13, 2016, Applied Capital, Inc., or Applied Capital, filed a lawsuit against ADT, LLC, the ADT Corporation, and Icontrol Networks, Inc.

District Court, the District of New Mexico.

Applied Capital, Inc v.

The ADT Corporation et al., D.

New Mexico Case No.

1-16-cv-00815.

Icontrol was dismissed without prejudice on May 22, 2017.

Applied Capital alleges that ADT’s sales of ADT Pulse directly and indirectly infringes U.S.

8,378,817 and 9,728,082, which were allegedly purchased by Applied Capital.

Applied Capital is seeking damages and attorneys’ fees.

ADT answered Applied Capital’s amended complaint on July 16, 2018.

Among other things, ADT has asserted defenses based on non-infringement and invalidity of the patents-in-suit.

On April 5, 2019, Applied Capital filed a lawsuit for breach of contract against Rodney Fox, the inventor of the patents-in-suit, in the Second Judicial District Court, County of Bernalillo in New Mexico State Court (No.

D-202-CV-2019-02841).

Fox counterclaimed, alleging that he is the rightful owner of the patents-in-suit.

Based on the dispute of ownership, on October 15, 2019, ADT filed a motion to stay in this matter pending its resolution.

Applied Capital and Mr.

Fox reached settlement and stipulated to dismissal of the New Mexico State Court action on October 31, 2019.

Applied Capital filed its Second Amended Complaint on January 27, 2020 and ADT answered, adding a claim of inequitable conduct, on February 10, 2020.

The court issued its claim construction order on August 12, 2019, fact discovery closed on November 12, 2019, expert discovery closed on March 9, 2020, and summary judgment and Daubert motions briefing closed on June 3, 2020 and are pending.

The pretrial conference is scheduled for March 22, 2021, and trial is set for June 15, 2021.

On July 2, 2020, Portus Singapore Pte.

and Portus Pty.

Ltd., or Portus, sued ADT, LLC d/b/a ADT Security Services in U.S.

District Court for the Western District of Texas.

Portus alleges that ADT’s sales of ADT Pulse directly and indirectly infringe U.S.

8,914,526 and 9,961,097, which were assigned to Portus.

Portus is seeking damages and attorneys’ fees.

ADT answered the complaint on August 31, 2020.

The claim construction hearing is set for June 11, 2021.

Trial is scheduled for April 4, 2022.

Should the plaintiffs prevail on the claims that one or more elements of ADT’s products infringe, we could be required to indemnify ADT for damages in the form of a reasonable royalty or ADT could be enjoined from making, using and selling our solution if a license or other right to continue selling our technology is not made available to us or we are unable to design around such patents, and required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

On February 25, 2021, Vivint filed a lawsuit against ADT LLC a/k/a ADT LLC of Delaware d/b/a ADT Security Services in U.S.

District Court, District of Utah, alleging that ADT Pulse, Control, and Blue each infringe one or more of six patents owned by Vivint.

Vivint is seeking damages and attorneys’ fees.

Vivint filed an amended complaint on March 24, 2021.

ADT answered the amended complaint on April 30, 2021 and asserted defenses based on non-infringement and invalidity of all the patents in question, and inequitable conduct as to one of the patents.

On August 6, 2021, the parties to the case stipulated to the dismissal of Vivint’s claims as to one of the six patents, leaving five in the case.

On June 25, 2021, ADT filed a motion for judgment on the pleadings seeking judgment in its favor on the grounds that the claimed inventions are directed to ineligible subject matter.

On February 22, 2022, the court denied the motion without prejudice and granted Vivint leave to file a second amended complaint.

The case is currently in discovery, and no trial date has been set.

One of the asserted patents is under inter partes review at the PTAB, and ADT has filed petitions for inter partes review for three other asserted patents for which decisions on institution are pending.

Should Vivint prevail on the claims that one or more elements of ADT’s products infringe, we could be required to indemnify ADT for damages in the form of a reasonable royalty or ADT could be enjoined from making, using and selling our solution if a license or other right to continue selling our technology is not made available or we are unable to design around such patents, and required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

The outcome of these legal claims cannot be predicted with certainty.

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Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

For a description of our legal proceedings, see Note 13 to our consolidated financial statements for additional information.

MINE SAFETY DISCLOSURES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings