What changed in this filing

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Item 1. Legal Proceedings

2023-05-10 compared with 2022-11-09 · 46 added, 19 removed, 57 unchanged (53% of the section changed)

8 unchanged sentences

These decisions were affirmed on appeal.

Discovery closed on October 29, 2021.

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

Discovery has closed with respect to seven claims in three of the asserted patents.

Vivint has moved for partial summary judgment and Alarm.com has moved for summary judgment as to those seven claims;

both motions are pending decision.

Vivint has also moved to assert previously abandoned claims from two of the patents in a new proceeding.

We have opposed the motion.

Claim construction and expert discovery as to nine other patent claims from two patents that were previously stayed has not yet been completed.

No trial date has been set.

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.

Since all remaining patent claims in the litigation have expired, Vivint shall not be entitled to injunctive relief as a remedy in this matter.

Additionally, as to unexpired patents asserted by Vivint in the Eastern District of Texas case, we 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.

While we believe we have valid defenses to Vivint’s claims, any of these outcomes could result in a material adverse effect on our business.

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Further related to Vivint, on October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013.

Vivint notified us it will stop paying license fees to Alarm.com under the agreement.

Vivint has paid the required license fees to Alarm.com since the agreement was executed in November 2013.

Vivint has stopped paying license fees to Alarm.com under the agreement.

Vivint had been paying the required license fees to Alarm.com since the agreement was executed in November 2013.

Alarm.com disputes Vivint's refusal of payment and is seeking continued payments of license fees in the arbitration, as well as interest and declaratory relief.

There can be no assurance that Alarm.com will be successful in the arbitration proceedings.

As a result of Vivint’s refusal to pay license fees under the agreement, beginning with the fourth quarter of 2022, Alarm.com believes that quarterly SaaS and license revenue and total revenue will be impacted by approximately $6.0 million.

Alarm.com also believes that quarterly earnings and cash flow will be impacted by the aforementioned $6.0 million, plus additional legal fees.

As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, SaaS and license revenue and total revenue will continue to be lowered by approximately $6.0 million on a quarterly basis.

We also believe that quarterly earnings and cash flow will continue to be impacted by the aforementioned $6.0 million, plus additional legal fees.

We also filed a lawsuit against Vivint on January 4, 2023 in U.S.

District Court, Eastern District of Texas, alleging that Vivint infringes 15 of our patents.

Since then, we have voluntarily dismissed without prejudice the infringement claims with respect to one of the patents, leaving 14 asserted patents.

The case is docketed as No.

2:23-CV-0004-JRG-RSP (E.D.

We are seeking compensatory and enhanced damages, a permanent injunction and other relief.

Vivint filed a partial motion to dismiss the complaint on February 27, 2023 which we have opposed.

On March 8, 2023, Vivint filed counterclaims in the action alleging that Alarm.com’s products and services directly and indirectly infringe 14 patents owned by Vivint.

Most of Vivint’s counterclaims also name our service provider ADT LLC as a defendant.

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

We answered the complaint on April 28, 2023.

Among other things, we asserted defenses based on non-infringement and invalidity of Vivint’s patents.

As to the unexpired patents asserted by Vivint, we 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.

While we believe we have valid defenses to Vivint’s claims, any of these outcomes could result in a material adverse effect on our business.

Even if we were to prevail, this litigation could continue to be costly and time-consuming, divert the attention of our management and key personnel from our business operations and dissuade potential customers from purchasing our solution, which would also materially harm our business.

During the course of the litigation, we anticipate announcements of the results of hearings and motions, and other interim developments related to the litigation.

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

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

7 unchanged sentences

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

Two of the other three asserted patents are currently in ex parte reexamination proceedings at the PTO, and all claims of the third were found unpatentable by the PTAB in inter partes review on April 18, 2022.

Also on April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of other proceedings involving the asserted patents, including the reexamination proceedings.

Four of the asserted patents are in ex parte reexamination proceedings at

the PTO, and all claims of the fifth were found unpatentable by the PTAB in inter partes review on April 18, 2022.

Also on April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of other proceedings involving the asserted patents.

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.

13 unchanged sentences

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

An evidentiary hearing in the

investigation was held from June 28, 2022 through July 1, 2022.

An initial decision by the presiding administrative judge is expected by November 16, 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.

An evidentiary hearing in the investigation was held from June 28, 2022 through July 1, 2022.

On February 16, 2023, the ITC issued a final decision in favor of Alarm.com and EnergyHub.

Causam filed an appeal of the ITC decision on April 14, 2023.

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.

7 unchanged sentences

ADT answered the second amended complaint on March 22, 2022, asserted defenses based on non-infringement and invalidity of all five asserted patents and counterclaimed for declaratory judgement of invalidity of all five asserted patents.

Two of the asserted patents are under inter partes review at the PTAB.

The PTAB granted inter partes review of two of the asserted patents at ADT's request.

On June 17, 2022, the court entered an order staying the case in view of the pending proceedings before the PTAB, with the exception of certain discovery of source code.

In decisions issued in February and March 2023, the PTAB found all challenged claims of the two patents under review unpatentable.

Vivint filed an appeal of the first PTAB decision on April 13, 2023.

Vivint has until May 30, 2023 to appeal the second PTAB decision.

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.

We are also incurring costs associated with the indemnification of our service provider Monitronics International, Inc.

d/b/a Brinks in ongoing patent infringement suits.

On November 4, 2022, January 13, 2023 and April 18, 2023, IOT Innovations LLC, or IOT, sued Monitronics in U.S.

District Court, Eastern District of Texas, alleging patent infringement of certain products and services sold by Monitronics.

Together, IOT has asserted infringement of 26 patents and is seeking permanent injunctions, enhanced damages and attorneys' fees.

Monitronics filed a Motion to Dismiss the first-filed case for lack of venue on January 24, 2023 and the second-filed case on March 24, 2023.

Should IOT prevail on the claims that one or more elements of Monitronics’ products or services infringe, we could be required to indemnify Monitronics for damages in the form of a reasonable royalty or Monitronics 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.

We may also be a party to litigation and subject to claims incident to the ordinary course of business.

Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business.

Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course

matters will not have a material adverse effect on our business.

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 12 to our condensed consolidated financial statements for additional information.

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-Q

Item 1. Legal Proceedings