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Item 3. Legal Proceedings

2024-02-22 compared with 2023-02-24 · 40 added, 48 removed, 41 unchanged (68% of the section changed)

2 unchanged sentences

District Court, District of Utah, alleging that our technology directly and indirectly infringes six patents that Vivint purchased.

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

We answered the complaint on July 23, 2015.

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

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.

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.

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

We have opposed the motion.

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.

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.

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 has stopped 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.

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, which began during the fourth quarter of 2022, SaaS and license revenue and total revenue will decrease by approximately $6.0 million on a quarterly basis.

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

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 had stopped paying license fees to Alarm.com under the agreement.

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 through December 31, 2023 were lower by approximately $6.0 million on a quarterly basis.

Quarterly earnings and cash flow through December 31, 2023 were also 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.

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’s response to the complaint is due February 27, 2023.

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

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

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

On December 21, 2023, Alarm.com and Vivint agreed to settle all outstanding litigation between the parties and to enter into a long-term intellectual property license agreement under which Alarm.com will license to Vivint its intellectual property portfolio.

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

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patents owned by EcoFactor.

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

We moved to dismiss the case for failure to state a claim on March 28, 2022.

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

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

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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.

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.

We moved to dismiss the Oregon case for failure to state a claim on March 28, 2022.

Three of the asserted patents are in ex parte reexamination proceedings at the PTO, and ex parte reexamination of a fourth patent concluded on August 23, 2023 after the claims were amended.

On April 18, 2022, all claims of a fifth patent were found unpatentable by the U.S.

Patent Trial and Appeal Board, or PTAB, in an inter partes review, and the parties expect that all claims of that patent will be canceled because EcoFactor's appeal of that PTAB decision was dismissed.

On April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of PTAB and other proceedings involving the asserted patents, and the parties filed a joint status report on January 2, 2024.

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.

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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.

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.

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

Causam has until April 17, 2023 to file an appeal of the decision in federal court.

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

Causam did not appeal the ITC decision with respect to Alarm.com and EnergyHub.

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.

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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.

For example, we incurred costs associated with the indemnification of our service provider ADT, LLC.

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.

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Vivint filed a second amended complaint on March 8, 2022.

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.

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.

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.

Further, on November 4, 2022 and January 13, 2023, IOT Innovations LLC sued our service provider Monitronics International, Inc.

d/b/a Brinks in U.S.

Pursuant to the December 21, 2023 settlement agreement between Alarm.com and Vivint, the allegations regarding ADT Pulse and Control will be dismissed, ending Alarm.com’s indemnification obligations in this matter.

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

d/b/a Brinks in 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.

Monitronics filed a Motion to Dismiss the first-filed case on January 24, 2023.

The cases are in the preliminary stages and the extent of Alarm.com’s indemnify obligations to Monitronics has not yet been determined, however should IOT Innovations 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.

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

On October 3, 2023, IOT filed a stipulation of dismissal of all three cases, ending the cases and the Company's involvement therein.

We also incur costs associated with the indemnification of our service provider, Central Security Group – Nationwide, Inc.

(d/b/a Alert 360), or CSG, in an ongoing patent litigation.

In 2018, Ubiquitous Connectivity, LP, or Ubiquitous, brought suit against CSG in U.S.

District Court, Northern District of Oklahoma, alleging infringement of two US patents.

The case was stayed by agreement of the parties for several years while the patents in suit were challenged before the PTAB.

In January 2021, the PTAB deemed 42 out of 46 claims of the two asserted patents unpatentable.

Ubiquitous appealed a portion of the PTAB’s findings to the United States Court of Appeals for the Federal Circuit.

The Federal Circuit affirmed the PTAB’s ruling on August 8, 2023.

As a result, only four patent claims remain at issue and the Northern District of Oklahoma case is no longer stayed.

A claim construction hearing is scheduled for December 12, 2024.

A hearing on dispositive motions, including for summary judgment, is scheduled for April 15, 2026.

A trial is scheduled for June 22, 2026.

Should Ubiquitous prevail on its infringement claims, we could be required to indemnify CSG for damages in the form of a reasonable royalty or of Ubiquitous’s lost profits.

CSG 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 if we are unable to design around such patents, and we could be 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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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