What changed in this filing

/stocks — the workspaceLOADING

Item 1. Legal Proceedings

2023-05-11 compared with 2022-11-14 · 25 added, 71 removed, 27 unchanged (78% of the section changed)

3 unchanged sentences

On May 26, 2022, we filed a complaint against Meta in the United States District Court for the Western District of Texas.

The complaint alleges that Meta’s AR/VR systems, including the Meta Quest 2, infringe six of our patents that cover various uses of haptic effects in connection with such AR/VR systems.

The complaint alleges that Meta’s augmented and virtual reality (“AR/VR”) systems, including the Meta Quest 2, infringe six of our patents that cover various uses of haptic effects in connection with such AR/VR systems.

We are seeking to enjoin Meta from further infringement and to recover a reasonable royalty for such infringement.

8 unchanged sentences

On September 12, 2022, Meta filed a motion to transfer the lawsuit to the Northern District of California or, in the alternative, to the Austin Division of the Western District of Texas.

Meta’s motion remains pending during venue discovery.

Our response is due December 5, 2022.

Samsung Electronics Co.

Immersion Corporation and Immersion Software Ireland Limited

On April 28, 2017, we received a letter from Samsung requesting that we reimburse Samsung with respect to withholding tax and penalties imposed on Samsung by the Korean tax authorities following an investigation where the tax authority determined that Samsung failed to withhold taxes on Samsung’s royalty payments to Immersion Software Ireland from 2012 to 2016.

On July 12, 2017, on behalf of Samsung, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes and penalties.

On October 18, 2018, the Korea Tax Tribunal held a hearing and on November 19, 2018, the Korea Tax Tribunal issued its ruling in which it decided not to accept Immersion’s arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on Samsung.

On behalf of Samsung, we filed an appeal with the Korea Administrative Court on February 15, 2019.

On July 16, 2020, the Korea Administrative Court issued its ruling in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on Samsung should be cancelled with some litigation costs to be borne by the Korean tax authorities.

On August 1, 2020, the Korean tax authorities filed an appeal with the Korea High Court.

The first hearing in the Korea High Court occurred on November 11, 2020.

A second hearing occurred on January 13, 2021.

A third hearing occurred on March 21, 2021.

The Korea High Court had indicated that a final decision was originally expected on May 28, 2021, but instead, decided to hold a fourth hearing on July 9, 2021.

On October 1, 2021, the Korea High Court issued its ruling in which it ruled that withholding taxes and penalties totaling approximately KRW 6,186,218,586 (approximately $5.2 million) in national-level withholding tax and local withholding taxes imposed by the Korean tax authorities on Samsung for royalties paid to Immersion during the period of 2012 – 2014 be cancelled on the basis that the Korea tax authorities wrongfully engaged in a duplicative audit with respect to such time period.

The Korea High Court also ruled that approximately KRW 1,655,105,584 (approximately $1.4 million) of national-level withholding tax and local withholding taxes imposed by the Korean tax authorities on Samsung for royalties paid to Immersion during 2015 and 2016 be upheld in part on the basis that Immersion Software Ireland Limited did not have sufficient economic substance to be considered the beneficial owner of the royalties paid by Samsung to Immersion Software Ireland Limited.

On or about October 22, 2021, the Korean tax authorities filed an appeal with the Korea Supreme Court with respect to certain portions of the Korea High Court decision and we filed an appeal with the Korea Supreme Court with respect to certain portions of the Korea High Court decision.

On December 1, 2021, the Korean tax authorities submitted its brief to the Korea Supreme Court challenging the cancellation by the Korea High Court of a portion of the withholding tax imposed by the Korean tax authorities.

On December 3, 2021, we submitted our own brief to the Korea Supreme Court providing arguments in support of our position that Immersion Software Ireland Limited has sufficient economic substance to be considered the beneficial owner of the royalties paid by Samsung to Immersion Software Ireland Limited.

Such brief also provided arguments challenging the calculation of the imposed withholding tax upheld by the Korea High Court.

On December 20, the Korean tax authorities filed a rebuttal brief

relating to our brief filed on December 3, 2021.

On December 29, 2021, we filed our rebuttal brief relating to the Korean tax authorities’ brief filed on December 1, 2021.

On February 24, 2022, the Korea Supreme Court issued a decision affirming the rulings of the Korea High Court.

We believe that any impairment in the Long-term deposits associated with the rulings of the Korea High Court is appropriately reflected in the Condensed Consolidated Balance Sheets .

On September 29, 2017, Samsung filed an arbitration demand with the International Chamber of Commerce against us demanding that we reimburse Samsung for the imposed tax and penalties that Samsung paid to the Korean tax authorities.

Samsung is requesting that we pay Samsung the amount of KRW 7,841,324,165 (approximately $6.9 million) plus interest from and after May 2, 2017, plus the cost of the arbitration including legal fees.

On March 27, 2019, we received the final award.

The award ordered Immersion to pay Samsung KRW 7,841,324,165 (approximately $6.9 million as of March 31, 2019), which we paid on April 22, 2019, denied Samsung’s claim for interest from and after May 2, 2017;

and ordered Immersion to pay Samsung’s cost of the arbitration in the amount of approximately $871,454, which was paid in 2019.

As a result of the Korea Supreme Court decision described above, we were reimbursed by Samsung in an amount equal to KRW 6,088,855,388 (approximately $5.0 million) representing Korea national-level taxes, penalties and interest that was canceled by the Korea Supreme Court.

We were also reimbursed an additional KRW 608,885,000 (approximately $0.5 million) representing local-level taxes, penalties and interest that was canceled by the Korea Supreme Court.

Meta’s motion remains pending, and a hearing on the transfer motion occurred on January 23, 2023.

In the meantime, claim construction briefing is closed, and fact discovery opened on February 7, 2023.

The claim construction hearing was scheduled for March 6, 2023, but had been rescheduled by the Court for April 24, 2023, and again rescheduled to May 11, 2023.

Immersion Corporation vs.

On or about March 3, 2023, we initiated patent infringement lawsuits against several companies of the Xiaomi-Group (the “Xiamoi-Group”) in Germany, France and India.

We initiated lawsuits against Xiaomi-Group companies and their agents in the Düsseldorf Regional Court in Germany, the Tribunal judiciaire de Paris (Paris First Instance Civil Court) in France, and the High Court of Delhi, at New Delhi, in India.

The complaints allege that the Xiaomi-Group’s devices, including the Xiaomi 12, infringe our patents that cover various uses of haptic effects in connection with such devices.

We are seeking injunctions that would allow us to prohibit the Xiaomi-Group from selling the infringing devices in Germany, France and India, as well as costs and damages as compensation for such infringement.

The complaints against the Xiaomi-Group assert infringement of the following patents:

• EP 2 463 752 B1 (German part) titled “ Haptisches Feedback-System mit gespeicherten Effekten ”

• EP 2 463 752 B1 (French part) titled “ Système de rendu haptique avec stockage d’effets ”

• IN 304 396 (India) titled “ Haptic Feedback System With Stored Effects”

LGE Korean Withholding Tax Matter

On October 16, 2017, we received a letter from LG Electronics Inc.

(“LGE”) requesting that we reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following an investigation where the tax authority determined that LGE failed to withhold on LGE’s royalty payments to Immersion Software Ireland from 2012 to 2014.

Pursuant to an agreement reached with LGE, on April 8, 2020, we provided a provisional deposit to LGE in the amount of KRW 5,916,845,454 (approximately $5.0 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korea courts.

In the second quarter of 2020, we recorded this deposit as Long-term deposits on our Condensed Consolidated Balance Sheets .

3 unchanged sentences

On behalf of LGE, we filed an appeal with the Korea Administrative Court on June 10, 2019.

The first hearing occurred on October 15, 2019.

A second hearing occurred on December 19, 2019.

A third hearing occurred on February 13, 2020.

A fourth hearing occurred on June 9, 2020.

A fifth hearing occurred on July 16, 2020.

We anticipated a decision to be rendered on or about October 8, 2020, but the Korea Administrative Court scheduled and held a sixth hearing for November 12, 2020.

A seventh hearing occurred on January 14, 2021.

An eighth hearing occurred on April 8, 2021.

A ninth hearing occurred on June 24, 2021.

A tenth hearing occurred on September 13, 2021.

An eleventh hearing occurred on November 15, 2021 .

A twelfth hearing occurred on December 23, 2021.

The Court had indicated that it expected to render a decision on this matter by the end of February 2022.

However, due to a reshuffling of judges, another hearing, which was originally scheduled for April 14, 2022 occurred on July 7, 2022.

A thirteenth hearing occurred on October 27, 2022.

A final hearing is scheduled for November 24, 2022.

The Court has indicated that it expects to render a decision on this matter by December 31, 2022.

Based on the developments in these cases, we regularly reassess the likelihood that we will prevail in some or all of the claims from the Korean tax authorities.

The Company has had numerous hearings before the Korea Administrative Court in the years 2019 through 2022.

The Korea Administrative Court had indicated that it expected to render a decision on this matter by December 31, 2022, but had subsequently updated the parties to indicate that a decision on this matter is expected by February 16, 2023.

On February 15, 2023, we were informed that the Korea Administrative Court had scheduled another hearing for April 27, 2023 due to a change in the main judge for this matter.

We had a hearing on April 27, 2023, and the Korea Administrative Court indicated that it expects to render a decision on this matter by June 8, 2023.

On April 25, 2023, we received notice from LGE requesting us to reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following a recent tax audit of LGE for the years 2018 through 2022 in the amount of KRW 3,025,251,775 (approximately $2.3 million).

We are currently evaluating our next steps with respect to the reimbursement of such withholding taxes in accordance with our obligations pursuant to the license agreement with LGE.

As of March 31, 2023, we have accrued $0.3 million of withholding taxes, interest and penalties related to the 2018 to 2022 period for which the Korean tax authorities have recently assessed LGE.

The additional income tax is accrued in Other Current Liabilities in our Condensed Consolidated Balance Sheets.

Based on the developments in these cases, we regularly reassess the likelihood that we will prevail in some or all the claims from the Korean tax authorities.

To the extent that we determine that it is more likely than not that we will prevail against the claims from the Korean tax authorities, then no additional tax expense is provided for in our Condensed Consolidated Statements of Income and Comprehensive Income .

1 unchanged sentence

If the additional income tax expense was related to the periods assessed by Korean tax authorities and for which we recorded in Long-term deposits on our Condensed Consolidated Balance Sheets , then the additional income tax expense would be recorded as an impairment in the Long-term deposits .

If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for a which we recorded a Long-term deposits on our Condensed Consolidated Balance Sheets , then the additional income tax expense would be accrued as an Other current liabilities .

If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for which we recorded a Long-term deposits on our Condensed Consolidated Balance Sheets , then the additional income tax expense would be accrued as an Other current liabilities .

We cannot predict the ultimate outcome of the above-mentioned actions that are pending, and we are unable to estimate any potential liability we may incur.

1 unchanged sentence

Contingencies of the Note to the Condensed Consolidated Financial Statements.

Immersion Software Ireland Limited v.

Marquardt GMBH

On August 3, 2021, we filed an arbitration demand with the American Arbitration Association (the “AAA”) against Marquardt GmbH (“Marquardt”), one of our licensees in the automotive market.

The arbitration demand had arisen out of that certain Amended and Restated Patent License Agreement (the “Marquardt License”), effective as of January 1, 2018, between us as licensor and Marquardt, as licensee.

Pursuant to the arbitration demand, we demanded that Marquardt cure its breach of the Marquardt License and pay all royalties currently owed under the Marquardt License.

Pursuant to the terms of the Marquardt License, we requested arbitration by a single arbitrator in Madison County, New York.

On August 9, 2021, the AAA confirmed receipt of our arbitration demand dated August 3, 2021.

On August 13, 2021, the AAA conducted an administrative conference call to discuss communications, mediation, tribunal appointment, place of arbitration, and other administrative topics.

On September 15, 2021, Marquardt filed an answer to our arbitration demand with the AAA, in which Marquardt provided general denials of our claims and asserted a counterclaim for approximately $138,000 in royalties previously paid to us under the Marquardt License.

On September 30, 2021, we filed an answer to Marquardt’s counterclaim in which we denied the allegations set forth in Marquardt’s counterclaim.

A preliminary hearing occurred on December 6, 2021, during which the parties agreed to explore mediation and the arbitrator set forth a schedule relating to the arbitration.

A mediation session occurred during the period of March 14-16, 2022.

At the mediation, we entered into a binding settlement term sheet with Marquardt pursuant to which we agreed to cause our arbitration demand to be dismissed.

In exchange, Marquardt agreed to the prepayment of certain royalties otherwise payable under the Marquardt License.

Additionally on April 4, 2022, we entered into an amendment to the Marquardt License to reflect such payment and other related terms.

On May 20, 2022, the parties submitted a stipulation of dismissal to the AAA dismissing with prejudice all claims brought by us against Marquardt in the arbitration.

There have been no material changes to the risk factors disclosed in Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 25, 2022.

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