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Item 3. Legal Proceedings

2021-03-31 compared with 2020-04-06 · 69 added, 67 removed, 42 unchanged (76% of the section changed)

Legal Proceedings.

Company is subject to various legal proceedings arising from normal business operations.

6 unchanged sentences

Company owns U.S.

9,253,452 (the “

‘452 Patent”), which generally covers the automatic activation

and coordination of multiple recording devices in response to a triggering event, such as a law enforcement officer activating

the light bar on the vehicle.

9,253,452 (the “‘452 Patent’”), which generally covers the automatic

activation and coordination of multiple recording devices in response to a triggering event, such as a law enforcement officer

activating the light bar on the vehicle.

Company filed suit on January 15, 2016 in the U.S.

3 unchanged sentences

Company is seeking both monetary damages and a permanent injunction against Axon for infringement of the ‘452 Patent.

December 2016 and January 2017, Axon filed two petitions for Inter Partes Review (“IPR”) against the ‘452

The United States Patent and Trademark Office (“USPTO”) rejected both of Axon’s petitions.

statutorily precluded from filing any more IPR petitions against the ‘452 Patent.

In December 2016 and January

2017, Axon filed two petitions for Inter Partes Review (“IPR”) against the ‘452 Patent.

The USPTO rejected

both of Axon’s petitions.

Axon is now statutorily precluded from filing any more IPR petitions against the ‘452 Patent.

District Court litigation in Kansas was temporarily stayed following the filing of the petitions for IPR.

20 unchanged sentences

judgment had nothing to do with Digital’s damages request.

The Company has filed an appeal to this ruling and has asked

the appellate court to reverse this decision.

The Company filed its Opening

Appeal Brief on August 26, 2019 and Axon filed its Responsive Brief on November 6, 2019 and the Company filed its Reply Brief

responding to Axon on November 27, 2019.

The United States Court of Appeals for the Federal Circuit scheduled oral argument on

the Company’s appeal of the district court’s summary judgment order on April 6, 2020.

This appeal is to address

the incorrect and mistaken dismissal of Digital Ally’s claims against Axon by Judge Carlos Murguia in the U.S.

Court of Kansas litigation.

If the Court of Appeals overturns the summary judgment ruling, a new judge will be assigned to handle

the litigation with Axon due to the recent resignation of Judge Murguia.

On March 12, 2020, the panel of judges for the United

States Court of Appeals issued an order cancelling the oral arguments previously set for April 6, 2020 having determined that

they will decide the appeal based on the parties’

briefs without oral argument.

The Company filed an opening

appeal brief on August 26, 2019 with the U.S.

Court of Appeals for the Tenth Circuit (the “Court of Appeals”), appealing

District Court’s granting of Axon’s motion for summary judgment.

Axon responded by filing a responsive brief

on November 6, 2019 and we then filed a reply brief responding to Axon on November 27, 2019.

The Court of Appeals scheduled oral

arguments on our appeal of the U.S.

District Court’s summary judgment ruling on April 6, 2020.

This appeal was intended

to address the Company’s position that the U.S.

District Court incorrectly dismissed our claims against Axon.

of Appeals overturns the ruling of the U.S.

District Court, the case will be remanded to the U.S District Court before a new judge.

On March 12, 2020, the panel of judges for the Court of Appeals issued an order cancelling the oral arguments previously set for

April 6, 2020, having determined that the appeal will be decided solely based on the parties’

On April 22, 2020,

a three-judge panel of the United States Court of Appeals denied our appeal and affirmed the District Court’s previous decision

to grant Axon summary judgment.

On May 22, 2020, we filed a petition for panel rehearing requesting that we be granted a rehearing

of our appeal of the U.S.

District Court’s summary judgment ruling.

Furthermore, we filed a motion requesting that

we be given an opportunity to make our case through oral argument in front of the three-judge panel of the Court of Appeals, which

motion was denied on June 9, 2020.

The Company had until November 7, 2020 to decide whether it would appeal the U.S.

District Court’s and Court of Appeals’

decisions to the United States Supreme Court.

The Company has abandoned

its right to any further appeals.

May 27, 2016, the Company filed suit against WatchGuard, (Case No.

2:16-cv-02349-JTM-JPO) alleging patent infringement based on

WatchGuard’s VISTA Wifi and 4RE In-Car product lines.

WatchGuard’s VISTA Wi-Fi and 4RE In-Car product lines.

May 13, 2019, the parties resolved the dispute and executed a settlement agreement in the form of a Release and License Agreement.

1 unchanged sentence

Release and License Agreement encompasses the following key terms:

WatchGuard paid

Digital Ally a one-time, lump settlement payment of $6,000,000.

Digital Ally granted

WatchGuard a perpetual covenant not to sue if WatchGuard’s products incorporate agreed-upon modified recording functionality.

Digital Ally also granted WatchGuard a license to the ‘292 Patent and the ‘452 Patent (and related patents, now

existing and yet-to-issue) through December 31, 2023.

The parties agreed to negotiate in good faith to attempt to resolve

any alleged infringement that occurs after the license period expires.

The parties further

agreed to release each other from all claims or liabilities pre-existing the settlement.

As part of the settlement,

the parties agreed that WatchGuard made no admission that it infringed any of Digital Ally’s patents.

receipt of the $6,000,000 the parties filed a joint motion to dismiss the lawsuit which the Judge granted.

January 22, 2019 the PGA Tour, Inc.

(the “PGA”) filed suit against the Company in the Federal District Court for the

District of Kansas (Case No.

2:19-cv-0033-CM-KGG) alleging breach of contract and breach of implied covenant of good faith and

fair dealing relative to the Web.com Tour Title Sponsor Agreement (the “Agreement”).

The contract was executed on

April 16, 2015 by and between the parties.

Under the Agreement, Digital Ally would be a title sponsor of and receive certain naming

and other rights and benefits associated with the Web.com Tour for 2015 through 2019 in exchange for Digital Ally’s payment

to Tour of annual sponsorship fees.

The suit was resolved and the case has been dismissed by Plaintiff with prejudice on April

time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us.

It is our policy to

not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us.

carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded,

we vigorously defend any lawsuit filed against us.

paid Digital Ally a one-time, lump settlement payment of $6,000,000.

Ally granted WatchGuard a perpetual covenant not to sue if WatchGuard’s products incorporate agreed-upon modified recording

functionality.

Digital Ally also granted WatchGuard a license to the ‘292 Patent and the ‘452 Patent (and related

patents, now existing and yet-to-issue) through December 31, 2023.

The parties agreed to negotiate in good faith to attempt

to resolve any alleged infringement that occurs after the license period expires.

parties further agreed to release each other from all claims or liabilities pre-existing the settlement.

part of the settlement, the parties agreed that WatchGuard made no admission that it infringed any of Digital Ally’s

receipt of the $6,000,000 the parties filed a joint motion to dismiss the lawsuit with the court, which was granted.

From time to time,

we are notified that we may be a party to a lawsuit or that a claim is being made against us.

It is our policy to not disclose

the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us.

After carefully assessing

the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously

defend any lawsuit filed against us.

We record a liability when losses are deemed probable and reasonably estimable.

When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the

amount of the loss or range of possible losses for the claim, if material for disclosure.

In evaluating matters for accrual and

disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the

specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of

any potential loss.

are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the

loss or range of possible losses for the claim, if material for disclosure.

In evaluating matters for accrual and disclosure purposes,

we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and

circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss.

We reevaluate and update accruals as matters progress over time.

the ultimate resolution is unknown, we do not expect that these lawsuits will individually, or in the aggregate, have a material

adverse effect to our results of operations, financial condition or cash flows.

However, the outcome of any litigation is inherently

uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution

of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage

and will not have a material adverse effect on our operating results, financial condition or cash flows.

Mine Safety Disclosures.

While the ultimate

resolution is unknown, we do not expect that these lawsuits will individually, or in the aggregate, have a material adverse effect

to our results of operations, financial condition or cash flows.

However, the outcome of any litigation is inherently uncertain

and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters

will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not

have a material adverse effect on our operating results, financial condition or cash flows.

Safety Disclosures.

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