This will be my last post on the subject of whether or not the Samsung settlement fee was booked in Q2. The "evidence" shows, in my mind, that it was.
Legal Matters
Business Litigation
In May 2006, the Company announced that a complaint had been filed against it and certain of its officers and employees by digEcor, Inc. (“digEcor”) in the Third Judicial District Court of Utah, County of Salt Lake (the “Court”). In January 2007, March 2009 and April 2009 the Court ruled on certain motions of the parties substantially limiting the issues for trial and each party voluntarily dismissed additional claims and specific defendants. In its rulings, the Court dismissed digEcor's unjust enrichment, fraud, negligent misrepresentation, tortious interference, non-competition, punitive damage and certain unfair competition claims. The bulk of the bench trial related to digEcor’s claims for breaches of three contracts and associated damages, and one claim for injunctive relief was completed in May 2009 followed by the parties filing Proposed Findings of Fact and Conclusions of Law and final arguments in July 2009.
On September 14, 2009, the Company announced that the Court ruled in favor of the Company by dismissing all remaining claims with prejudice and ordering that digEcor recover no damages or injunctive relief. Specifically, the Court dismissed digEcor's claims for breach of a November 2005 Purchase Order between the parties, breach of a digital rights management (“DRM”) Agreement, and breach of an October 22, 2002 Product Agreement. All claims were dismissed "with prejudice and on the merits." The Court also declined to grant digEcor any injunctive relief in connection with the DRM-related claim. The Court’s ruling and prior rulings may be subject to future appeal by either party.
At September 30, 2009 the Company had an accrual of $80,000 related to a deposit for batteries made by digEcor.
On November 13, 2009 the Company entered into a settlement agreement ending the digEcor litigation with digEcor agreeing to waive any right to appeal the Court’s rulings and orders in favor of the Company and the Company withdrawing its applications for costs of suit. The agreement also reduced and settled the judgment (related to batteries) to $60,000. The agreement included standard mutual release of claims and covenants not to sue.
Intellectual Property Litigation
In September 2007 and March 2008, the Company filed complaints against eight electronic product manufacturers in the U.S. District Court for the Eastern District of Texas asserting that products made by the companies infringe four of the Company's U.S. patents covering the use of flash memory technology. These patents are part of the Company’s Flash-R patent portfolio. By September 30, 2009 the Company had licensed and settled the litigation with seven of the manufacturers and suspended the complaint against one defendant currently in bankruptcy.
Subsequent to September 30, 2009 the Company filed an additional patent infringement complaint in the United States District Court for the District of Colorado against nineteen companies that manufacture devices using flash memory.
14. SUBSEQUENT EVENTS
The subsequent events have been evaluated through November 16, 2009, which was the date the Financial Statements were issued (see notes 7, 9 and 12).
