"Nunchi is a technology which retrieves data from an array of existing mobile phone sensors and uses this information to recognize, understand and affect interactions among people. Nunchi based services utilize cloud-based servers, existing communication networks, sensor fusion, adaptive algorithms and relational databases to understand and anticipate the needs of people. The actual effect of Nunchi ranges from simplistic tasks such as communication screening (based on the user's availability and the nature of the call) to much more complex tasks such as optimizing a user's interactions and activities to enrich their lives." (Source)

EDigital's Nunchi patent portfolio can become very useful and lucrative in the future if context awareness, communication screening and optimizing a user's interactions reach and flourish in the consumer marketplace.

Risks:

EDigital has appealed an adverse ruling in October that could have hampered the company's ability to assert some of it key patents. On October 9, 2013, the company appealed a collateral estoppel ruling that attached to eDigital's various cases to assert its Flash-R patent portfolio. A successful appeal would reverse the collateral estoppel ruling and would require the court to hold a new claim construction hearing on the disputed terms on the '108 and '774 patents.

It should be noted that this did not prevent a settlement with Apple or any of cases filed after this ruling. The company's key Flash-R patent portfolio is only protected through 2016, so they company will have to assert the portfolio soon, as it is doing now. Afterwards, the company can sue those infringing for past damages within the time constraints. I would expect the company to expand its operations after this date - such as to its microSignet division which has recently been introduced.

Conclusion:

EDigital's settlement with Apple is an extraordinary feat, as Apple rarely settles an IP case - let alone with a smaller player in the market. This removes significant risk from EDigital moving forward as a loss in the court room could have been catastrophic for the small company. The settlement is likely small as Apple likely settled to avoid the more costly legal fees involved with a full blown case. Although the settlement affirms eDigital's technology so it can assert it against other infringers with Apple's validation, it removes the risk of losing the case at trial and it removes potentially costly legal fees with an undisclosed timeline.

EDigital has some very interesting technologies under its belt - as contextual awareness is a very intriguing area that may come to market in the future. The company's long history of flash memory speaks to its successful settlements with many defendants moving forward. Being a microcap stock, eDigital could move easily on positive news. Although I would caution investors to wait on the sidelines until more is known regarding the company's future actions and to the depth of the settlement with Apple. I would assert to readers and potential investors that the settlement with Apple has the potential to be a game-changer, although to keep eDigital on your watchlist pending research instead of pulling the trigger right away.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.