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LEGAL PROCEEDINGS
12 Months Ended
Feb. 28, 2017
LEGAL PROCEEDINGS [Abstract]  
LEGAL PROCEEDINGS

NOTE 16 – LEGAL PROCEEDINGS

Omega patent infringement claim

In December 2013, a patent infringement lawsuit was filed against the Company by Omega Patents, LLC (“Omega”), a non-practicing entity. Omega alleged that certain of the Company’s vehicle tracking products infringed on certain patents owned by Omega. On February 24, 2016, a jury in the U.S. District Court for the Middle District of Florida awarded Omega damages of $2.975 million, for which CalAmp recorded a reserve of $2.9 million in the fiscal 2016 fourth quarter. Following trial, Omega brought a motion seeking an injunction and requesting the court to exercise its discretion to treble damages and assess attorneys’ fees. On April 5, 2017, the court denied the request for an injunction, but granted the request for treble damages in the aggregate amount of $8.9 million. On April 24, 2017 the court awarded attorneys’ fees, costs, and prejudgment interest in the aggregate amount of $1.2 million, and directed the payment of royalties by CalAmp to Omega for any infringing sales after February 24, 2016 at a royalty rate to be determined. As a result of these April 2017 court rulings, the Company accrued $7.2 million in the fourth quarter of fiscal 2017. The Company has not yet recorded an accrual for the court’s award of royalties for post-February 24, 2016 sales because such amount is not presently determinable. The Company plans to file motions with the court seeking judgment as a matter of law in its favor and, alternatively, a new trial. If, following resolution of those motions, the judgment against the Company remains wholly or substantially intact, then CalAmp intends to pursue an appeal at the Court of Appeals for the Federal Circuit. CalAmp is seeking to invalidate a number of Omega’s patents in proceedings filed with the U.S. Patent and Trademark Office. Notwithstanding the adverse jury verdict and April 2017 court rulings, the Company continues to believe that its products do not infringe Omega’s patents and that should the Company be compelled to seek appellate relief, it will prevail on appeal. While it is not feasible to predict with certainty the outcome of this litigation, its ultimate resolution could be material to the Company’s cash flows and results of operations.

Orbcomm patent infringement claim

In April 2016, a patent infringement lawsuit was filed against the Company by Orbcomm Inc. (“Orbcomm”) in the U.S. District Court for the Eastern District of Virginia. Orbcomm alleged that certain of the Company’s systems for tracking, monitoring, and controlling vehicles, machinery and other assets infringed five patents asserted by Orbcomm. The Court dismissed one of Orbcomm’s patents for being directed at ineligible subject matter and therefore invalid; Orbcomm dismissed its claims with prejudice under three of its other asserted patents; and as a result of the Court’s claim construction, the parties stipulated to noninfringement of the fifth Orbcomm patent. In October 2016, CalAmp filed its own patent infringement suit against Orbcomm asserting two of its own patents. The Court dismissed certain claims of one of those patents for failing to claim patent eligible subject matter. In April 2017, the parties entered into a settlement agreement pursuant to which both parties agreed to dismiss all claims, counterclaims and defenses in both the Orbcomm v. CalAmp case and the CalAmp v. Orbcomm case, and which provides that each of Orbcomm and CalAmp grant the other royalty free licenses and covenants not to sue for the patents-in-suit described above as well as general releases. Neither party made a settlement payment to the other party. On May 2, 2017, the Court dismissed each case.

EVE battery claim

LoJack began to receive notice in 2013 from some of its international licensees that the self-powered LoJack units that these licensees had purchased from LoJack, which contained batteries manufactured by LoJack’s then battery supplier, EVE Energy Co., Ltd. (“EVE”), were exhibiting degraded performance below LoJack’s quality standards. These notifications led LoJack to perform its own investigation and to contact EVE for help. As a result, LoJack determined over time that the batteries manufactured by EVE that were included in certain self-powered LoJack units sold in the United States and to LoJack’s international licensees were exhibiting a failure to power over a period of time that could impact the ability of the LoJack unit to transmit a signal when called upon for stolen vehicle recovery. LoJack manufactures both vehicle-powered and self-powered (battery) units, and this degraded performance potentially affects only the transmit battery pack in the self-powered units. The majority of LoJack units currently in use are vehicle-powered.

On October 27, 2014, LoJack and its wholly-owned subsidiary, LoJack Ireland, commenced arbitration proceedings against EVE by filing a notice of arbitration with a tribunal before the Hong Kong International Arbitration Centre (the “Tribunal”). The filing alleges that EVE breached representations and warranties made in supply agreements with LoJack relating to the quality and performance of batteries supplied by EVE. The arbitration proceedings against EVE were held in Hong Kong on June 6 to 24, 2016. The Tribunal held additional hearings on the merits on September 15 to 16, 2016, and on damages on January 9 to 10, 2017. The arbitration is now concluded, and the Company is awaiting the Tribunal’s decision. The Company cannot predict the ultimate outcome of the arbitration proceedings or the amount of damages, if any, that the Company may be awarded by the Tribunal.

Tracker South Africa claim

On December 9, 2016, Tracker Connect (Pty) LTD (“Tracker”), LoJack’s international licensee in South Africa, commenced arbitration proceedings against LoJack Ireland by filing a notice of arbitration with the International Centre for Dispute Resolution. The filing alleges breaches of the parties’ license agreement, misrepresentations, and violation of Massachusetts General Laws chapter 93A. Tracker seeks various relief, including monetary damages and recovery of attorneys’ fees. On March 3, 2017, LoJack Ireland filed its response to Tracker’s notice, denying Tracker’s allegations against LoJack, and filing counterclaims against Tracker for Tracker’s material breaches of the parties’ license agreement and bad faith conduct. The selection of the arbitral tribunal is currently underway, and the scheduling order has not yet been set for the arbitration proceedings. The Company has accrued its best estimate of the loss from this arbitration proceeding as of February 28, 2017.

In addition to the foregoing matters, from time to time as a normal consequence of doing business, various claims and litigation may be asserted or commenced against the Company. In particular, the Company in the ordinary course of business may receive claims concerning contract performance, or claims that its products or services infringe the intellectual property of third parties. While the outcome of any such claims or litigation cannot be predicted with certainty, management does not believe that the outcome of any of such matters existing at the present time would have a material adverse effect on the Company’s consolidated results of operations, financial condition and cash flows.