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LEGAL PROCEEDINGS
3 Months Ended
May 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
LEGAL PROCEEDINGS

NOTE 14 – 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 addition, 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 increased its reserve by $7.2 million in the fourth quarter of fiscal 2017.

On May 23, 2017, the Company and Omega stipulated, subject to the agreement of the court, to supplemental damages for sales of products found to infringe Omega’s patents from February 25, 2016 through April 5, 2017, plus an ongoing royalty for sales of the products deemed to infringe after April 5, 2017. The Company is discontinuing the products that would be subject to this royalty and therefore does not believe that any future royalty amounts will be material. In the stipulation, the Company preserved its rights to assert all of its challenges that have been or will be made by the Company to the jury verdict and the court’s April 2017 rulings. As a result of the stipulation, the Company recorded an additional reserve of $6.1 million in the quarter ended May 31, 2017.

The Company has filed a motion with the court seeking judgment as a matter of law in its favor and, alternatively, a new trial. The Company also filed a motion to vacate the judgment and dismiss the case for lack of venue, or in the alternative, to vacate the judgment and transfer the case to the Central District of California for a new trial. If, following resolution of these motions, the judgment against the Company remains wholly or substantially intact, then the Company intends to pursue an appeal at the Court of Appeals for the Federal Circuit. The Company is also 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, the April 2017 court rulings and the May 23, 2017 stipulation, the Company continues to believe that its products do not infringe any valid claims of Omega’s patents. 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 or results of operations.

EVE battery claim

On October 27, 2014, LoJack commenced arbitration proceedings against EVE Energy Co., Ltd. (“EVE”) by filing a notice of arbitration with a tribunal before the Hong Kong International Arbitration Centre (the “Tribunal”). The filing alleged that EVE breached representations and warranties made in supply agreements with LoJack relating to the quality and performance of battery packs supplied by EVE. On June 2, 2017, the Company was notified that the Tribunal awarded damages to LoJack (the “Damage Award”) for EVE’s breach of contract.

On June 9, 2017, LoJack entered into a settlement agreement with EVE and its controlling shareholder EVE Holdings Limited to resolve the Damage Award by having EVE Holdings Limited make payments to LoJack in the aggregate amount of approximately $46 million, which amount is net of LoJack’s attorneys’ fees and insurance subrogation payment (the “Settlement”). LoJack received approximately $12 million as of June 27, 2017 and another $3 million is scheduled to be received by June 30, 2017, which amounts are net of LoJack’s attorneys’ fees and the insurance subrogation payment. These amounts are expected to be reported as other non-operating income in the Company's consolidated statement of income for the quarter ending August 31, 2017. There are three remaining settlement installments due to be received by LoJack on October 31, 2017, February 28, 2018 and June 7, 2018 of approximately $13 million, $13 million and $5 million, respectively, all such amounts net of attorneys' fees. The Company has not yet determined the income tax effects of the Settlement, as it will depend in part on how the award is ultimately apportioned between LoJack’s domestic and international operations. The amounts to be realized by the Company pursuant to the Settlement are expected to be material to the Company's consolidated financial position and results of operations in the periods in which the Settlement installments are received and recorded.

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’s Irish subsidiary 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 monetary damages and recovery of attorneys’ fees. On March 3, 2017, LoJack’s Irish subsidiary 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 arbitral tribunal has been selected and the hearing is scheduled for March 2018. The Company has estimated the potential losses from this arbitration proceeding and accrued a reserve in that amount during fiscal 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.