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LEGAL PROCEEDINGS
9 Months Ended
Nov. 30, 2019
Commitments And Contingencies Disclosure [Abstract]  
LEGAL PROCEEDINGS

NOTE 18 – LEGAL PROCEEDINGS

 

Omega patent infringement claim

 

As previously disclosed in our Form 10-Q for the fiscal quarter ended May 31, 2019 that was filed with the U.S. Securities and Exchange Commission on June 28, 2019, we filed motions with the court seeking judgment as a matter of law and for a new trial in response to the patent infringement law suit filed by Omega Patents, LLC (“Omega”) that was decided against us in 2016. The court denied our motions on November 14, 2017. We then appealed to the Court of Appeals for the Federal Circuit (the “Federal Circuit”). The appeal was fully briefed, and the court heard oral argument on January 9, 2019. On April 8, 2019, the Federal Circuit vacated the compensatory and enhanced damages and attorney’s fees awarded by the trial court to Omega. The Federal Circuit also set aside the jury’s verdict that our alleged infringement was willful, and remanded the case for a new trial. As a result, substantially all of the previously reserved legal provisions of $19.1 million as of November 30, 2018 were reversed as of February 28, 2019. The reversal was recorded as a reduction of general and administrative expenses in our consolidated statement of comprehensive income for the fiscal year ended February 28, 2019. The new trial began on September 23, 2019 in the U.S. District Court for the Middle District of Florida, and on September 30, 2019, the jury determined that the Company infringed two of the four patents; however, the jury found that there was no willful infringement. On the first patent (U.S. Pat. No. 7,671,727), the jury found only one unit infringed, and assessed $1 in damages. On the second patent (U.S. Pat. No. 8,032,278), the jury found direct infringement and awarded damages at a rate of $5 per unit, for total damages of approximately $4.6 million. On November 26, 2019 the U.S. District Court for the Middle District of Florida entered judgment, awarding Omega damages of $4.6 million, together with pre-judgment interest in the amount of $0.8 million through September 30, 2019. We plan to file motions with the court seeking judgment as a matter of law in our favor and, alternatively, a new trial. If, following resolution of those motions, the judgment against the Company remains intact, we intend to again pursue an appeal at the Federal Circuit.

 

In connection with this claim, we have accrued our best estimate of the probable liability based on reasonable royalty rates for similar technologies. It is reasonably possible that the judgement and amounts described above could be upheld.

 

We also initiated ex parte reexamination proceedings filed in the U.S. Patent and Trademark Office seeking to invalidate a number of Omega’s patents involved in the litigation. Those proceedings currently remain pending. We continue to believe that our products do not infringe on any of Omega’s patents. While it is not feasible to predict with certainty the outcome of this litigation, we believe that its ultimate resolution would not have a material adverse effect on our consolidated results of operations, financial condition and cash flows.

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 us. In particular, in the ordinary course of business, we may receive claims concerning personnel matters, contract performance, or claims that our products or services infringe the intellectual property of third parties. In connection with these matters, we may be required to enter into license agreements or other settlement arrangements that require us to make significant payments in the future. While the outcome of any such claims or litigation cannot be predicted with certainty, we do not believe that the outcome of any such matters existing at the present time would have a material adverse effect on our consolidated results of operations, financial condition and cash flows.