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Litigation
3 Months Ended
Mar. 31, 2015
Loss Contingency [Abstract]  
LITIGATION

NOTE 8       LITIGATION

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business.

 

On February 21, 2012, the Company filed a suit for breach of contract, intentional misrepresentation, negligent misrepresentation, fraud, false advertising, and unfair competition with a former consultant.   It seeks damages due to their alleged failure to meet the contractual requirements regarding promotions.   The defendant has been served.   In September of 2014, the Company received a Default Judgment against the Defendant.    The Company is vigorously pursuing collection on this judgment.

 

On August 14, 2012, the Company, along with two shareholders of the Company, were named as a defendant in an action filed in the Superior Court for the State of California and the County of San Diego. The plaintiff alleges he was terminated by his former employer “Acoustics Control Sciences, LLC” (which is a company that is not affiliated with Max Sound Corporation) in August 2008 without receiving wages and other compensation allegedly due him. The plaintiff further claims that two of the members or “shareholders” of Acoustics Control Sciences, LLC, wrongfully transferred a patent owned by his former employer and this transfer prevented his former employer from paying the wages alleged due. According to the plaintiff, when the assets of his former employer were sold to the Company, Max Sound Corporation became a successor-in-interest to the plaintiff’s former employer. Plaintiff thus seeks unpaid wages and other compensation from each alleged successor-in-interest named in his complaint. This case will be vigorously prosecuted and has a good likelihood of success.

 

On August 11, 2014, the Company and VSL simultaneously filed trade secret and patent infringement actions against Google, Inc., and its subsidiaries YouTube, LLC, and On2 Technologies, Inc., relating to proprietary and patented technology owned by Vedanti Systems Limited (“Vedanti”), a subsidiary of VSL.  The patent infringement complaint was originally filed in the U.S. District Court for the District of Delaware; the trade secret suit was filed in Superior Court of California, County of Santa Clara.  On September 30, 2014, the Company filed notices of voluntary dismissal without prejudice as to both lawsuits. On October 1, 2014, the Company amended the patent complaint and filed it in the U.S. District Court for the Northern District of California. In this patent lawsuit, which remains pending, the Company contends that, in 2010, while Google was in discussions with Vedanti about the possibility of acquiring Vedanti's patented digital video streaming techniques and other proprietary methods, Google gained access to and received technical guidance regarding Vedanti’s proprietary codec, a computer program capable of encoding and decoding a digital data stream or signal.  The lawsuit further alleges that soon after Google and Vedanti initiated negotiations, Google willfully infringed Vedanti's patent by incorporating Vedanti's patented technology into Google's own VP8, VP9, WebM, YouTube, Google Adsense, Google Play, Google TV, Chromebook, Google Drive, Google Chromecast, Google Play-per-view, Google Glasses, Google+, Google’s Simplify, Google Maps, and Google Earth, without compensating Vedanti for such use.  Plaintiffs are seeking a permanent injunction against Google, compensatory damages, as well as treble damages. As exclusive agent to VSL to enforce all rights with respect to the subject technology, the Company has hired Grant & Eisenhofer PA and Buether Joe & Carpenter LLC to represent the Company in the suit on a contingency fee basis. The case will be vigorously prosecuted, and the Company believes it has a good likelihood of success. 

 

Additionally, on December 5, 2014, the Company, along with renowned architect Eli Attia, filed a lawsuit in the Superior Court of California, County of Santa Clara, against Google, its co-founders Sergey Brin and Larry Page, Google’s spinoff company Flux Factory, and senior executives of Flux. Plaintiffs’ allege misappropriation of trade secrets, breach of contract and other contract-related claims, breach of confidence, slander of title, violation of California’s Unfair Competition Law (California Business and Professionals Code §§ 17200 et seq.), and fraud, and also bring a claim for declaratory relief. The lawsuit contends that Google and the other Defendants stole Mr. Attia’s trade secrets, proprietary information, and know-how regarding a revolutionary architecture design and building process that he alone had invented, known as Engineered Architecture. Defendants are alleged to have engaged Mr. Attia in 2010 and 2011 to translate his architectural technology into software for a proof of concept, with the goal of determining at that point whether to continue with full-scale development with Mr. Attia. Instead, the lawsuit claims that once Mr. Attia had disclosed the trade secrets and proprietary information Defendants needed to bring the technology to market, they severed ties with Mr. Attia, and continued to use his technology without a license and without compensation, in order to bring the technology to market themselves. Plaintiffs seek a permanent injunction against Google, damages (including punitive damages), and restitution. As exclusive agent to Eli Attia to enforce all rights with respect to the subject technology, the Company has retained Buether Joe & Carpenter LLC to represent the Company in the suit, on a contingency fee basis. The case will be vigorously prosecuted, and the Company believes it has a good likelihood of success. 

 

On September 8 and 9, 2014, respectively, the Company and VSL were granted preliminary injunctions by the District Court of Berlin, Germany, against the Chinese company Shenzhen KTC Technology Co. Ltd. and the French company Pact Informatique S.A. Both companies have been offering products at the International Consumer Electronics Trade Show 2014 in Berlin, which, according to the company’s claim and the Preliminary Injunctions issued by the Court, infringed the rights to a patent. This patent is the German is the German part of the patent on optimized data transmission, owned by Vedanti, which is already asserted the United States infringement proceedings. The products in question are tablet computers and smart phones with Android OS and with the ability to encode videos in the format H.264. The injunctions were issued ex-parte and can be appealed by the Defendants. However, currently there are no indications that any prospective appeals will be interposed. The Company can still enforce claims for cost reimbursement with regard to these legal proceedings.

 

On December 2, 2014, the Company filed a patent infringement action against Google, Inc., Germany GmBH, Google Commerce Ltd. and YouTube LLC with the District Court of Mannheim, Germany. The asserted patent infringement concerns the same patent infringement asserted in the in the prior Germany Preliminary Injunctions described herein. The Complaint alleges that Google Inc. and it above-named subsidiaries are offering and selling products which can also decode and show videos, which have been encoded in a patent protected and proprietary way. The complaint also avers that YouTube LLC offers to German customers, which are encoded and transmitted in a manner claimed and protected by the patent. The Company mainly seeks a permanent injunction against the Defendants, damages and information regarding past infringements.

 

On January 26, 2015, the Company was named as a defendant in an action filed in the Superior Court for the State of California and the County of Los Angeles captioned Bibicoff Family Trust v. Max Sound Corporation (Case No. SC123679). In the complaint the plaintiff alleges a cause of action for breach of contract associated with the non-payment by the Company for certain services plaintiff agreed to provide to the Company. The Company interposed a cross-complaint against plaintiffs averring causes of action for breach of contract, fraud, and negligent misrepresentation by defendants with respect to defendants’ undisclosed inability to perform the services that are the subject of this dispute. This lawsuit will be vigorously defended and prosecuted. While this lawsuit is in its infancy, the Company believes there is a strong likelihood of success on the merits with respect to the defending and prosecuting this action.

 

The Company intends to vigorously prosecute these various patent infringement litigations. The Company believes it has a good likelihood of success associated with these patent infringement lawsuits. However, no assurance can be given by the Company as to the ultimate outcome of these actions or its effect on the Company. The law firm is prosecuting these action on a pure contingency fee basis.

 

No assurance can be given as to the ultimate outcome of these actions or its effect on the Company.