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Commitments and Contingencies
3 Months Ended
Mar. 31, 2017
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

15. Commitments and Contingencies

 

Legal Proceedings

 

ORBCOMM v. CalAmp Corp.

 

On April 7, 2016, the Company filed a complaint against defendant CalAmp Corp. (“CalAmp”) in the U.S. District Court for the Eastern District of Virginia alleging infringement of five patents, seeking compensatory damages, treble damages, and an injunction.  

 

On May 27, 2016, CalAmp filed a motion to dismiss the Company’s claims on the basis, inter alia, that the Company’s patents are directed at ineligible subject matter and are therefore invalid under 35 U.S.C. § 101.  On July 22, 2016, the court denied CalAmp’s motion; however, CalAmp filed a motion for reconsideration of its motion to dismiss.  On October 19, 2016, the court denied CalAmp’s motion for reconsideration with respect to four of the five patent in suits and granted CalAmp’s motion to invalidate one of the Company’s patents in-suit as an unpatentable abstract idea.

 

On July 18, 2016, CalAmp filed its answer to the Company’s complaint and counterclaim for (1) declaratory judgment of unenforceability of ORBCOMM’s patents in-suit; (2) inequitable conduct related to the U.S. Patent and Trademark Office action to correct one of the patents in-suit; and (3) an award of legal fees to CalAmp.  

 

On January 25, 2017, the court ruled on the disputed claim construction issues with respect to the remaining patent in-suit, in which it ruled that the claim term “wireless network” is limited to wireless pager networks.  While this claim construction resulted in a stipulation of non-infringement, the Company believes this claim construction to be incorrect and, prior to the global settlement described below, was in the process of filing an appeal which would have requested that this claim construction ruling be reviewed on a de novo basis.

 

Each of the Company and CalAmp filed motions for summary judgment with respect to CalAmp’s counterclaim for inequitable conduct related to the U.S. Patent and Trademark Office action to correct the one remaining patent-in-suit.  CalAmp’s motion requested summary judgment finding inequitable conduct rendering the patent unenforceable and providing a basis to seek an award of its legal fees. The Company’s motion requested summary judgment to dismiss such counterclaim.

 

 

CalAmp Wireless Networks Corporation v. ORBCOMM Inc.

 

On October 26, 2016, a patent infringement lawsuit was filed against the Company by CalAmp Wireless Networks Corporation (“CalAmp Wireless”) in the U.S. District Court for the Eastern District of Virginia.  CalAmp Wireless alleged that certain of the Company’s modems, devices and geofencing systems for tracking and monitoring vehicles, machinery, and other assets infringe on two patents asserted by CalAmp Wireless.  CalAmp Wireless did not make a specific damages claim, but sought compensatory damages, treble damages, and equitable relief.

 

On February 9, 2017, the court invalidated the majority of the claims in one of the two patents in-suit brought by CalAmp Wireless.

 

On April 24, 2017, the Company and CalAmp Wireless entered into a Confidential Settlement, General Release, and License Agreement (the “CalAmp Settlement Agreement”).  The CalAmp Settlement Agreement resolves both pending litigation matters between the parties and provides that each of the Company and CalAmp Wireless 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. Each of the Company and CalAmp will bear its own costs and fees associated with the prior litigation.

 

In addition to the foregoing matters, from time to time, the Company is involved in various litigation claims or matters involving ordinary and routine claims incidental to its business.  While the outcome of any such claims or litigation cannot be predicted with certainty, management currently believes that the outcome of these proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s business, results of operations or financial condition.

 

OG2 Satellite Insurance

In April 2014, the Company obtained launch and one year from launch in-orbit insurance for the OG2 satellite program. For the first launch of six satellites, the Company obtained (i) a maximum total of $66,000 of launch plus one year in-orbit insurance coverage; and (ii) $22,000 of launch vehicle flight only insurance coverage (“Launch One”). The total premium cost for Launch One was $9,953. For the second launch of 11 satellites, the Company obtained (i) a maximum total of $120,000 of launch plus one year in-orbit insurance coverage; and (ii) $22,000 of launch vehicle flight only insurance coverage (“Launch Two”). The total premium cost for Launch Two was $16,454. In April 2014, the Company paid the total premium for Launch One and 5% of the total premium for Launch Two, with the balance of the premium cost for Launch Two paid in December 2015. The majority of the premium payments are recorded as satellite network and other equipment, net in the condensed consolidated balance sheet.

The policy had a three satellite deductible across both missions under the launch plus one-year insurance coverage whereby claims are payable in excess of the first three satellites in the aggregate for both Launch One and Launch Two combined that are total losses or constructive total losses during the one-year policy period. The policy is also subject to specified exclusions and material change limitations customary in the industry. These exclusions include losses resulting from war, anti-satellite devices, insurrection, terrorist acts, government confiscation, radioactive contamination, electromagnetic interference, loss of revenue and third party liability.

On July 14, 2015, the Company obtained an additional one year in-orbit insurance for the five Launch One OG2 satellites for a maximum total of $40,000. The additional in-orbit coverage took effect on July 15, 2015, following the end of the coverage period for the initial launch and one year in-orbit insurance for Launch One. This additional policy contains a one satellite deductible across the five in-orbit OG2 satellites whereby claims are payable in excess of the first satellite that is a total loss or constructive total loss. The policy is also subject to a specific exclusion for losses that have resulted from an anomaly with the same signatures as the initial OG2 satellite loss. There are other specified exclusions and material change limitations customary in the industry which include losses resulting from war, antisatellite devices, insurrection, terrorist acts, government confiscation, radioactive contamination, electromagnetic interference, loss of revenue and third party liability. On July 15, 2016, the Company extended the in-orbit insurance policy for the five Launch One OG2 satellites through December 21, 2016, under the same terms, for an additional premium of $179. The Company did not renew this insurance policy after its expiration on December 21, 2016.

Airtime credits

In 2001, in connection with the organization of ORBCOMM Europe and the reorganization of the ORBCOMM business in Europe, the Company agreed to grant certain country representatives in Europe approximately $3,736 in airtime credits. The Company has not recorded the airtime credits as a liability for the following reasons: (i) the Company has no obligation to pay the unused airtime credits if they are not utilized; and (ii) the airtime credits are earned by the country representatives only when the Company generates revenue from the country representatives. The airtime credits have no expiration date. Accordingly, the Company is recording airtime credits as services are rendered and these airtime credits are recorded net of revenues from the country representatives. For the three months ended March 31, 2017 and 2016, airtime credits used totaled approximately $7 and $7, respectively. As of March 31, 2017 and 2016, unused credits granted by the Company were approximately $2,002 and $2,031, respectively.