Commitments and Contingencies	12 Months Ended
Dec. 31, 2019
Commitments and Contingencies
Commitments and Contingencies	8. Commitments and Contingencies We establish contingent liabilities when a particular contingency is both probable and estimable. The Company is not aware of any pending claims or assessments, other than as described below, which may have a material adverse impact on the Company’s financial position or results of operations. Outsource Manufacturers. We have manufacturing agreements with electronics manufacturing service (“EMS”) providers related to the outsourced manufacturing of our products. Certain manufacturing agreements establish annual volume commitments. We are also obligated to repurchase Company-forecasted but unused materials. The Company has non-cancellable, non-returnable, and long-lead time commitments with its EMS providers and certain suppliers for inventory components that will be used in production. The Company’s purchase commitments under such agreements is approximately $844 as of December 31, 2019. Uncertain Tax Positions. As further discussed in Note 12, we had $233 of uncertain tax positions as of December 31, 2019. Due to the inherent uncertainty of the underlying tax positions, it is not possible to forecast the payment of this liability to any particular year. Legal Proceedings. Intellectual Property Litigation The Company is involved in litigation against Shure Incorporated (“Shure”). Shure initiated this litigation on April 24, 2017, by filing a complaint in the U.S. District Court for the Northern District of Illinois seeking a declaratory judgment of non-infringement and invalidity of the Company’s U.S. Patent No. 9,635,186 (“’186 Patent”) and Patent No. 9,264,553 (“’553 Patent”). The matter is Shure Inc. v. ClearOne, Inc., Case No. 17-cv-03078 (the “2017 N.D. Illinois Matter”). In early 2018, Shure added a claim that the ’186 Patent is unenforceable. The Court dismissed Shure’s request for declaratory judgment relating to the ’553 Patent, which at the time in 2017, had not been threatened or asserted by the Company against Shure and had been submitted to the USPTO for reissue. The Company has filed counterclaims against Shure for willful infringement of the Company’s ’186 Patent and the Company’s U.S. Patent No. 9,813,806 (“’806 Patent”). On July 14, 2017, Shure filed a petition with Patent Trial and Appeals Board (“PTAB”) for inter partes review against the ’553 Patent. The matter is Shure Incorporated v. ClearOne, Inc., No. IPR2017-01785. On January 29, 2018, the PTAB instituted inter partes review of the ’553 Patent. On January 24, 2019, PTAB issued a final written decision confirming the patentability of all claims of the ‘553 Patent. Shure filed a request for a rehearing, which the PTAB denied on March 25, 2019. Shure appealed the PTAB’s decision to the U.S. Court of Appeals for the Federal Circuit, which issued a judgment affirming the PTAB’s decision on March 6, 2020. On August 6, 2017, the Company filed a motion seeking a preliminary injunction to enjoin Shure from continuing to infringe on the Company’s ’186 Patent. On March 16, 2018, the Court denied the Company’s motion for preliminary injunction regarding the ’186 Patent. On February 6, 2019, the Company filed a motion for reconsideration in light of the PTAB’s January 24, 2019, decision confirming the patentability of the related ’553 Patent. On August 25, 2019, the Court denied the Company’s motion for reconsideration. On April 17, 2018, the Company filed a motion seeking a preliminary injunction to enjoin Shure from continuing to infringe on the Company’s ’806 Patent. On August 6, 2019, the Court granted the Company’s motion for preliminary injunction regarding the ’806 Patent preventing Shure from manufacturing, marketing, and selling the Shure MXA910 Ceiling Array Microphone for use in its “drop-ceiling mounting configuration.” The Court determined that such sales are likely to infringe the ’806 Patent and that Shure had not raised a substantial question of the ’806 Patent validity. The Court’s order also prevents Shure from encouraging others to use the Shure MXA910 beamforming microphone array in the “drop-ceiling mounting configuration” and “applies to Shure’s officers, agents, servants, employees, and attorneys, as well as anyone who is in active concert or participation with those listed persons.” On August 20, 2019, the Company deposited $4,452 with the Court to satisfy a bond securing the preliminary injunction. On February 15, 2019, the Company filed a petition for inter partes review of Shure’s U.S. Patent No. 9,565,493 (“’493 Patent”), arguing that all claims of the ’493 Patent should be cancelled in light of several prior art references, including the ’806 Patent. The matter is ClearOne, Inc. v. Shure Acquisition Holdings, Inc., IPR2019-00683. Shure opposed the petition, but the PTAB instituted inter partes review on August 16, 2019. A final decision is expected by August 2020. On April 10, 2019, the Company filed a lawsuit against Shure in the United States District Court for the Northern District of Illinois alleging that Shure’s MXA910 and MXA310 infringes the ’553 Patent and that Shure has misappropriated ClearOne’s trade secrets. The matter is ClearOne, Inc. v. Shure Inc., 19-cv-02421 (the “2019 N.D. Illinois Matter”), and has been coordinated with the initial matter filed in 2017 for trial purposes. On December 16, 2019, the Court granted the Company’s motion for leave to amend its complaint to add claims against Shure for intentional interference with prospective economic advantage and trade libel. On January 13, 2020, Shure moved to dismiss the Company’s new claims. The Company opposed the motion, which is pending before the Court. On July 18, 2019, Shure, Inc. filed a lawsuit against the Company in the U.S. Court for the District of Delaware alleging that ClearOne’s BMA CT product, launched in February of 2019, infringes Shure’s ’493 Patent and that ClearOne engaged in unfair competition, tortious interference, deceptive trade practices, and false advertising. Shure is seeking monetary damages and injunctive relief. ClearOne successfully moved to stay Shure’s infringement claim relating to the ’493 Patent until August 2020 when the PTAB is set to issue a Final Written Decision on its inter partes review of the ’493 Patent. On November 19, 2019, the Court granted Shure’s request for leave to amend its complaint to add a claim of infringement of Shure’s recently issued U.S. Patent No. D865723 (the “Design Patent”) and additional claims of trade libel. ClearOne has moved to dismiss Shure’s claims or to transfer them to the Northern District of Illinois. Those motions are pending. The Company believes that the lawsuit is without merit and intends to vigorously defend itself. On November 4, 2019, the Company filed a lawsuit against Shure in the U.S. District Court for the Northern District of Illinois seeking a declaratory judgment of non-infringement of Shure’s Design Patent. The matter is ClearOne, Inc. v. Shure Inc., Case No. 19-cv-07825 (N.D. Ill.), and is stayed pending a decision on the Company’s motion to dismiss Shure’s claims in the Delaware Action. On February 21, 2020, the Company asked for a Court order that Shure has been manufacturing, marketing, and selling its redesigned MXA910, the MXA910W-A released in December 2019, in violation of a preliminary injunction issued on August 20, 2019. Under the law, that court-ordered injunction applied to Shure’s MXA910 as well as “colorable imitations” thereof. ClearOne’s filings assert that Shure has been willfully manufacturing, marketing, and selling its MXA910W-A in a way that “encourages or allows integrators to install it in a drop-ceiling mounting configuration.” The Company argues that the measurements of the MXA910W-A allow it to be installed securely in the prohibited configuration in the majority of U.S. drop-ceiling grids, and Shure’s marketing materials encourage such installation. In addition, ClearOne has found evidence that third parties are in fact installing the MXA910W-A in the prohibited configuration. ClearOne has asked the Court to order Shure to cease marketing and selling the MXA910W-A in the United States, notify all customers that the MXA910W-A violates the preliminary injunction and is thus subject to recall, award ClearOne its attorneys’ fees associated with the contempt motion, and for additional discovery relating to how Shure’s customers are installing the MXA910W-A. On March 9, 2020, Shure filed its opposition, arguing that it has fully complied with the preliminary injunction, its MXA910W-A is not subject to the preliminary injunction, and it instructs customers not to install the MXA910W-A in a drop ceiling mounting configuration. On March 10, the Court granted ClearOne leave to conduct limited additional discovery, and granted ClearOne leave to submit a reply in support of the motion by April 1, which was later extended to April 22 due to the COVID-19 crisis. The Company intends to continue to vigorously enforce and defend its intellectual property rights in these proceedings. The Company capitalized $5,085 and $4,698 of litigation expenses related to this matter during the twelve months ended December 31, 2019 and 2018, respectively. In addition, the Company is also involved from time to time in various claims and legal proceedings which arise in the normal course of our business. Such matters are subject to many uncertainties and outcomes that are not predictable. However, based on the information available to us, we do not believe any such other proceedings will have a material adverse effect on our business, results of operations, financial position, or liquidity. Conclusion We believe there are no other items that will have a material adverse impact on the Company’s financial position or results of operations. Legal proceedings are subject to all of the risks and uncertainties of legal proceedings and there can be no assurance as to the probable result of any legal proceedings. The Company believes it has adequately accrued for the aforementioned contingent liabilities. If adverse outcomes were to occur, our financial position, results of operations and cash flows could be negatively affected materially for the period in which the adverse outcomes are known.

8. Commitments and Contingencies

We establish contingent liabilities when a particular contingency is both probable and estimable. The Company is not aware of any pending claims or assessments, other than as described below, which may have a material adverse impact on the Company’s financial position or results of operations.

Outsource Manufacturers. We have manufacturing agreements with electronics manufacturing service (“EMS”) providers related to the outsourced manufacturing of our products. Certain manufacturing agreements establish annual volume commitments. We are also obligated to repurchase Company-forecasted but unused materials. The Company has non-cancellable, non-returnable, and long-lead time commitments with its EMS providers and certain suppliers for inventory components that will be used in production. The Company’s purchase commitments under such agreements is approximately $844 as of December 31, 2019.

Uncertain Tax Positions. As further discussed in Note 12, we had $233 of uncertain tax positions as of December 31, 2019. Due to the inherent uncertainty of the underlying tax positions, it is not possible to forecast the payment of this liability to any particular year.

Legal Proceedings.

Intellectual Property Litigation

The Company is involved in litigation against Shure Incorporated (“Shure”).

Shure initiated this litigation on April 24, 2017, by filing a complaint in the U.S. District Court for the Northern District of Illinois seeking a declaratory judgment of non-infringement and invalidity of the Company’s U.S. Patent No. 9,635,186 (“’186 Patent”) and Patent No. 9,264,553 (“’553 Patent”). The matter is Shure Inc. v. ClearOne, Inc., Case No. 17-cv-03078 (the “2017 N.D. Illinois Matter”). In early 2018, Shure added a claim that the ’186 Patent is unenforceable. The Court dismissed Shure’s request for declaratory judgment relating to the ’553 Patent, which at the time in 2017, had not been threatened or asserted by the Company against Shure and had been submitted to the USPTO for reissue. The Company has filed counterclaims against Shure for willful infringement of the Company’s ’186 Patent and the Company’s U.S. Patent No. 9,813,806 (“’806 Patent”).

On July 14, 2017, Shure filed a petition with Patent Trial and Appeals Board (“PTAB”) for inter partes review against the ’553 Patent. The matter is Shure Incorporated v. ClearOne, Inc., No. IPR2017-01785. On January 29, 2018, the PTAB instituted inter partes review of the ’553 Patent. On January 24, 2019, PTAB issued a final written decision confirming the patentability of all claims of the ‘553 Patent. Shure filed a request for a rehearing, which the PTAB denied on March 25, 2019. Shure appealed the PTAB’s decision to the U.S. Court of Appeals for the Federal Circuit, which issued a judgment affirming the PTAB’s decision on March 6, 2020.

On August 6, 2017, the Company filed a motion seeking a preliminary injunction to enjoin Shure from continuing to infringe on the Company’s ’186 Patent. On March 16, 2018, the Court denied the Company’s motion for preliminary injunction regarding the ’186 Patent. On February 6, 2019, the Company filed a motion for reconsideration in light of the PTAB’s January 24, 2019, decision confirming the patentability of the related ’553 Patent. On August 25, 2019, the Court denied the Company’s motion for reconsideration.

On April 17, 2018, the Company filed a motion seeking a preliminary injunction to enjoin Shure from continuing to infringe on the Company’s ’806 Patent. On August 6, 2019, the Court granted the Company’s motion for preliminary injunction regarding the ’806 Patent preventing Shure from manufacturing, marketing, and selling the Shure MXA910 Ceiling Array Microphone for use in its “drop-ceiling mounting configuration.” The Court determined that such sales are likely to infringe the ’806 Patent and that Shure had not raised a substantial question of the ’806 Patent validity. The Court’s order also prevents Shure from encouraging others to use the Shure MXA910 beamforming microphone array in the “drop-ceiling mounting configuration” and “applies to Shure’s officers, agents, servants, employees, and attorneys, as well as anyone who is in active concert or participation with those listed persons.” On August 20, 2019, the Company deposited $4,452 with the Court to satisfy a bond securing the preliminary injunction.

On February 15, 2019, the Company filed a petition for inter partes review of Shure’s U.S. Patent No. 9,565,493 (“’493 Patent”), arguing that all claims of the ’493 Patent should be cancelled in light of several prior art references, including the ’806 Patent. The matter is ClearOne, Inc. v. Shure Acquisition Holdings, Inc., IPR2019-00683. Shure opposed the petition, but the PTAB instituted inter partes review on August 16, 2019. A final decision is expected by August 2020.

On April 10, 2019, the Company filed a lawsuit against Shure in the United States District Court for the Northern District of Illinois alleging that Shure’s MXA910 and MXA310 infringes the ’553 Patent and that Shure has misappropriated ClearOne’s trade secrets. The matter is ClearOne, Inc. v. Shure Inc., 19-cv-02421 (the “2019 N.D. Illinois Matter”), and has been coordinated with the initial matter filed in 2017 for trial purposes. On December 16, 2019, the Court granted the Company’s motion for leave to amend its complaint to add claims against Shure for intentional interference with prospective economic advantage and trade libel. On January 13, 2020, Shure moved to dismiss the Company’s new claims. The Company opposed the motion, which is pending before the Court.

On July 18, 2019, Shure, Inc. filed a lawsuit against the Company in the U.S. Court for the District of Delaware alleging that ClearOne’s BMA CT product, launched in February of 2019, infringes Shure’s ’493 Patent and that ClearOne engaged in unfair competition, tortious interference, deceptive trade practices, and false advertising. Shure is seeking monetary damages and injunctive relief. ClearOne successfully moved to stay Shure’s infringement claim relating to the ’493 Patent until August 2020 when the PTAB is set to issue a Final Written Decision on its inter partes review of the ’493 Patent. On November 19, 2019, the Court granted Shure’s request for leave to amend its complaint to add a claim of infringement of Shure’s recently issued U.S. Patent No. D865723 (the “Design Patent”) and additional claims of trade libel. ClearOne has moved to dismiss Shure’s claims or to transfer them to the Northern District of Illinois. Those motions are pending. The Company believes that the lawsuit is without merit and intends to vigorously defend itself.

On November 4, 2019, the Company filed a lawsuit against Shure in the U.S. District Court for the Northern District of Illinois seeking a declaratory judgment of non-infringement of Shure’s Design Patent. The matter is ClearOne, Inc. v. Shure Inc., Case No. 19-cv-07825 (N.D. Ill.), and is stayed pending a decision on the Company’s motion to dismiss Shure’s claims in the Delaware Action.

On February 21, 2020, the Company asked for a Court order that Shure has been manufacturing, marketing, and selling its redesigned MXA910, the MXA910W-A released in December 2019, in violation of a preliminary injunction issued on August 20, 2019. Under the law, that court-ordered injunction applied to Shure’s MXA910 as well as “colorable imitations” thereof. ClearOne’s filings assert that Shure has been willfully manufacturing, marketing, and selling its MXA910W-A in a way that “encourages or allows integrators to install it in a drop-ceiling mounting configuration.” The Company argues that the measurements of the MXA910W-A allow it to be installed securely in the prohibited configuration in the majority of U.S. drop-ceiling grids, and Shure’s marketing materials encourage such installation. In addition, ClearOne has found evidence that third parties are in fact installing the MXA910W-A in the prohibited configuration. ClearOne has asked the Court to order Shure to cease marketing and selling the MXA910W-A in the United States, notify all customers that the MXA910W-A violates the preliminary injunction and is thus subject to recall, award ClearOne its attorneys’ fees associated with the contempt motion, and for additional discovery relating to how Shure’s customers are installing the MXA910W-A. On March 9, 2020, Shure filed its opposition, arguing that it has fully complied with the preliminary injunction, its MXA910W-A is not subject to the preliminary injunction, and it instructs customers not to install the MXA910W-A in a drop ceiling mounting configuration. On March 10, the Court granted ClearOne leave to conduct limited additional discovery, and granted ClearOne leave to submit a reply in support of the motion by April 1, which was later extended to April 22 due to the COVID-19 crisis.

The Company intends to continue to vigorously enforce and defend its intellectual property rights in these proceedings.

The Company capitalized $5,085 and $4,698 of litigation expenses related to this matter during the twelve months ended December 31, 2019 and 2018, respectively.

In addition, the Company is also involved from time to time in various claims and legal proceedings which arise in the normal course of our business. Such matters are subject to many uncertainties and outcomes that are not predictable. However, based on the information available to us, we do not believe any such other proceedings will have a material adverse effect on our business, results of operations, financial position, or liquidity.

Conclusion

We believe there are no other items that will have a material adverse impact on the Company’s financial position or results of operations. Legal proceedings are subject to all of the risks and uncertainties of legal proceedings and there can be no assurance as to the probable result of any legal proceedings.

The Company believes it has adequately accrued for the aforementioned contingent liabilities. If adverse outcomes were to occur, our financial position, results of operations and cash flows could be negatively affected materially for the period in which the adverse outcomes are known.