Annual report pursuant to Section 13 and 15(d)

Litigation

v3.20.1
Litigation
12 Months Ended
Dec. 31, 2019
Litigation  
Litigation

Note 17 — Litigation

We are not currently involved in any actual or pending material legal proceedings or litigation, and we are not aware of any such proceedings contemplated by or against us or our property, except as follows:

On or about December 16, 2019, Throop, LLC (“Throop”) filed a patent infringement lawsuit in the United States District Court for the Central District of California against the Company. The complaint alleges that certain Vuzix products (which have yet to be sufficiently identified) infringe claims of U.S. Patent No. 7,035,897 and U.S. Patent No. 9,479,726. Both patents expired on January 14, 2020. The complaint purports to seek an injunction or payment of an ongoing royalty with respect to the patents, an award of damages to compensate for alleged past infringement, trebled damages, and an award of costs and attorney’s fees. On March 6, 2020, before the Company filed a formal response to the complaint with the Court, Throop filed a voluntary dismissal without prejudice of the California complaint in response to the Company’s position that venue was improper. The Company denies that Throop is entitled to the relief requested and intends to vigorously defend itself against the claims asserted and any lawsuit related thereto brought against the Company going forward.

We were involved in the following litigation matters in 2019, which have been resolved:

On April 5, 2018, we filed a defamation lawsuit against Ricardo Antonio Pearson (a\k\a Richard Pearson) in the Supreme Court of the State of New York, County of New York. The Company’s complaint against Mr. Pearson alleged that he published false and defamatory articles about the Company. Vuzix sought damages in excess of $80 million, including punitive damages, and money damages. The lawsuit was moved from New York State Supreme Court, New York County, to the United States District Court, Southern District of New York, and Mr. Pearson filed a motion to dismiss the complaint for lack of jurisdiction, among other grounds. On or about November 8, 2019, the Court granted Mr. Pearson’s motion and dismissed the lawsuit on the basis that it lacked personal jurisdiction over him. In its decision, the Court noted that it was not making a determination or ruling on the actual merits of the lawsuit.

On or about October 27, 2018, Bob Glenn filed a shareholder derivative suit in the Supreme Court of the State of New York, County of Monroe against certain of the Company’s current and former directors and executive officers. The Company was named as a nominal defendant only. The complaint alleged breaches of fiduciary duty, unjust enrichment, and waste of corporate assets. The complaint also alleged that the Company and certain of its officers and directors made materially false and/or misleading statements and failed to disclose material adverse events about the Company’s business, operations and prospects in press releases and public filings. The complaint sought a declaration that the defendants breached and/or aided and abetted the breach of their fiduciary duties to the Company, determining and awarding damages, and directing the Company to reform and improve its corporate governance. Similar derivative suits were filed by Michael Washington and John Mayer on or about October 26, 2018 and October 29, 2018, and pursuant to the parties’ stipulation, the Court ordered the three lawsuits to be consolidated on January 29, 2019. Because the Company believed the allegations to be false and without merit, it filed a motion to dismiss the consolidated complaints on September 6, 2019. In response to the motion, the plaintiffs filed a consolidated amended complaint on October 3, 2019 in an attempt to bolster their allegations, but the causes of action remained substantially similar to those asserted in the original complaints. Because the Company found the claims in the consolidated amended complaint also to be baseless, it filed a motion to dismiss that pleading as well on November 4, 2019. Electing not to respond to the motion, the plaintiffs chose, instead, to voluntarily discontinue the action against the Company, and filed a stipulation to that effect with the Court on December 10, 2019. Accordingly, the Court marked the case disposed.