Note 8 - Commitments and Contingencies	12 Months Ended
Dec. 31, 2018
Notes to Financial Statements
Commitments and Contingencies Disclosure [Text Block]	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 $1,247 as of December 31, 2018. Uncertain Tax Positions. As further discussed in Note 12, we had $679 of uncertain tax positions as of December 31, 2018. 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 patent infringement against Shure Inc. ("Shure") in the matter styled Shure Inc. v. ClearOne, Inc. , 1:17 -cv- 03078, which is pending in the United States District Court for the Northern District of Illinois, Eastern Division, before the Honorable Edmond E. Chang. Shure initiated this litigation on April 24, 2017. Shure’s initial complaint sought a declaratory judgment for 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"). 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 asserted by the Company against any defendant 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. On January 29, 2018, PTAB decided to institute inter partes review. On August 6, 2017, the Company filed a motion seeking a preliminary injunction to enjoin the 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. On February 6, 2019, the Company filed a motion for reconsideration of the Court’s order denying a preliminary injunction against Shure to enjoin infringement of the ’186 Patent. That motion is still pending. In November 2018, the Court heard argument on the Company’s motion seeking a preliminary injunction to enjoin Shure from continuing to infringe the Company’s ’806 Patent. The Court indicated during a status hearing on March 15, 2019 that it will issue a decision by mid- April 2019. That motion is still pending. On January 24, 2019, PTAB issued a final written decision confirming the patentability of all claims of the ‘553 Patent. The '553 Patent covers aspects of ClearOne’s revolutionary innovations in beamforming microphone arrays (BMAs). Shure filed a request for a rehearing, which the PTAB denied on March 25, 2019. Shure filed a notice of appeal of the PTAB’s decision on April 8, 2019. On April 10, 2019, the Company filed a new lawsuit against Shure in the United States District Court for the Northern District of Illinois, Eastern Division, styled ClearOne, Inc. v. Shure Inc. , 1:19 -cv- 02421. In this lawsuit, the Company asserts claims against Shure for infringement of the Company’s ’553 Patent and for trade secret misappropriation. The Company intends to continue to vigorously enforce and defend its intellectual property rights in the Illinois Action and the PTAB proceedings. During the twelve months ended December 31, 2018 and 2017, the Company recorded $0 and $1,111, respectively, of pretax gross expenses related to this intellectual property litigation to prevent infringement of the Company’s patents. In addition, the Company also capitalized $4,698 and $2,289 of litigation expenses related to this matter during the twelve months ended December 31, 2018 and 2017, respectively. Former Employee Litigation OSHA Complaint : On or about October 24, 2016, the Company received written notice from the United States Department of Labor, Occupational Health and Safety Administration (“OSHA”) that a complaint had been filed against it by a former employee. Among other things, the former employee’s OSHA complaint alleged harassment, retaliation, and violations of 18 U.S.C.A. Section 1514A, et seq. (the “Sarbanes-Oxley Act”), arising out of the termination of his employment with the Company on or about August 17, 2016 ( the “OSHA Complaint”). By letter dated March 2, 2017, the Company received notice that the same former employee who initiated the OSHA Complaint filed a complaint with the Utah Labor Commission, Anti-Discrimination & Labor Division (“UALD”), alleging that the employee's termination was discriminatory based upon a disability or, in the alternative, retaliatory for substantially the same reasons alleged in the OSHA Complaint. The charge was also forwarded to the United States Equal Employment and Opportunity Commission (“EEOC”) and was also recognized as a charge under the EEOC's federal jurisdiction. Following negotiations between the parties, the parties executed a settlement agreement on December 7, 2017 ( “the Agreement”) with respect to the OSHA Complaint. Per the terms of the Agreement, the Company's signing of the Agreement in no way constitutes an admission of a violation of any law or regulation enforced by OSHA. Around the same time in December 2017, the parties executed a side settlement agreement by which the former employee acknowledged that he does not believe that the Company engaged in activities which would be construed as violations of securities-related laws and agreed to withdraw his charge against the Company from the UALD and the EEOC. The charge was effectively withdrawn on December 6, 2017. During the twelve months ended December 31, 2018 and 2017, the Company recorded $0 and $152, respectively, of pretax gross expenses and settlement costs related to the defense of the OSHA Complaint and review of the allegations underlying the former employee’s OSHA complaint. The amount recorded in 2017 is net of recoveries from the insurance company towards this matter. The Company maintains an Employment Practices Liability policy with Chubb/Federal Insurance Company (the “EPL Policy”). Based on the allegations contained in the OSHA Complaint, the Company has tendered a claim for coverage under the EPL Policy. 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.

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

$1,247

as of

December 31, 2018.

Uncertain Tax Positions.

As further discussed in Note

12,

we had

$679

of uncertain tax positions as of

December 31, 2018.

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 patent infringement against Shure Inc. ("Shure") in the matter styled

Shure Inc. v. ClearOne, Inc.

1:17

-cv-

03078,

which is pending in the United States District Court for the Northern District of Illinois, Eastern Division, before the Honorable Edmond E. Chang. Shure initiated this litigation on

April 24, 2017.

Shure’s initial complaint sought a declaratory judgment for 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"). 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 asserted by the Company against any defendant 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").

July 14, 2017,

Shure filed a petition with Patent Trial and Appeals Board ("PTAB") for

inter partes

review against the

‘553

Patent. On

January 29, 2018,

PTAB decided to institute

inter partes

review.

August 6, 2017,

the Company filed a motion seeking a preliminary injunction to enjoin the 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. On

February 6, 2019,

the Company filed a motion for reconsideration of the Court’s order denying a preliminary injunction against Shure to enjoin infringement of the

’186

Patent. That motion is still pending.

November 2018,

the Court heard argument on the Company’s motion seeking a preliminary injunction to enjoin Shure from continuing to infringe the Company’s

’806

Patent. The Court indicated during a status hearing on

March 15, 2019

that it will issue a decision by mid-

April 2019.

That motion is still pending.

January 24, 2019,

PTAB issued a final written decision confirming the patentability of all claims of the

‘553

Patent. The

'553

Patent covers aspects of ClearOne’s revolutionary innovations in beamforming microphone arrays (BMAs). Shure filed a request for a rehearing, which the PTAB denied on

March 25, 2019.

Shure filed a notice of appeal of the PTAB’s decision on

April 8, 2019.

April 10, 2019,

the Company filed a new lawsuit against Shure in the United States District Court for the Northern District of Illinois, Eastern Division, styled

ClearOne, Inc. v. Shure Inc.

1:19

-cv-

02421.

In this lawsuit, the Company asserts claims against Shure for infringement of the Company’s

’553

Patent and for trade secret misappropriation.

The Company intends to continue to vigorously enforce and defend its intellectual property rights in the Illinois Action and the PTAB proceedings.

During the

twelve

months ended

December 31, 2018

and

2017,

the Company recorded

and

$1,111,

respectively, of pretax gross expenses related to this intellectual property litigation to prevent infringement of the Company’s patents. In addition, the Company also capitalized

$4,698

and

$2,289

of litigation expenses related to this matter during the

twelve

months ended

December 31, 2018

and

2017,

respectively.

Former Employee Litigation

OSHA Complaint

: On or about

October 24, 2016,

the Company received written notice from the United States Department of Labor, Occupational Health and Safety Administration (“OSHA”) that a complaint had been filed against it by a former employee. Among other things, the former employee’s OSHA complaint alleged harassment, retaliation, and violations of

U.S.C.A. Section

1514A,

et seq. (the “Sarbanes-Oxley Act”), arising out of the termination of his employment with the Company on or about

August 17, 2016 (

the “OSHA Complaint”). By letter dated

March 2, 2017,

the Company received notice that the same former employee who initiated the OSHA Complaint filed a complaint with the Utah Labor Commission, Anti-Discrimination & Labor Division (“UALD”), alleging that the employee's termination was discriminatory based upon a disability or, in the alternative, retaliatory for substantially the same reasons alleged in the OSHA Complaint. The charge was also forwarded to the United States Equal Employment and Opportunity Commission (“EEOC”) and was also recognized as a charge under the EEOC's federal jurisdiction.

Following negotiations between the parties, the parties executed a settlement agreement on

December 7, 2017 (

“the Agreement”) with respect to the OSHA Complaint. Per the terms of the Agreement, the Company's signing of the Agreement in

way constitutes an admission of a violation of any law or regulation enforced by OSHA. Around the same time in

December 2017,

the parties executed a side settlement agreement by which the former employee acknowledged that he does

not

believe that the Company engaged in activities which would be construed as violations of securities-related laws and agreed to withdraw his charge against the Company from the UALD and the EEOC. The charge was effectively withdrawn on

December 6, 2017.

During the

twelve

months ended

December 31, 2018

and

2017,

the Company recorded

and

$152,

respectively, of pretax gross expenses and settlement costs related to the defense of the OSHA Complaint and review of the allegations underlying the former employee’s OSHA complaint. The amount recorded in

2017

is net of recoveries from the insurance company towards this matter.

The Company maintains an Employment Practices Liability policy with Chubb/Federal Insurance Company (the “EPL Policy”). Based on the allegations contained in the OSHA Complaint, the Company has tendered a claim for coverage under the EPL Policy.

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

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

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.