Note 14. Commitments and Contingencies

Ontario County Industrial Development Authority Agreement

On February 27, 2018, the Company entered into a Lease and Project Agreement (the “Lease and Project Agreement”) and a Company Lease Agreement (the “Company Lease Agreement” and together with the Lease and Project Agreement, the “Agreements”), each dated as of February 1, 2018, with the Ontario County Industrial Development Agency, a public benefit corporation of the State of New York (the “OCIDA”). Pursuant to the Agreements, the Company will lease for $1.00 annually to the OCIDA an approximately 9.995 acre parcel of land in Canandaigua, New York, together with the improvements thereon (including the Company’s New York fabrication facility), and transfer title to certain related equipment and personal property to the OCIDA (collectively, the “Facility”). The OCIDA will lease the Facility back to the Company for annual rent payments specified in the Lease and Project Agreement for the Company’s primary use as research and development, manufacturing, warehouse and professional office space in its business, and to be subleased, in part, by the Company to various existing tenants. The Company estimates substantial tax savings during the term of the Agreements, which expire on December 31, 2028. In addition, subject to the terms of the Lease and Project Agreement, certain purchases and leases of eligible items will be exempt from the imposition of sales and use taxes. Subject to the terms of the Lease and Project Agreement, the OCIDA has also granted to the Company an exemption from certain mortgage recording taxes for one or more mortgages securing an aggregate principal amount not to exceed $12.0 million, or such greater amount as approved by the OCIDA in its sole and absolute discretion. Benefits totaling approximately $0.4 million provided to the Company through March 31, 2024 pursuant to the terms of the Lease and Project Agreement are subject to claw back over the life of the Agreements upon certain recapture events, including certain events of default.

Litigation, Claims and Assessments

Qorvo Inc. vs. Akoustis Technologies, Inc., DE Case 1:21-cv-01417-JPM 

On October 4, 2021, the Company was named as a defendant in a complaint filed by Qorvo, Inc. (“Qorvo”) in the United States District Court for the District of Delaware alleging, among other things, infringement of U.S. Patent No. 7,522,018 (“the ’018 Patent”) and U.S. Patent No. 9,735,755 (“the ’755 Patent”), false advertising, false patent marking, and unfair competition. The complaint alleges that the defendants misappropriated proprietary information, made misleading statements about the characteristics of certain of its products, and sold products infringing on certain of the plaintiff ’s patents. The plaintiff seeks an injunction enjoining the Company from the alleged infringement and damages, including punitive and statutory enhanced damages, in an unspecified amount. The Company filed a motion to dismiss all of the claims other than the direct patent infringement claims, but the court permitted the plaintiff to file an amended complaint which the court subsequently determined was sufficient for pleading purposes. The Court denied the Company’s motion in May 2022. The Court held a claims construction hearing in November 2022, issuing its claim construction order on March 15, 2023. On February 8, 2023, Qorvo filed a second amended complaint adding allegations of misappropriation of trade secrets, racketeering activities, and civil conspiracy. Fact discovery closed on November 15, 2023 and expert discovery closed on January 26, 2024.

On February 1, 2024, the Company filed a motion for partial summary judgment in its favor with respect to Qorvo’s claims of false advertising, false patent marking, unfair competition, misappropriation of trade secrets, violation of the RICO Act, and civil conspiracy. In its motion, the Company also moved for summary judgment in its favor regarding Qorvo’s claim of infringement regarding its ’755 Patent with respect to newer designs of certain Company BAW filters. That same day, Qorvo filed a motion seeking partial summary judgment in its favor with respect to the Company’s defenses of invalidity regarding the ’018 Patent and the ’755 Patent.

On February 9, 2024, the Company filed Motions to Exclude Expert Testimony of Qorvo’s damages expert. That same day, Qorvo filed Motions to Exclude Expert Testimony of the Company’s damages expert and one of the Company’s technical experts.

On April 25, 2024, the court granted the Company’s Motion for Partial Summary Judgment with respect to Qorvo’s false patent marking and RICO claims, but denied the remainder of the Company’s motion. That same day, the court granted in part Qorvo’s Motion to Exclude Testimony of one of Akoustis’ expert technical witnesses. On April 30, 2024, the court denied each party’s Motion to Exclude the Expert Witness Testimony of the other party’s damages expert.

On May 2, 2024, the court granted Qorvo’s Motion for Partial Summary Judgment with respect to the validity of the ‘018 Patent and the ‘755 Patent.

The trial for Qorvo Inc. vs. Akoustis Technologies, Inc., DE Case 1:21-cv-01417-JPM commenced on May 6, 2024. The Company can provide no assurance as to the outcome of such trial, and the result may include judgments against the Company for an injunction, significant damages or other relief, such as future royalty payments to Qorvo or restrictions on certain of the Company’s activities.

Akoustis Technologies, Inc. vs. Qorvo, Inc., TX Case 2:23-cv-00180-JRG-RSP 

On April 20, 2023, the Company filed a complaint against Qorvo in the United States District Court for the Eastern District of Texas alleging infringement by Qorvo of U.S. Patent No. 7,250,360 (“the ’360 Patent”), a patent licensed exclusively to the Company by Cornell University. The complaint alleges Qorvo’s willful infringement of the Cornell patent and seeks remedies including enhanced damages and attorneys’ fees. On July 24, 2023, Qorvo filed a motion to dismiss the complaint.

On August 11, 2023, Qorvo filed a motion to strike Akoustis’ infringement contentions. On January 10, 2024, the Court denied Qorvo’s motion to strike and Qorvo agreed to respond to the Company’s interrogatories and document requests relating to the accused products listed in the Company’s infringement contentions.

In connection with the litigation, the Company issued subpoenas to certain suppliers of Qorvo. On March 1, 2024, a supplier of Qorvo filed an inter partes review with the Patent Trial and Appeal Board challenging the validity of the ‘360 Patent and, on April 17, 2024, Qorvo made a similar filing.

On May 1, 2024, the Company filed a motion for leave to amend its complaint to add Cornell University as a co-plaintiff, as well as a motion to compel financial discovery.

The Company intends to vigorously pursue its claims against Qorvo but can provide no assurance as to the outcome of these disputes.

Resolution of each of the matters described above has been prolonged and costly, and the ultimate result or judgment is uncertain due to the inherent uncertainty in litigation and other proceedings. An adverse result in the matters described above would have a material adverse effect on the Company and its business and create an urgent need for additional liquidity or result in the Company’s curtailing or ceasing operations and seeking protection by filing a voluntary petition for relief under the Bankruptcy Code. Even if ultimately settled or resolved in the Company’s favor, the matters described above and other possible future actions have resulted in significant expenses, diversion of management and technical personnel attention and disruptions and delays in the Company’s business and product development, and other collateral consequences. Any out-of-court settlement of the above matters or other actions may also have an adverse effect on the Company’s business, financial condition and results of operations, including, but not limited to, substantial expenses, the payment of royalties, licensing or other fees payable to third parties, or restrictions on its ability to develop, manufacture, and sell its products.

From time to time, the Company may become involved in other lawsuits, investigations, and claims that arise in the ordinary course of business. The Company believes it has meritorious defenses against such other pending claims and intends to vigorously pursue them. While it is not possible to predict or determine the outcomes of any such other pending actions, the Company believes the amount of liability, if any, with respect to such other pending actions, would not materially affect its financial position, results of operations, or cash flows.

Tax Credit Contingency

The Company accrues a liability for indirect tax contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period in which such determination is made.

The Company’s gross unrecognized indirect tax credits totaled $0.1 million as of March 31, 2024 and $0.1 million as of June 30, 2023 and are recorded on the Consolidated Balance Sheet as a long-term liability.