AXON ENTERPRISES (TASER) ACKNOWLEDGES THE VALIDITY OF DIGITAL’S AUTO-ACTIVATION ‘292 PATENT BY DISMISSING ITS APPEAL



Digital Ally (NASDAQ: DGLY), which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial applications, has generated some big wins in the first half of 2018, and it looks set for even more success in the months and quarters ahead.

In addition to expansion of its commercial operations, including high-profile deals with NASCAR and Crime Stoppers International, DGLY has had a string of court victories in its ongoing patent infringement suits.

Most importantly, in May, industry heavy-weight Axon Enterprises (NASDAQ: AAXN) lost its final appeal at the US Patent & Trademark Office (USPTO).

Police Siren Lights

Not only does this set the stage for DGLY to move forward toward damage awards in its litigation against Axon and others from a position of strength, it also may impede the competition’s ability to secure lucrative major contracts.

Phoenix Body Cam RFP Shows Special Terms Related to IP

In a publicly-available RFP from the City of Phoenix for their upcoming purchase of body cams, special terms and conditions are included related to intellectual property:

Intellectual Property Warranties

SOURCE: Phoenix RFP for Body-Worn Cameras, pg. 42

Based on this term alone, having lost its final appeal with the USPTO, its unlikely Axon can bid on this potentially lucrative contract. And its likely this consideration is not unique to Phoenix. Other police departments in major urban markets, contemplating multi-million-dollar purchases are likely to take similar precautions.

With DGLY well on its way to demonstrably proving its rightful ownership of its patented auto-activation technology and the likely willful infringement of that patent by Axon and others, in addition to potentially hundreds of millions of dollars in damages, DGLY is ideally positioned for potentially big contract wins.

Over the past 10 years, DGLY has shipped 93,500 units of its products worldwide, and more than 8,000 (out of 18,500 total) law enforcement agencies in the US are now using DGLY products.

While up against some large players in this market, DGLY’s auto-activation technology provides a distinct competitive advantage. And with its success in court, it should finally begin to truly realize that advantage.

Rideshare Operator Signed Deal with DGLY in May

Kansas City-based zTrip, a provider of taxi and rideshare services in 18 US cities, upgraded its first 450 vehicles with DGLY’s FleetVu Manager cloud-based system, in a deal announced in mid-May.

FleetVu enables commercial operators to easily monitor their fleet of vehicles and driver performance.

Patent Law Book

The cloud-based service add powerful real-time options for zTrip and other commercial customers, including asset tracking and mapping, as well as customizable real-time alerts, such as collisions, geo fences and speeding.

Users can store and manage video, remotely update firmware and wireless configurations, while using features such as mapping, reporting and creating driver score cards.

A mobile application mobile allows drivers to perform pre- and post-inspections of their vehicle, and instantly sends alerts via SMS or email to fleet managers if there is a breakdown, maintenance request, or any issue with that vehicle. As a result, the system may be instrumental in reducing accident, fraud, and litigation risks.

While the initial order under the deal covered 450 vehicles, zTrip currently manages a fleet of 5,000 vehicles across the US and has plans to expand to 30 US and 16 international cities by the end of 2018.

Commenting on the relationship, zTrip CEO Bill George stated, “Digital Ally has been a good partner, and we're looking forward to a significant expansion of our long-term relationship. Our passengers and drivers can be assured that their safety is our number one priority and with the adoption of the FleetVu cloud-based manager we are taking substantial steps to demonstrate the same.”

Exclusive Partnership with NASCAR

DGLY signed a multiyear partnership with NASCAR in February this year.

As part of the deal, DGLY installed its camera technology in the Monster Energy NASCAR Cup Series garage this season.

“NASCAR takes seriously its role in providing a safe environment for its fans and competitors, and this partnership with Digital Ally is the next step in that commitment,” said Scott Miller, NASCAR Senior Vice President, Competition.

According to DGLY management, it expects “some very big things, revenue-wise, in the future from the partnership.”

NASCAR cars racing

On its Q1 earnings call, DGLY’s CFO, Thomas Heckman, noted that the potential deals that the company expects from this relationship will be with companies “that everybody knows, everybody sees, or everyday names in everybody's life in the US.”

Growing Interest from Wall Street

Analysts from ValuEngine, Zacks Investment Research, Maxim Group, and Westpark Capital have issued reports on DGLY this year, with price targets as high as $6 per share.

The stock has recently traded in the $2 range, creating a compelling opportunity for investors.

And with the patent infringement litigation having reached a “when not if” stage, the potential for a big upside surprise could send shares significantly higher.