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Instant Analysis: Digital Ally Claims Victory in Patent Tussle With TASER

By Rich Duprey – Jan 25, 2016 at 5:51PM

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Competing claims over police body camera patents make for a potentially explosive outcome.

What happened?
In the ongoing patent infringement battle between Digital Ally and industry heavyweight TASER International (AXON -2.48%), the upstart is claiming it is finally triumphant and has filed a lawsuit against its rival.

Does it matter?
The market for police body cameras is booming, particularly after civil unrest fractured cities like Ferguson and Baltimore after police-involved shootings. President Obama said he'd direct studies into the effectiveness of body cameras worn by police, and last spring the Justice Department launched a $75 million program to help fund the purchase of body cameras by police departments. Between hardware like body cams and in-car video systems and data management through cloud storage services, it was already blossoming into a $1 billion industry, but TASER thinks it can grow to as much as $3 billion.

Despite TASER's entry into the industry through its Axon video surveillance platform, the market is dominated by smaller outfits like WatchGuard Video, Safariland's Vievu, and Digital Ally, which has sued TASER for violating its '292 body cam patent. While TASER tried to claim victory last September when the U.S. Patent & Trademark Office issued a preliminary finding that seemed to question the validity of Digital Ally's patent, the industry insurgent recently announced that upon further consideration the USPTO "ultimately rejected TASER's efforts and confirmed the validity" of the '292 patent.

The he said-she said nature of the competing claims is important because it goes to the heart of TASER's body cam activation system. Under a previous construct, Axon cameras had to be manually activated, a less-than-optimal situation because it leaves too much of the decision open to officer discretion. The Digital Ally model, and Axon's subsequent evolution, relies instead upon a triggering event, such as when a police vehicle's emergency lights are turned on or the officer draws his weapon. Digital Ally says its lawsuit against its rival is seeking both monetary damages and a permanent injunction to prevent TASER from selling its infringing product.

TASER has called the lawsuit "egregious and frivolous" and contends Digital Ally has so amended its patent claims that the Axon technology doesn't infringe any portion of the '292 patent.

As body cameras become an increasingly important component of TASER International's business -- Axon revenues more than doubled last quarter, which boosted sales of its digital evidence management solutions -- the outcome of the case could very well determine the stun-gun maker's future.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends TASER International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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