Digital Ally Wins Patent Litigation: What's It Mean For Shares?

The U.S Patent and Trademark Office (USPTO) handed Digital Ally Inc DGLY a major legal victory on Wednesday, issuing a final decision invalidating the majority of the claims against Ally after a nearly two-year legal battle with Utility Associates Inc. Digital Ally is a developer, manufacturer and marketer of advanced law enforcement video surveillance products, and the dispute centered on Utility’s U.S. Patent No. 6,831,556.

The claims
Utility claimed that the patent applies to all mobile surveillance systems capable of capturing video, audio and other data, but Digital Ally argued that the claims in the patent were unpatentable. The USPTO mostly ruled in favor of Digital Ally, declaring that 23 of the 25 claims asserted in the patent were invalid.

The ruling means that it is now highly unlikely that Utility will be able to further pursue patent infringement charges against Digital Ally, which believes that the final two claims are not applicable to Digital’s business.

Digital Ally fires back
In a statement following the ruling, Digital Ally CEO Stanton Ross explained that the company plans to continue to pursue legal claims against Utility related to its past actions against Digital Ally, including a letter-writing campaign.

“We look forward to continue pressing forward with our actions against Utility in light of this favorable decision by the United States Patent Office and to continue to protect our customers and our company from the false and misleading threats of patent infringement disseminated by Utility,” Ross said.

What does it mean for shareholders?
Digital Ally shares climbed 1.9 percent on Wednesday, as the market saw the ruling as good news for the company. Rodman & Renshaw analyst Amit Dayal sees the ruling as a green light for buyers of Digital Ally stock.

“We believe recent highly publicized law enforcement incidents have provided legislators an opportunity to reassess spending priorities away from militarization of the police to increasing transparency and accountability,” Dayal writes.

Rodman & Renshaw currently has a Buy rating on Digital Ally and a $24 target for the stock.