IMMERSION CORP

LGE Korean Withholding Tax Matter

On October 16, 2017, we received a letter from LG Electronics Inc. (“LGE”) requesting that we reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following an investigation where the tax authority determined that LGE failed to withhold on LGE’s royalty payments to Immersion Software Ireland Limited, a subsidiary of the Company, from 2012 to 2014. Pursuant to an agreement reached with LGE, on April 8, 2020, we provided a provisional deposit to LGE in the amount of KRW 5,916,845,454 (approximately $5.0 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korean courts.

On November 3, 2017, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding its findings with respect to the withholding taxes related to the 2012 to 2017 period. The Korea Tax Tribunal hearing took place on March 5, 2019. On March 19, 2019, the Korea Tax Tribunal issued its ruling in which it decided not to accept our arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on LGE. On behalf of LGE, we filed an appeal with the Korea Administrative Court on June 10, 2019. We had numerous hearings before the Korea Administrative Court in the years 2019 through 2022. We had a hearing on April 27, 2023, and the Korea Administrative Court rendered a decision on this matter on June 8, 2023, in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on LGE should be cancelled with litigation costs to be borne by the Korean tax authorities.

In connection with the Korea Administrative Court's decision, the Korean tax authorities filed an appeal on June 28, 2023, with the Seoul High Court to seek the cancellation of the lower court's decision. The appellate case is in progress at the Seoul High Court. The first and second hearings took place on November 30, 2023, and February 1, 2024, respectively. As of the date of this filing, the next hearing date had not yet been set.

The Seoul Administrative Court issued an additional judgment on July 27, 2022 (clarifying the ratio of software vs. patent usage) and that, as of the date of this filing, the Seoul High Court appeal remained pending.

On April 25, 2023, we received notice from LGE requesting that we reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following a recent tax audit of LGE for the years 2018 through 2022. Pursuant to an agreement reached with LGE, on June 2, 2023, we provided a provisional deposit to LGE in the amount of KRW 3,024,877,044 (approximately $2.3 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korean courts.

On June 29, 2023, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding its findings with respect to the withholding taxes related to the 2018 to 2022 period. On August 7, 2023, the Korean tax authority submitted its answer against the tax appeal. On September 8, 2023, on behalf of LGE, we submitted our rebuttal brief in response thereto. On September 25, 2023, the Korean tax authority submitted an additional response brief. On November 23, 2023, the Korea Tax Tribunal rendered a decision against LGE, dismissing our claims on the grounds that they are without merit. In response thereto, on behalf of LGE, we filed an appeal with the Korea Administrative Court on December 29, 2023.

On July 25, 2024, the Korea Tax Tribunal rendered a decision against LGE on the related local income tax assessment, and the deadline for the court appeal of the local income tax claim was October 21, 2024. On October 18, 2024, we filed a complaint and a brief with the Korea Administrative Court for the local income tax appeal. This case has been reassigned due to its significance. The Korean tax authority filed its answer on November 27, 2024. The first hearing date, which was originally scheduled for March 21, 2025, has been set at a later date, as the counsel for the plaintiff submitted an application for hearing date to be set at a later date by obtaining the defendant’s consent. No subsequent changes have been made so far.

The provisional deposits remain recorded on our balance sheet net of estimated impairment charges and will be returned to us to the extent we ultimately prevail in the appeals.

Immersion Corporation vs. Valve Corporation (“Valve”)

On May 15, 2023, we filed a complaint against Valve in the United States District Court for the Western District of Washington. The complaint alleges that Valve’s AR/VR systems, including the Valve Index, and its handheld Steam Deck, infringe seven of our patents that cover various uses of haptic effects in connection with such AR/VR systems and other video game systems. We are seeking to enjoin Valve from further infringement and to recover a reasonable royalty for such infringement.

The complaint against Valve asserts infringement of the following patents:

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U.S. Patent No. 7,336,260: “Method and Apparatus for Providing Tactile Sensations”

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U.S. Patent No. 8,749,507: “Systems and Methods for Adaptive Interpretation of Input from a Touch-Sensitive Input Device”

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U.S. Patent No. 9,430,042: “Virtual Detents Through Vibrotactile Feedback”

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U.S. Patent No. 9,116,546: “System for Haptically Representing Sensor Input”

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U.S. Patent No. 10,627,907: “Position Control of a User Input Element Associated with a Haptic Output Device”

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U.S. Patent No. 10,665,067: “Systems and Methods for Integrating Haptics Overlay in Augmented Reality”

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U.S. Patent No. 11,175,738: “Systems and Methods for Proximity-Based Haptic Feedback”

Valve responded to the complaint on July 24, 2023, with a motion to dismiss. Valve re‑noted its motion, which changed our response deadline from August 14, 2023, to August 21, 2023. We timely filed our response, and Valve filed its reply on August 25, 2023. The Court heard arguments on Valve's motion on February 8, 2024. The Court entered a case schedule on November 21, 2023. The case schedule did not include a trial date but set the pretrial conference for May 30, 2025.

On March 14, 2024, Valve filed a motion to stay the district court case pending the Patent Trial and Appeal Board's (“PTAB”) decisions on Valve’s inter partes review (“IPR”) petitions. We opposed the motion on March 25, 2024, and Valve filed its reply brief on March 29, 2024. On April 4, 2024, the Court granted Valve’s motion to stay the district court proceedings. In connection with that order, the Court struck Valve's motion to dismiss with leave to refile at a later date. The case remains stayed pending resolution of the IPR proceedings.

Valve has filed multiple IPR petitions with the PTAB challenging the validity of the patents asserted in the district court litigation. As of the date of this filing, the status of these proceedings is as follows:

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IPR2024‑00477 and IPR2024‑00478 (filed January 19, 2024) directed to U.S. Patent Nos. 7,336,260 and 9,430,042, respectively. We filed our patent owner preliminary responses on April 26, 2024, and April 29, 2024, respectively. The PTAB instituted review on July 24, 2024, and July 25, 2024, respectively. We filed our patent owner responses on October 15, 2024, and October 17, 2024, respectively. Our patent owner sur‑replies to Valve’s replies were both filed on February 28, 2025. Oral arguments in both proceedings were held on April 30, 2025.

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On June 12, 2025, the PTAB issued final written decisions determining all challenged claims unpatentable for both IPRs, and we filed a notice of appeal in IPR2024‑00478 on August 14, 2025 with an opening Federal Circuit brief filed January 29, 2026.

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IPR2024‑00508 (filed January 30, 2024) directed to U.S. Patent No. 9,116,546. We elected not to file a patent owner preliminary response. The PTAB instituted review on August 6, 2024. We elected not to file a patent owner response to the petition.

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On July 31, 2025, the PTAB issued a final written decision determining all challenged claims unpatentable, with a statutory deadline for final written decision not later than August 6, 2025. The Company elected not to file a patent owner response to the petition.

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IPR2024‑00556 (filed February 7, 2024) directed to U.S. Patent No. 8,749,507. We filed our patent owner preliminary response on May 15, 2024. The PTAB instituted review on August 6, 2024. We elected not to file a patent owner response to the petition.

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On July 28, 2025, the PTAB issued a final written decision determining all challenged claims unpatentable, with the statutory deadline for the final written decision not later than August 6, 2025.

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IPR2024‑00557 (filed February 7, 2024) directed to U.S. Patent No. 10,665,067. We filed our patent owner preliminary response on May 15, 2024. The PTAB instituted review on August 13, 2024. Our patent owner response was filed on November 5, 2024. Valve filed its reply on February 4, 2025. Our patent owner sur‑reply was filed March 18, 2025.

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Oral argument occurred on May 9, 2025, and on August 11, 2025, the PTAB issued a final written decision determining all challenged claims unpatentable. We filed a notice of appeal on September 26, 2025, with our opening Federal Circuit brief due March 12, 2026.

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IPR2024‑00582 (filed February 16, 2024) directed to U.S. Patent No. 11,175,738. We filed our patent owner preliminary response on June 27, 2024. The PTAB instituted review on September 25, 2024. Our patent owner response was filed on December 20, 2024. The Company’s patent owner sur-reply to Petitioner’s reply was filed on May 5, 2025. Oral argument in the proceeding was held on June 23, 2025. On September 4, 2025, the Board extended its statutory deadline of September 25, 2025, for a final written decision by up to six months. The final written decision in this proceeding is now expected by March 25, 2026.

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Our sur‑reply was filed May 5, 2025, oral argument was held June 23, 2025, and on September 4, 2025, the PTAB extended the statutory deadline for a final written decision to March 25, 2026.

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IPR2024‑00714 (filed March 22, 2024) directed to U.S. Patent No. 10,627,907. We filed our patent owner preliminary response on July 30, 2024. The PTAB instituted review on August 28, 2024. Our patent owner response was filed on January 21, 2025. The Company’s sur-reply to Petitioner’s reply was filed June 10, 2025. Oral argument in the proceeding was held on July 29, 2025. The Board issued a final written decision determining all challenged claims unpatentable on October 24, 2025.

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Our sur‑reply was filed on June 10, 2025, oral argument occurred on July 29, 2025, and on October 24, 2025, the PTAB issued a final written decision determining all challenged claims unpatentable.

The parties submitted their joint claim construction statement and respective positions in the district court litigation on March 29, 2024. The district court case is currently stayed pending the outcome of the IPR proceedings.

We are unable at this time to predict the ultimate outcome of the district court litigation or the related IPR proceedings, the impact of any PTAB decisions and any appeals therefrom, or to reasonably estimate the amount or range of any possible loss or recovery associated with these matters.