Markforged enters settlement, patent license agreement in IP litigation

Markforged entered into a Settlement and Patent License Agreement in connection with the patent infringement litigation brought by Continuous Composites. The Settlement Agreement resolves all claims and counterclaims in this litigation, which is currently pending before the United States District Court for the District of Delaware. As previously disclosed in our public filings, in July 2021, Continuous Composites filed a patent-infringement lawsuit against Markforged. Four patents originally asserted against Markforged, comprising a total of nineteen patent claims, were removed from the case in April 2023, leaving four claims from a patent that was added to the case in 2022. Two of the four claims from the remaining patent were tried to a jury in April 2024. On April 11, 2024, the jury found one of the two remaining patent claims Continuous Composites asserted at trial against us to be invalid and not infringed. However, the jury found that we had infringed the other patent claim and awarded monetary damages to Continuous Composites in the amount of $17.34 million. We challenged this verdict through post-trial motions. Through its post-trial motions, Continuous Composites also asserted claims for additional royalty payments for sales of certain products manufactured and/or sold by Markforged in the United States after December 31, 2023. Under the terms of the Settlement Agreement, Markforged will make an upfront payment of $18 million to Continuous Composites, which is expected to occur in the fourth quarter of fiscal year 2024, and three additional installment payments thereafter of $1 million, $2 million and $4 million in the fourth quarters of fiscal years 2025, 2026 and 2027, respectively. In consideration of such payments, the Settlement Agreement provides for a dismissal of all claims with prejudice, cross-licenses of the parties’ respective patent portfolios, a mutual release of claims for liabilities arising prior to the effective date of the Settlement Agreement and mutual covenants not to sue. As a condition to the effectiveness of the Settlement Agreement, the Company also entered into a Security Agreement with Continuous Composites pursuant to which the Company granted Continuous Composites a security interest in, among other assets, Markforged’s patent intellectual property rights. The Settlement Agreement acknowledges that neither party admitted to any liability or wrongdoing with respect to the claims alleged in the Continuous Composites Lawsuit. The Settlement Agreement also requires the parties to file a joint dismissal of the dispute with prejudice with the District Court to dismiss all claims and counterclaims with prejudice. The Settlement Agreement is subject to review by the District Court.