Route1 Inc.
TSX VENTURE : ROI
OTCQB : ROIUF

Route1 Inc.

March 28, 2017 08:00 ET

Route1 Files Complaint against AirWatch LLC for Patent Infringement

Provides an update on U.S. government MobiKEY renewals

TORONTO, ONTARIO--(Marketwired - March 28, 2017) - Route1 Inc. (OTCQB:ROIUF)(TSX VENTURE:ROI) (the Company or Route1), a world-leader in secure data protection technologies and user authentication for government and enterprise, today announced that yesterday the Company filed a complaint against AirWatch LLC (AirWatch) in the U.S. District Court for the District of Delaware for infringement of U.S. Patent No. 7,814,216, seeking damages and an injunction. The damages the Company will be seeking are material when compared to Route1's market capitalization.

Patent Litigation

A U.S. patent lawsuit typically takes at least three years to resolve. Route1 anticipates that its current cash resources and future cash generated from operating performance will be sufficient to fund Route1's estimated cash costs of the litigation through trial. Damages for infringing activity may be awarded from six years prior to the filing of the lawsuit until the expiration of the infringed patent. Damages are often calculated using the "reasonable royalty" approach, wherein revenue from infringing activity is multiplied by a reasonable royalty rate; for software, the Company has been advised that the rate can be between 10-20%.

AirWatch LLC

AirWatch is a provider of Enterprise Mobility Management (EMM) software and standalone management systems for content, applications and email. AirWatch's EMM solutions emphasize secure communications with its customer's employees' mobile devices and enterprise resources. AirWatch is a wholly-owned subsidiary company of VMware, Inc., whose majority shareholder is EMC Dell. It is likely that AirWatch benefits from access to VMware's large client base and extensive distribution channels.

The EMM Market

According to various industry publications:

  • the EMM market was approximately US$1.8 billion in calendar year 2015;
  • the EMM market grew by approximately 27% per year during 2013-2015;
  • there is room for significant growth for EMM licenses in the enterprise vertical, as fewer than half of the worldwide installed base for business-use mobile devices - corporate and bring your own device - are currently managed by an EMM platform;
  • the projected average annual growth rate for the EMM market through 2020 is expected to be more than 30%;
  • AirWatch is the largest participant in the EMM market with a share of approximately 17%; and
  • other significant EMM market participants include but are not limited to Blackberry/Good (14%), MobileIron (8%), Citrix (8%), and Microsoft (8%).

U.S. Patent No. 7,814,216

Route1's U.S. Patent No. 7,814,216 (the 216 Patent), "System And Method For Accessing Host Computer Via Remote Computer", was issued by the United States Patent and Trademark Office (USPTO) on October 12, 2010 and expires on March 3, 2025. Route1 is the owner by assignment of the entire right, title and interest in the 216 patent, including the sole and undivided right to sue for infringement.

U.S. Patent No. 7,814,216 is generally directed to using a controller to enable secure communication between a remote device, such as a smartphone or a portable computer, and a host computer. The controller, remote and host are in different locations; the host is usually part of a customer's computer system. The method disclosed in the 216 patent includes: the remote and the host validating their identities to the controller; the controller receiving, from the remote, a selection of a host; the controller sending characteristics of the remote to the selected host, along with an instruction to the selected host to establish a connection to the remote; and then the host and the remote communicate without using the controller to transport data.

Route1's Infringement Complaint against AirWatch

Route1 contends that AirWatch infringes on U.S. Patent No. 7,814,216 in violation of 35 U.S.C. § 271 through at least the operation of a cloud-based controller of what AirWatch refers to as "The AirWatch Enterprise Mobility Management System" (AirWatch EMM System) in order to facilitate secure communications between remote computing devices such as cell phones and tablets and resources residing on corporate networks, such as email and corporate intranets, and application programs such as spreadsheets and word processors.

U.S. CBP Renewal Update

The Company has been actively working with its U.S. government clients to put contracts in place for the continued use of the MobiKEY technology, where the renewal for an account falls during the late Q1 or early Q2 period. The Company expects to renew all of its material contracts with its U.S. government clients with the exception of the U.S. Customs and Border Protection (CBP).

As of a result of the factors outlined in the Company's February 9, 2017 news release, recent leadership changes in the office of the CIO at CBP, and a move by current technology leadership at CBP to closely align CBP's mobility plan with that set out by the recently resigned CIO at the Department of Homeland Security, CBP will not be renewing its license for 7,000 MobiKEY subscribers after its current subscription term ends on April 30, 2017.

The Company is disappointed with the decision made by CBP. Further, Route1 is of the firm opinion that the MobiKEY technology is more cost-effective for the tax payer and a demonstrably more secure solution than the technology to which CBP is migrating.

Despite the loss of CBP, Route1 believes that it will continue to generate positive EBITDA in calendar year 2017. The Company's plan for growth consists of organic growth from MobiKEY and DerivID sales, and the release of new technologies, as well as through acquisitions, which collectively will serve as the roadmap to accelerated revenue and cash flow growth in calendar 2017.

Year End Financial Results

Route1 will report its fourth quarter and full year financial results for the period ended December 31, 2016 after the market closes on Thursday, April 13, 2017.

The Company will also hold a conference call and web cast to discuss the financial results on Thursday, April 13, 2016 at 4:15 pm eastern. Participants should dial 1-800-263-8506 or 1-719-325-2362 at least 10 minutes prior to the conference time of 4:15 pm eastern. For those unable to attend the call, a replay will be available after 7:15 p.m. at 1-844-512-2921 or 1-412-317-6671, pass code 1247452 until midnight on April 27, 2017. The webcast will be presented live at http://public.viavid.com/index.php?id=123610.

About Route1 Inc.

Route1 Inc. is a world-leader in secure data protection technologies and user authentication for government and enterprise. Route1 solutions enable the workforce to be more productive and more flexible without compromising system access, data-at-rest, or data-in-use. The Company's suite of patented enterprise security solutions combines best-in-class authentication, data security and secure communications with streamlined administration tools, running on a proven, trusted infrastructure. From mobile access to business continuity to best-in-class full system encryption, Route1 offers the most effective, affordable methods to secure the digital fortress, while meeting or exceeding the highest standards for government and industry. Route1 has Full Authority to Operate from the U.S. Department of Defense, the U.S. Department of the Navy, the U.S. Department of the Interior, and other government agencies. The Company is also trusted by enterprise security teams in the banking, healthcare, legal and education sectors, among others. With offices in Washington, D.C., Boca Raton, FL and Toronto, Canada, Route1 serves public and private sector clients around the world. Route1 is listed on the OTCQB in the United States under the symbol ROIUF and in Canada on the TSX Venture Exchange under the symbol ROI.

For more information, visit: www.route1.com.

This news release, required by applicable Canadian laws, does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release contains statements that are not current or historical factual statements that may constitute forward-looking statements including statements with respect to damages and remedies sought by the Company; the success of any litigation commenced by the Company; the typical length of time it takes to resolve a U.S. Patent lawsuit; the ability to fund litigation; anticipated future operating performance and cash revenues; positive EBITDA in 2017; anticipated subscription and material contract renewals; how damages may be awarded or calculated and the quantum that may be awarded; and the future growth of the EMM Market and the trends that influence or may influence that market. These statements are based on certain factors and assumptions including expected financial performance; business prospects; expected renewals of subscriptions and material contracts; technological developments and trends; development activities; the results, timing and outcome of litigation; the validity of the Company's intellectual property and how damages may be awarded and calculated; the impact of a change in the Executive Branch of the United States Government on the past practices, policies and actions of U.S. government agencies and their Chief Information Officers and how the transition is implemented; and like matters. While Route1 Inc. considers these factors and assumptions to be reasonable, based on information currently available, they may prove to be incorrect. These statements involve risks and uncertainties, including but not limited to the risk factors described in reporting documents filed by the Company. Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, except as required by law. Except as otherwise specified, estimates used in this news release are from Company sources.

This news release contains information derived from statistical data, market research and industry forecasts obtained or based on third party publications or based on estimates derived from such publication. Industry publications and reports generally indicate that they have obtained their information from sources believed to be reliable, but do not guarantee the accuracy and completeness of their information. None of the authors of such publications has provided any form of consultation, advice or counsel regarding any aspect of, or is in any way whatsoever associated with, the Company or its operations.

While management believes the third party publications relied upon to be reliable, market and industry data are subject to variations and cannot be verified due to limits on the availability and reliability of data inputs, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical or other survey. Accordingly, the accuracy, currency and completeness of this information cannot be guaranteed. The Company has not independently verified any of the market data included in this news release or the underlying assumptions relied upon by the third parties who prepared such data.

© 2017 Route1 Inc. All rights reserved. No part of this document may be reproduced, transmitted or otherwise used in whole or in part or by any means without prior written consent of Route1 Inc. See https://www.route1.com/terms-of-use.html for notice of Route1's intellectual property.

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