Turtle Beach Signals Intellectual Property Fight, New Gaming License Risk
Company targeted in IP infringement action.
March 12, 2021
Turtle Beach Corporation (HEAR), a seller of gaming headset solutions, computer accessories, and microphones, experienced a surge in demand during the global pandemic. Not only did the gaming market boom, the work and learn-from-home trends resulted in HEAR’s net income more than doubling from the prior year.

The historic year appears to have caught the attention of third-parties and competitors that believe Turtle Beach has stolen their works or inventions. In its 2019 10-K, Turtle Beach offered a boilerplate warning on IP infringement:

“Although we do not believe that our products infringe the proprietary rights of any third parties, there can be no assurance that infringement or other legal claims will not be asserted against us or that we will not be found to infringe the intellectual property rights of others.”

In its 2020 10-K, Turtle Beach reveals its warning from the prior year has come to fruition:

“Although we do not believe that our products infringe the proprietary rights of any third parties, we have received notices of alleged infringement in the past and there can be no assurance that infringement or other legal claims will not be asserted against us in the future or that we will not be found to infringe the intellectual property rights of others.”

Turtle Beach is licensed by Microsoft (MSFT) to sell Xbox platform compatible audio products. The license agreement gives Turtle Beach the right to manufacture, market and sell audio products for the Xbox platform video game console. In its 2019 10-K, Turtle Beach warns Microsoft has the right to terminate the license:

“Should the Xbox One Agreement be terminated, our headset offerings may be limited, thereby significantly reducing our revenues.”

In its 2020 10-K, Turtle Beach reiterates the Microsoft termination warning and adds language suggesting another console maker may require a license:

“Should that license be terminated, our headset offerings may be limited, which could significantly reduce our revenues. While Sony does not currently require a license for audio products to be compatible with PlayStation® consoles, they could do so in the future.”
Related: MSFT, SONOS, LOGI, SONY, NTDOY
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