Over the past two-and-a-half years, the firm has spent $2 million on patent litigation and contingency fees and reaped $4.5 million in patent-related revenues, dwarfing the $1.2 million it generated through sales of its products.

Like many patent attorneys, the firm's outside counsel, Anton Handal, has been keeping an eye on the case ofMedtronic v. Boston Scientific, which went before the Supreme Court last month and could potentially shift the burden of proof in patent-related declaratory judgments from the patent holder to the licensee.

Handal, who heads the downtown law firm Handal & Associates, does not believe that Medtronic will have much impact on E-Digital (OTC: EDIG) , since the vast majority of its lawsuits involve companies that don't have licenses with the firm.

"I don't know what the Supreme Court will say, but the most that this is likely to do in the long run is make companies hire some smart lawyers to rewrite or modify their licensing agreements," he said. "I don't think it will affect court cases as much as the way licensing agreements are written."

When Medtronic's attorney, Seth Waxman, argued the case before the Supreme Court last month, he essentially argued the same thing. He suggested that patent owners could add clauses to their licensing agreements to make the filing of a declaratory judgment action a breach of contract or to would raise the royalty rate if an accused infringer seeks a declaratory judgment.

Companies like E-Digital are experiencing more significant effects from the growing impact of the 17-year-old case ofMarkman v. Westview Instruments Inc., which held that the interpretation of patent claims was a matter of law to be determined by judges rather than a matter of fact to be decided by juries.

A growing number of jurisdictions now hold "Markman hearings" before the presiding judge even before the jury trial begins — and cases are increasingly settled once the judge has rendered his opinion.

In August, U.S. District Judge Dana Sabraw in San Diego sharply limited E-Digital from suing on one of its patents, relying on a Markman hearing from Colorado that held that "fairness and public policy" required narrowing the company's interpretations of one of its key patents.

E-Digital's history dates back to 1988, when it was known as Norris Corp. In 1996, it developed the technology that is at the heart of most of its suits: a portfolio of five patents known collectively as Flash-R, which the company claims was the first digital voice recorder with a removable flash memory. For several years, the company had one paying customer, Lanier, which used its technology in a portable dictation device.

But over the past 16 years, the company has sued a wide variety of companies, charging that the Flashback technology is at the root of such products as smartphones and tablets, which weren't even on the drawing board when Flashback was developed.

"Although the patents were issued long ago and the scope of products has changed, much of the underlying technology remains the same," Hallan said.

After hiring Hallan's firm in September 2012, the company filed 21 suits in federal court in San Diego naming 100 companies as patent infringers, ranging from technology giants like AT&T (NYSE: T), Motorola (NYSE: MSI), Apple(Nasdaq: AAPL) and Verizon (NYSE: VZ) to the retail chains that sell their products, like Best-Buy (NYSE: BBY),Sears (Nasdaq: SHLD), Wal-Mart (NYSE: WMT) and Target (NYSE: TGT).

Hallan says that E-Digital is no patent troll, referring to firms that make money by scooping up existing patents and then suing users for infringement.

"E-Digital is a practicing entity that has its own products and is continuing to develop new technology," he said.

Critics say that the accused infringers often settle with E-Digital rather than going through costly investigations and complicated trials to determine whether they are actually using its technology.

Although the company does make revenues from product sales — notably its eVu in-flight entertainment systems for airlines — the bulk of its revenues typically come from Flash-R litigation.

And now that airline passengers are bringing their own entertainment, demand for eVu is dropping sharply. E-Digital's non-litigation revenues dropped from $627,000 in fiscal 2012 to $431,000 in fiscal 2013 to $124,275 in the first half of fiscal 2013.

But the patent-related revenues have been iffy, too. In fiscal 2012, the company hit the jackpot with a string of settlements with such companies as Samsung (OTC: SSNLF), Panasonic (OTC: PCFRY) and Canon (NYSE: CAJ), totaling $4.1 million, including $1.3 million in contingent legal fees for its then-attorneys.

In fiscal 2013, however, the firm only made $11,000 in patent-related revenues, bouncing back to $426,275 during the first half of fiscal 2014, ended Sept. 30.

Over the past two months, however, several E.Digital suits have been dismissed or settled as Judge Sabraw continues to rely on the Markman hearing from Colorado, which limited one of the key Flash-R claims to devices that use flash memory alone, rather than RAM or other memory systems.

The firm is appealing Sabraw's decision, arguing that the facts in the recent San Diego cases differ from those in Colorado.

In the meantime, Fred Falk, E.Digital's president and CEO, says the firm is trying to develop new business through its patented Nunchi and MicroSignet technologies, used for mobile phones, communications networks and cloud computing. Falk said E.Digital's lawsuits "have created an awareness in the industries" of the firm's newer patents.

As far as the other patent litigation goes, "our future success will be determined to some degree by factors out of our control, such as Markman and other court rulings," E-Digital said in its fiscal 2013 financial report.

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