Cochlear penalised $372 million in US patent infringement case.

Hearing implant maker Cochlear (ASX:COH) today (November 5) announced a US court had made a massive patent infringement order against it in the latest round of a long-running patent infringement case in the United States.

A US court awarded the Alfred E. Mann Foundation for Scientific Research (AMF) and Advanced Bionics LLC (AB) damages of US$268 million (AUD$372.3) for infringing what are now long-expired patents.

Cochlear’s CEO and President Dig Howitt said: “We are surprised by the decision and do not agree with the reasons given by the judge.

“We will continue to defend this case and the next step in the litigation process is our appeal to the U.S. Court of Appeals.

“The case is likely to take years to finally resolve.”

Howitt is a member of the Australian Manufacturing Forum.

Cochlear said it would review a provision it had made in its accounts of Aud$21.3 million to cover the court judgement while it continues to fight the case.

The patent battle has been in court since 2014 when a jury found Cochlear had infringed two of AMF and AB’s patents.

The US District Court subsequently found that three of the patent claims were invalid, a judgement that was again amended by the US Court of Appeals in 2016.

The latest hearing before the District Court again revised the judgements, upheld judgement of infringement, and awarded AMF and AB US$268 million.

The company said in a statement to the ASX that a decision on the appeal is expected in approximately two years.

“To stay the execution of the judgement pending the outcome of the appeal, Cochlear will need to lodge a USD 335 million insurance bond with the Court within 14 days of the entry of judgement to secure the judgement amount, and any interest and costs.

“Cochlear has debt and other facilities available to cover
the amount of the insurance bond.”

The company is conducting a review of its likely ultimate liability and will update the market at a later date.

As the patents have expired, the judgement has no implications for current sales of Cochlear’s market-leading implants.

While Cochlear has financial coverage for the potential penalties in this case, a loss of such magnitude would be significant for the Melbourne-based firm.

Read Cochlear’s ASX release here.
Picture: Cochlear/Cochlear implant.
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