The Cochlear Limited (ASX: COH) share price is pushing higher today despite a major announcement this morning.
At the time of writing the hearings solutions company's shares are up over 1% to $176.57.
What did Cochlear announce?
This morning Cochlear provided an update on its court battle with Alfred E. Mann Foundation (AMF) for Scientific Research and Advanced Bionics (AB).
In November 2018 Cochlear revealed that the United States District Court in Los Angeles ruled against it in the patent infringement lawsuit by AMF and AB. Damages totalling approximately US$268 million were awarded to the two parties. The company appealed this decision soon after.
However, overnight the United States Court of Appeals for the Federal Circuit in Washington D.C. affirmed the previous decision and ordered the company to pay US$268 million of damages to AMF and AB.
Cochlear's CEO and President, Dig Howitt, was disappointed with the decision.
He said: "This case relates to two patents that are long expired. The Court invalidated the first patent and the remaining patent was much narrower in scope. We believe the amount of damages awarded is out of proportion with the limited application of the patented feature. We are very disappointed with this decision, but inflated damages awards are a risk of patent disputes in the US."
What now?
Cochlear advised that it will now seek an en banc review by the full Court of Appeals in a petition for a rehearing.
If the petition is unsuccessful and the Judgment amount and post judgment interest is paid, the insurance bond of US$335 million to secure the Judgment will be returned to Cochlear. The company has committed bank loan facilities available to fund this Judgment.
In addition to this, the company revealed that a decision in the US District Court is still pending on AMF and AB's application for prejudgment interest of US$123 million and attorney's fees of US$15 million.
Management has opposed both applications and the calculation methodology. However, it notes that there is significant uncertainty on whether prejudgment interest and/or costs will be awarded and the amount of any award and therefore this exposure is being treated as a contingent liability.
One positive is that the patent at issue in the litigation has now expired, so the Judgment will not disrupt Cochlear's business or customers in the United States.
The company also advised that it has the cash required to fund its business operations. Mr Howitt concluded: "In determining the cash needs for the business over the coming months, Cochlear had factored in this adverse judgment."
Alfred Mann Foundation response.
AMF's CEO, John Petrovich, was pleased with the court's decision and hailed it as a "great outcome."
Mr Petrovich commented: "We are gratified at the speedy disposition of this matter by the Federal Circuit. We felt confident in our position going into the appeal, and now we see that this confidence was justified."
"We will be working with our legal team over the next several days to determine next steps. I would like to thank the teams at AMF and Advanced Bionics for their support throughout this litigation, as well as a big thanks to our legal counsel, Morgan Lewis."
