Alcon may pay $95 million in dispute over phaco patents

June 15, 2005

Santa Ana, CA—A jury has ordered Alcon Laboratories Inc. to pay Advanced Medical Optics Inc. (AMO) $94.8 million for what it found to be willful infringement of two patents for phacoemulsification equipment used during cataract surgery.

Santa Ana, CA-A jury has ordered Alcon Laboratories Inc. to pay Advanced Medical Optics Inc. (AMO) $94.8 million for what it found to be willful infringement of two patents for phacoemulsification equipment used during cataract surgery.

In its May 6 verdict, the jury in the U.S. District Court for the District of Delaware said Alcon had used patented information relating to the occlusion mode on Alcon's Infiniti Vision System. It also said Alcon violated patents for the fluidics management system on the Infiniti and the Series 20000 AdvanTec and Everest software upgrades to the Legacy phaco system.

With this ruling in hand, AMO will seek a permanent injunction to block Alcon's sales of these devices with the disputed features, said Sheree Aronson, vice president of investor relations and corporate communications, AMO. And, because the jury determined the infringement to be "willful," the judge could alter the amount of damages, Aronson said.

"We remain confident that when the matter is further reviewed, the court will find that Alcon does not infringe and owes no damages," she said.

The verdict covered "only certain features" of the Infiniti and the AdvanTec and Everest software upgrades to the Legacy, the statement noted. Doug MacHatton, vice president of investor relations and strategic corporate communications, Alcon, said the company would have no further comment.

AMO has sought $161 million in lost profits and a "reasonable" royalty, Aronson said. In its verdict, the jury awarded AMO $45.7 million for lost profits related to the occlusion mode on the Infiniti and Legacy systems, and $6.5 million for lost profits related to the fluidics management technology on the Infiniti. The jury also ordered Alcon to pay $42.6 million in royalty fees related to the occlusion mode.

"We don't know how the jury determined its award," AMO's Aronson said. She said she did not know the number of Infiniti and Legacy machines Alcon sold with this disputed technology.

"Alcon holds a very large position in the market, so you can assume it's a sizeable number," she said.

The occlusion mode on AMO's Sovereign phaco provides an automatic, safe, and cool means of clearing occlusions at the phaco tip by modulating power down when the tip is occluded and flow is reduced. The occlusion technology was part of the Sovereign machine when it was introduced in 1999 and upgraded with the WhiteStar technology in 2002. Alcon added the occlusion mode to its Legacy as part of the AdvanTec upgrade package in 2001.

The fluidics system (also part of the Sovereign) ensures that air is purged from the aspiration line of the phaco system for a more stable vacuum pressure and an efficient procedure. The technology was developed at Allergan before AMO spun off as an independent company in 2002.

Alcon noted in its prepared statement that, although it expects the verdict to be set aside, it had already planned to remove the occlusion power management feature "because few, if any, of its customers actually used it."