Ruling: infringement of AMO found 'willful'

February 1, 2006

Fort Worth, TX—Alcon Inc. is disputing a judge's finding that the company intentionally copied aspects of Advanced Medical Optics (AMO) Inc.'s Sovereign phacoemulsification machine and says it will appeal.

Fort Worth, TX-Alcon Inc. is disputing a judge's finding that the company intentionally copied aspects of Advanced Medical Optics (AMO) Inc.'s Sovereign phacoemulsification machine and says it will appeal.

The ruling, issued Dec. 16 in the U.S. District Court for the District of Delaware, upheld a jury's decision in May 2005 and awarded AMO $213.9 million in damages plus attorneys' fees. The damages were originally estimated at $94.8 million for lost profits, but lowered to $71.3 million after the judge said AMO did not sufficiently mark its patents on the equipment. However, the judge subsequently tripled the damages because, the judge said, Alcon deliberately copied AMO's patented technology with occlusion features on its Infiniti Vision System and the Advantec and Everest software upgrades to the Legacy system.

"Alcon not only had access to AMO's Sovereign machine, it prepared reports on the Sovereign's operation, photographed the fluidics system, and changed its own fluidics design after viewing the Sovereign," the judge wrote in a 26-page decision. "This evidence of copying, which supported the jury's finding of willfulness, also supports an enhanced damages award."

Doug MacHatton, Alcon's vice president, investor relations and strategic corporate communications, said the company did not deliberately copy AMO's design and it believes strongly in its case.

"We believe we did not infringe," MacHatton said. "We believe we have a number of grounds to appeal. We look forward to pursuing that appeal."

However, Russ Trenary, one of AMO's corporate vice presidents and the chief marketing officer, said trial evidence showed Alcon's engineering drawings for the Infiniti changed significantly after its designers examined AMO's Sovereign machine.

"Alcon (officials) knew what they were doing. They copied those patents on purpose," Trenary said. "It wasn't just willful (infringement), it was obviously willful."

The award was based on Alcon's $1.5 billion in sales of cataract surgery products for 2004-including $30 million in U.S. sales of the Infiniti and $60 million worldwide.

Although the judge granted AMO's motion for an injunction, the court stayed that injunction until the appeal can be heard. Therefore, the judge will allow Alcon to continue to sell its Infiniti systems and fluid management system cassettes during the appeal. New and existing customers will be able to use the systems for the life of the equipment, regardless of the outcome.

MacHatton said, as a precaution, Alcon engineers are working to redesign the cassette for availability in the first half of 2006.

"We have to plan for the possibility that we would have to have an alternate design to the cassette, so we are moving forward with that," MacHatton said. "Given that the judge has stayed the injunction, it gives us sufficient time to develop and make the transition when it's appropriate."

The fact that the judge tripled the damages sends a signal to other companies about the severity of infringement, Trenary said.

"But this wasn't about something happening serendipitously or by accident," he said. "This is about a company who liked what they saw in our technology, they copied it, and they got caught."