A Medical Device Daily

Escalon Medical (Wayne, Pennsylvania) reported that it has entered into an agreement with IntraLase (Irvine, California) to settle all outstanding litigation between them.

IntraLase will make a lump sum payment to Escalon of $9.6 million, with all pending litigation between them dismissed. The payment satisfies all outstanding past, current and future royalties owed or alleged to be owed by IntraLase to Escalon.

They will exchange general releases, and full ownership of all patents and intellectual property formerly licensed to IntraLase from Escalon will be obtained by IntraLase, and all obligations under the parties' license agreement will terminate. Escalon said it licensed its intellectual laser properties to IntraLase in 1997 in exchange for an equity interest in IntraLase as well as royalties on future product sales.

In April 2005, Escalon, which had been a holder of the common stock of IntraLase, demanded to inspect certain of IntraLase's records, suspecting the withholding of royalties. IntraLase rejected the demand, Escalon said.

"We believe the $9.6 million payment will enhance our ability to strategically expand our businesses and also provide the means to selectively pursue opportunities for synergistic growth," said Richard DePiano, CEO and chairman of Escalon.

Escalon said the entire $9.6 million will be recorded as a gain on sale in the current period.

The settlement also marks the end of any future royalty payments to be received under the license agreement, expected to have a material effect on earnings in subsequent periods, partially offset by the elimination of legal fees related to this matter.

"With this settlement our disputes with Escalon are completely resolved," said Robert Palmisano, president/ CEO of IntraLase. "We . . . believe that sole ownership of the Escalon patents will further strengthen our already robust intellectual property portfolio."

Escalon develops ophthalmic diagnostic, surgical and pharmaceutical products as well as vascular access devices.

IntraLase manufactures a laser, related software and disposable devices used to create a corneal flap, the first step in LASIK surgery. Its lasers also are used for surgeries treating diseased corneas.

Iridex (Mountain View, California) reported that the Hon. Catherine Perry, U.S. District Judge, granted summary judgment to Iridex on its claim that Synergetics' (O'Fallon, Missouri) adapter-based connector systems infringe 12 separate claims of Iridex's Patent No. 5,085,492.

The suit was filed in 2005 and is scheduled for a jury trial on April 16. At that trial, the jury will be asked to award damages and decide whether Synergetics' infringement was willful.

Barry Caldwell, president/CEO of Iridex, said, "Due to this ruling, Synergetics will now appear before the jury as an adjudicated infringer. We believe that this ruling means that our requests for triple damages and an injunction are more likely to be granted."

In its order, the court also ruled that Synergetics' new connector system, which Synergetics only introduced after the litigation began, does not infringe. However, Iridex said it expects to prove at trial that this system, which depends on a dangling wire to work on an Iridex laser, is a commercial failure.

The court previously granted summary judgment to Iridex on Synergetics' defense on the doctrine of repair. The court also denied Synergetics' motion for summary judgment on the issues of laches and estoppel. The court held that the jury may not hear arguments about any of these issues. Two summary judgment motions remain for the court to decide.

Under laches, Iridex could only obtain damages from between the time the lawsuit was filed in October 2005 on, but only for sales with the old connector design. Under estoppel, Iridex would be precluded from obtaining any damages.

Synergetics said in a statement that it believes that the court's ruling as to the new connector design further strengthens its position under the doctrines of laches and estoppel because had Iridex brought its suit in 1999 or in the early 2000 timeframe, Synergetics could have switched to its current connector design then and avoided further potential liability. The court has already ruled that a trial must be held on the laches and estoppel issues because facts are in dispute.

"Gregg Scheller, president/CEO of Synergetics, said that the ruling "that our current connector system does not infringe, either literally or under the doctrine of equivalents, ensures our continued presence in the marketplace without interference from Iridex. Any suggestion by Iridex that our current connector is a commercial failure is blatantly false. Tens of thousands of these connectors have been profitably sold into the marketplace. Our revenue numbers have not decreased. We continue to sell this product successfully and are now unencumbered into the future."

Iridex develops laser systems, disposable laser probes and delivery devices to treat eye diseases and skin disorders.

Synergetics develops devices for use in ophthalmic surgery and neurosurgery and other healthcare applications.