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SURG - Court Rules Synergetics' Current Connector Design Does Not Infringe Iridex Patent
Wednesday February 28, 8:23 am ET


O'FALLON, Mo.--(BUSINESS WIRE)--Synergetics provides the following update to its shareholders on the status of the pending Iridex (NASDAQ: IRIX - News) patent infringement lawsuit, Synergetics USA, Inc. (NASDAQ: SURG - News).



In mid-2006, Synergetics switched to a new and current connector design based on infringement arguments made by Iridex. The Court issued an order today that has cleared Synergetics' current connector design. This ruling is significant in two respects. It caps Synergetics' potential liability to sales primarily predating mid-2006 and it allows Synergetics to continue selling probes and related products for use on Iridex lasers with the new connector system without threat of infringement under the Court's order.

The Court has also ruled that Synergetics' old product design infringes some claims of the Iridex patent, but not all. Thus, the broad issue remaining in the case is whether Iridex is entitled to any damages for the use of the old connector design. Synergetics still has what it believes to be substantial defenses to the damage claim, including defenses which would preclude Iridex from obtaining any damages or which would at least drastically reduce the amount of damages that Iridex could obtain.

These defenses include "laches" and "estoppel." 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 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 back 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.

Synergetics also seeks to correct what it believes are several inaccuracies contained in the Iridex announcement relating to the Court's rulings of February 27, 2007. Nothing in the Court's rulings make the prospect of an injunction more likely to be granted as Iridex claimed in its release. In fact, the opposite is true. There is no chance under the Court's order that Synergetics could be enjoined from using its current connector system. Thus, Synergetics will be able to continue to sell its product lines with the current connector system moving forward. The vast majority of Synergetics' current laser probe sales utilize the current connector system. Likewise, the Court's ruling can only potentially affect one aspect of Synergetics' new motion for an antitrust counterclaim, but has no effect on that portion of the claim that relates to laches and estoppel fraud. Iridex has also misrepresented in its announcement that the issues of laches and estoppel may not be heard at trial. Those issues will indeed be heard and resolved at trial. (Case Number 4:05-cv-01916-CDP, Document #247 in the pleadings and #282 on the website.)

Synergetics also disagrees with Iridex's statement that it is more likely to prevail on the issue of treble damages for willful infringement. Synergetics obtained a competent opinion of counsel prior to selling its old connector product in 1999 and still believes that the non-infringement opinion is valid. Iridex has internal emails that confirm that even it did not think that Synergetics' old connector design infringed. The fact that Iridex knew about Synergetics' old connector design but did not sue for over six years underscores that Iridex had serious doubts about its infringement claim. Given how hard fought these issues have been, Synergetics believes it highly unlikely that it could be found a willful infringer or that damages would be increased given the circumstances of this case.

Finally, the Court has not ruled on the summary judgment briefing that encompasses the issue of invalidity. The invalidity issues also offer another potential complete defense to Iridex's claim for damages. The primary basis of Synergetics' invalidity defense rests on a pre-existing patent owned by a competitor that shows the essential features of Iridex's patent claims, namely the use of a resistor to encode attached instruments to the laser.

"Overall, I am pleased with today's developments," said Gregg D. Scheller, President and Chief Executive Officer. "The Judge's 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."

Mr. Scheller continued, "Synergetics may or may not appear before the jury as an 'adjudicated infringer.' There remains an issue of patent validity in front of the court. If we do appear as such, our strong defenses of laches and estoppel remain. The Judge recently ruled against both parties on summary judgment on laches and estoppel and directed this issue to trial."

"Synergetics views the Court's ruling as a significant victory," said Rudy Telscher, the Company's intellectual property attorney with Harness, Dickey and Pierce. "The Court's ruling removes any chance of an injunction against the sale of Synergetics probes and related products moving forward and limits any claim by Iridex for damages to products sold using the old connector design, subject only of course to either party's rights to appeal the decision. Synergetics still has substantial defenses to any damage claims and believes that it will either be liable to Iridex for no damages or damages far below what Iridex seeks. Synergetics claims against Iridex are still in the case and Synergetics believes that it will still obtain damages against Iridex for false advertising, defamation, and injurious falsehood. Synergetics also still has antitrust claims pending before the court as well, at least a portion of which is not affected by the Court's ruling."

About Synergetics USA, Inc.

Synergetics USA, Inc. resulted from the September 2005 combination of Valley Forge Scientific Corp. and Synergetics, Inc., bringing together their respective unique capabilities in bipolar electrosurgical generators and design, and manufacture of microsurgical hand instruments. Synergetics USA, Inc. designs, manufactures and markets medical devices for use primarily in ophthalmic surgery and neurosurgery and for other healthcare applications. Its products are designed and manufactured to support micro or minimally invasive surgical procedures. In addition to its surgical devices and equipment, it designs and manufactures disposable and non-disposable supplies and accessories for use with such devices and equipment. It also manufactures and sells bipolar electrosurgical generators and other generators, based on its DualWave(TM) technology, and complementary instrumentation and disposable products for use in neurosurgery, spine surgery, pain control and in dental applications. Synergetics sells its products primarily to hospitals, clinics and surgeons in approximately 70 countries.

Forward-Looking Statements

Some statements in this release may be "forward-looking statements" for the purposes of the Private Securities Litigation Reform Act of 1995. In some cases forward-looking statements can be identified by words such as "believe," "expect," "anticipate," "plan," "potential," "continue" or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important facts that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These facts, risks and uncertainties are discussed in our Annual Report on Form 10-K for the year ended July 31, 2006, as updated from time to time in our filings with the Securities and Exchange Commission.



Contact:
Synergetics USA, Inc.
Pamela G. Boone, 636-939-5100
Executive Vice President & CFO
http://www.synergeticsusa.com

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Source: Synergetics USA, Inc.