Cutera settles patent litigation with Palomar

Jun 5 2006

Cutera today announced that it has settled all patent infringement lawsuits with Palomar Medical Technologies, Inc.

As part of this transaction, Cutera and Palomar have agreed to refrain from asserting any further patent claims against the other's current product offerings.

Under the terms of the settlement, Cutera will pay Palomar for sales of its systems that contain Nd:YAG- and/or ProWave770 handpieces for hair removal. A one-time estimated payment of $22 million will be paid to Palomar for royalties due on past sales of those systems, accrued interest, penalties and reimbursement of Palomar's legal costs.

The royalty rate for sales of hair-removal-only systems, which represent approximately ten percent of Cutera's current net revenue, will be equal to 7.5% of net sales and that rate will drop to as low as 3.75% for multi-application systems that include hair-removal capability. Products which do not include hair removal capability -- such as Cutera's Solera Titan system, Service and Titan hand-piece refills -- are not subject to any royalties. The Company's blended royalty rate is estimated to equal about 3.5% of Cutera's current revenue, as opposed to about 7.5% of total 2000 revenue.

Kevin Connors, Cutera's president and CEO, commented, "We have been engaged in this litigation since February 2002, and are pleased to get the cost and related distraction behind us. Both the uncertainty associated with a jury trial, and the costly, protracted schedule of a second lawsuit and possible appeals have helped us determine that global resolution of these matters is the best solution. We have shown a commitment to launching innovative applications each year, and any new products that do not include hair-removal capability would not be subject to royalties under this license agreement. With this litigation now behind us, Cutera will be able to better focus its efforts on building a world class organization that offers the broadest range of aesthetic solutions to the professional medical market."