Syneron to pay Palomar $31M in patent settlement

16 Sep 2011

Israel-based Syneron and Palomar settled the case just three weeks before it was due to go before a Massachusetts court.

Syneron has agreed to pay Palomar Medical Technologies $31 million in cash and a new royalty agreement to settle a long-running dispute between the two companies over the sale of laser-based systems for hair removal treatment. The case had been due to go before a Massachusetts Court on October 3 before the two parties agreed the settlement.

Palomar agreed to grant Syneron and its subsidiary Candela – which Syneron acquired after the legal dispute began – a non-exclusive worldwide license for professional laser and lamp-based hair removal systems that Palomar had claimed infringed US patents 5,735,844 and 5,595,568.

Syneron must pay Palomar the $31 million by September 19 under that first part of the agreement, while under the terms of a second settlement it will also pay a royalty on future sales of similar home-use systems sold in the US. That basic royalty will be 5%, rising to 6.5% and 7.5% if Syneron reaches certain undisclosed sales milestones.

Palomar had initially licensed the technology from the Massachusetts-based General Hospital Corporation, and will pay GHC 40% of all the payments that it receives from Syneron through the settlement.

Describing the agreement as “mutually beneficial”, Syneron CEO Louis Scafuri said that the company had a strong balance sheet, and that the paid-up license would represent a positive utilization of the cash it has available. According to its most recent set of financial results, Syneron held $63 million in cash and equivalents as of June 30, as well as $16.5 million in short-term bank deposits and a further $118.3 million in liquid marketable securities.

Fast-growing application
According to Palomar CEO Joseph Caruso, hair removal applications have become one of the fastest-growing applications in the medical sector since it first launched a high-power laser system for the application back in 1997, and “the most popular cosmetic light-based procedure performed today”.

In May, Judge Rya Zobel ruled in the Massachusetts District Court in Boston that all but one of Palomar’s twelve initial claims were invalid – in what had appeared to be a significant victory for Candela and its parent firm. The one remaining claim had centered on the manner in which laser light was focused onto a patient’s skin – Candela products had used a convex lens to do this.

And it appears that the strength of that claim was sufficient for Syneron to agree an out-of-court deal. Commenting in a statement issued after the settlement agreement, Palomar’s general counsel Patricia Davis warned: “Licensing these patents to Candela and Syneron further substantiates the strength of these patents. Palomar intends to continue its strategy of vigorously enforcing our [sic] patent position.”

CEO Caruso added: “Our intellectual property strategy has proved to be a valuable asset for our shareholders and we will continue to focus on expanding our intellectual property in the future.”