Cochlear share price drops following patent infringement case update

The Cochlear Limited (ASX:COH) share price is dropping lower on Monday following an update on its patent infringement case…

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The Cochlear Limited (ASX: COH) share price is edging lower on Monday afternoon following the release of an update on its patent infringement case.

At the time of writing the hearing solutions company's shares are down just over 0.5% to $199.05.

What was in Cochlear's update?

This afternoon Cochlear announced that it has settled the claims for pre-judgement interest and attorney fees by the Alfred E. Mann Foundation for Scientific Research (AMF) and Advanced Bionics (AB).

According to the release, the parties have settled the claims for US$75 million. This is a small win for Cochlear given that AMF and AB were previously seeking pre-judgement interest of US$123 million and attorney fees of $15 million.

Though, this still remains conditional upon the outcome of an appeal by Cochlear to the United States Supreme Court. It is appealing against the judgement of US$280 million in patent infringement damages and post judgement interest against Cochlear and its US subsidiary Cochlear Americas.

What's next?

Cochlear has agreed to file its appeal in the Supreme Court by no later than 15 September 2020.

In the meantime, it has agreed to deposit US$75 million into an escrow account pending the outcome of the appeal.

If Cochlear's Supreme Court appeal is unsuccessful, the monies in the escrow account will be paid to AMF and AB and the settlement will become final.

However, if Cochlear's Supreme Court appeal is successful, the monies in the escrow account will be returned to Cochlear and there may be a new trial to redetermine the quantum of damages.

In accordance with accounting standards, a provision for the settlement liability and associated legal expenses will be recognised in Cochlear's upcoming FY 2020 financial results.

Cochlear is scheduled to release its results on Tuesday morning before holding an analyst call at 10am Eastern time.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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