Palomar Medical resolves patent issue with Alma Lasers

Palomar Medical Technologies has announced the resolution of its on- going patent infringement and trade dress infringement lawsuit against Alma Lasers, Inc.

Palomar accused Alma's Harmony, Soprano, Soprano XL and Sonata Systems of infringing U.S. Patent Nos. 5,735,844 and 5,595,568 (the "Patents"). Palomar has an exclusive license to these patents from the General Hospital Corporation in Boston, Massachusetts. Palomar also accused Alma's Harmony System of infringing the distinctive trade dress of Palomar's StarLux System.

Alma has admitted to the infringement, validity and enforceability of the Patents and has agreed not to challenge them in the future. Alma has also agreed to change the trade dress of the Harmony and Aria Systems within the next six to nine months.

Alma will pay Palomar a 9.5% patent royalty plus interest on prior sales of their laser- and lamp-based hair removal systems beginning with their initial sales in 2003 and a 1.5% trade dress fee plus interest on prior sales of their Harmony and Aria systems. Those amounts will be determined based on an audit by an independent auditor that will be conducted over the next few months, and Palomar will recognize those amounts only after they are determined as part of that audit. In addition, Alma will pay Palomar for its legal costs incurred during the lawsuit. From March 28, 2007 through December 31, 2007, Alma will pay Palomar an 8.5% patent royalty and, beginning on January 1, 2008, Alma will pay Palomar a 7.5% patent royalty on future sales of current and any new light-based hair removal systems. The terms are in accordance with Palomar's standard license terms including combination systems that include multiple light sources for hair removal and other applications.

Patricia Davis, Senior Vice President and General Counsel of Palomar, commented, "The resolution of this lawsuit against Alma as well as the resolution last spring of the lawsuits against Cutera demonstrate the strength of Palomar's patent portfolio. As in the past, when forced to litigate, we will seek higher royalties than when competitors take a license on a voluntary basis. As we announced on November 7, 2006, our license agreement with Cynosure was on more favorable terms simply because we were not forced to sue Cynosure prior to executing the license. We have notified our unlicensed competitors that for now Palomar remains willing to offer licenses. Our willingness and the rates of such licenses, however, may change as competitors continue to wait for us to sue them for patent infringement."

Joseph P. Caruso, President and Chief Executive Officer of Palomar, commented, "This favorable resolution with Alma so early in this litigation further substantiates the strength of these patents. Palomar pioneered the cosmetic light-based industry with the first high-powered light-based hair removal system in 1997. Since then, this industry has become one of the fastest-growing segments in the medical industry with hair removal procedures being the most popular cosmetic light based procedure performed today. Many companies have taken advantage of this high growth by offering products covered by patents controlled by Palomar, and we intend to continue to enforce our intellectual property. This strategy provides significant financial benefit to Palomar and its shareholders."

Mr. Caruso continued, "We were also able to force Alma to change the look of their products on a worldwide basis. Over the past few years the market has confused their products with ours and Alma has been able to sell their product based on the reputation of Palomar. Our sales and marketing group will now be free to address the growing market for light-based aesthetic products without this confusion."

Under Palomar's license agreement with the General Hospital Corporation, Palomar will pay to the General Hospital Corporation 40% of all payments from Alma excluding Palomar's legal costs and the trade dress fees.