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Cochlear’s (ASX:COH) US$75 million lawsuit update

Cochlear (ASX: COH) has revealed an update about the lawsuit it’s facing in the US. It has announced a US$75 million settlement.

Cochlear’s lawsuit

Cochlear is currently in the US courts fighting a lawsuit about patent infringement.

Today the hearing device business announced that it has settled the claims for prejudgement interest and attorneys’ fees by the Alfred E. Mann Foundation for Scientific Research (AMF) and Advanced Bionics (AB) for US$75 million.

The settlement is conditional upon the outcome of an appeal by Cochlear against the US Supreme Court judgement of US$280 million in patent infringement damages and post judgement interest against Cochlear and its US subsidiary. Cochlear will file its appeal by 15 September 2020 at the latest.

Until the appeal is outcome is known, Cochlear has agreed to deposit US$75 million into an escrow account. If Cochlear’s appeal is unsuccessful then the money will be paid AMF and AB and the settlement will come final.

If Cochlear’s appeal is successful then they money will be returned to Cochlear and there will be a new trial to decide the amount of damages.

Cochlear will recognise this provision for settlement liability and legal expenses will be recognised in the FY20 accounts.

Clearly Cochlear and its shareholders will be hoping that it’s successful with the appeal. Patents are important and this law case could have a big effect on the FY20 and FY21 result. Putting this case aside, Cochlear’s price/earnings ratio looks too high with its current (low) growth rate for me to want to invest. I would prefer to buy other ASX growth shares.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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