February 21, 2005, Wayland, MA--An arbitrator has ordered medical-laser manufacturer Candela Corporation to pay additional royalties to the the Regents of the University of California. Candela licenses certain patent rights from the Regents relating to technology incorporated in Candela's dynamic cooling device (DCD).

The arbitrator found in favor of the Regents as to the primary issue in dispute: that Candela is obligated to pay royalties on the good faith list prices of its Sclero, SPTL, GentleLASE and GentleYAG laser systems when those systems are sold with DCDs, and not just on the good-faith list prices of the DCDs for sale with those systems. The arbitrator denied the Regents' request for the right to declare a forfeiture of Candela's license with the Regents, and found in Candela's favor on the remaining monetary disputes concerning Candela's past royalty payments to the Regents.

"We are disappointed with the outcome of the arbitrator's interim decision, but we observe that the arbitrator made a finding that Candela acted in good faith with respect to its actions," said Gerard Puorro, president and CEO of Candela. "Moreover, while Candela will have to pay higher royalties to The Regents going forward, The Regents were unsuccessful in their attempt to terminate our exclusive license."

The arbitrator will issue a final decision with actual damages after further submissions by the parties as to calculation of damages. Because the Regents prevailed on the primary issue in dispute, as part of the damages award Candela will be obligated to reimburse the Regents for its costs and fees associated with the arbitration, as well as the amount of unpaid royalties computed in accordance with the final decision.

The Regents have asserted past-due royalty damages of $3.5 million, plus interest, through the quarter ended July 3, 2004; during the arbitration, Candela deposited approximately $3.4 million into an interest-bearing escrow fund pending the outcome of the arbitration. Candela will take a charge for the related expense in the fiscal quarter in which the arbitrator issues his final decision. As a result of the arbitrator's interim ruling, Candela will incur royalty obligations to The Regents on future sales of the DCD at a higher royalty rate than it has recognized on DCD sales over the past few years.

Mon Feb 21 10:28:00 CST 2005