Monday, 12 October 2009

Patent litigation and the reporting of forward expectations

Last Friday's Reuters press release, "Australian Appeals Court Lifts Temporary Injunction Against Smith & Nephew Foam Dressing Kit", reports on the announcement by Kinetic Concepts, Inc. that the Full Court of The Federal Court of Australia had lifted a temporary injunction in its patent litigation with Smith & Nephew in a dispute over the latter's sale of foam dressing kits for negative pressure wound therapy in Australia, with the trial of the infringement issue being scheduled for June 2010. KCI is seeking monetary damages and permanent injunctive relief against Smith & Nephew in Australia for the marketing and sale of NPWT dressing kits which KCI believes infringe a patent licensed to KCI from Wake Forest University Health Sciences.

Not just the final result but even the interim stages of a patent dispute are eagerly watched by lawyers, particularly where litigation over the same patent takes place in more than one jurisdiction. These same events are also studied carefully by institutional investors, lenders and competitors who are not actively participating in the dispute. Accordingly, what the parties say -- and how it's reported -- can have a major impact on share price, investor confidence and market credibility.

In this instance KCI's statement was notably upbeat:
"We are looking forward to the trial in June 2010 where the Court will have the opportunity to fully consider our case," said Stephen D. Seidel, KCI`s General Counsel. "We continue to believe that the Smith & Nephew products infringe our IP and should be enjoined in Australia. The intellectual property rights we hold in Australia and elsewhere enable KCI to bring innovative and efficacious healthcare solutions to patients and caregivers around the world."
But Reuters have an eye to their own credibility as well, not to mention any issue that might arise in terms of detrimental reliance upon its press releases. Accordingly the press release concludes with a lengthy caveat of its own, entitled "Forward-Looking Statements". This message reads as follows:

This press release contains forward-looking statements regarding management`s expectations for the outcome of litigation and the company's future plans for the commercialization of new products. Forward-looking statements may contain words such as believes, expects, anticipates, estimates, projects, intends, should, seeks, future, continue, or the negative of such terms, or other comparable terminology. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Additional risks and factors are identified in KCI's filings with the U.S. Securities Exchange Commission (the SEC), including its Annual Report on Form 10-K for the fiscal year ending December 31, 2008 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, which are available on the SEC's Web site at KCI undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise".
Given that the caveat is so much longer and gloomier than the upbeat message it follows, it must be a difficult decision for corporate public relations experts to make as to whether it's better to say nothing at all than to issue a positive statement.

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