elc@well.sf.ca.us (Eric L. Cook) (04/24/91)
EVEREX TO APPEAL HAYES PATENT DECISION
Fremont, California -- April 23, 1991 -- Everex Systems,
Inc. (NASDAQ/NMS:EVRX) announced that the second phase of the
patent trial of Hayes Microcomputer Products v. Everex Systems,
Inc., Ven-Tel, Inc., and Omnitel, Inc., ended today with the
resolution of post-trial motions by the U.S. District Court Judge
Samuel Conti.
Everex submitted post-trial motions requesting that judgment
be entered in its favor notwithstanding the jury verdict
previously entered upholding the disputed patent, on the grounds
that the evidence at trial did not support the jury verdict and
in fact showed, as a matter of law, that the patent is not valid.
Judge Conti declined to overturn the verdict. The judge
also granted Hayes' request to enhance the damages awarded by the
jury. While Hayes sought to have the damages trebled, this motion
was denied and damages were instead doubled, bringing the total
award, plus prejudgment interest, to approximately $3.4 million.
Judge Conti also issued an injunction to prevent further
sales of Everex products which infringe the so-called
"Heatherington" patent. However, the Judge immediately stayed
the injunction, pending appeal. The Judge explained that should
the appeal be successful, an injunction now would have done
irreparable harm to the defendants. Instead, Judge Conti
instructed the defendants to set up an escrow account to hold
future royalty payments, based on a 1.75% royalty rate. Hayes'
request for an enhanced royalty rate and a minimum royalty during
the injunction period was also denied.
Steve Hui, Chairman and Chief Executive Officer of Everex,
expressed satisfaction with the judge's decisions. "While we are
disappointed that the judge failed to overturn the verdict, we
are pleased that our customers will experience no inconvenience.
We will continue to ship modems as usual as this matter works its
way through the Courts. We are confident that we will prevail on
Appeal."
The case involves a dispute over U.S. Patent No. 4,549,302,
issued to Hayes' co-founder, Dale A. Heatherington, on October
22, 1985. The patent relates to the implementation of an "escape
sequence" command utilized in most modems today. The defendants,
including Everex, have asserted the generally held industry
position that the patent is invalid. The jury determined that
three of the five claims of the patent were infringed by all
defendants. No infringement was found as to two claims of the
Heatherington patent.
Everex continues to believe, based on the advice of its
patent counsel, that the patent is invalid and intends to appeal
the case in the Court of Appeals for the Federal Circuit ("CAFC")
which hears all patent litigation appeals. The Company believes
that the appellate courts, based on the evidence established at
trial, will ultimately find the patent invalid.
If the judgment is ultimately upheld on appeal, Everex would
be liable to Hayes for past royalties of $1,614,839, which
represents 1.75% on all modem sales of Everex from October 1985
to January 1991, plus damages of $1.6 million and prejudgment
interest of approximately $185,000, and for prospective royalties
on future sales. Everex has already provided contingent reserves
in the amount of $2 million in the event the appeal is not
successful.
Everex Systems, Inc., a computer industry leader
headquartered in Fremont, California, designs, manufactures and
supports a complete family of personal computers and peripherals.
Everex products are distributed through a worldwide dealer and
VAR network. Everex stock is traded on the National Market System
under the NASDAQ symbol EVRX.
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