Fron HQ:
- We feel strongly that this U.K. ruling is not a reliable indicator of what
will happen in the U.S. First, patent laws differ by country, and patent rulings
by U.K. courts in particular do not generally create strong precedents in other
European countries or in the U.S. To cite a particular example which applies
here, a key VISX patent was found by the U.K. court to be invalid because there
may have been a public disclosure of the covered invention about a month prior
to the filing of the patent. In Europe, a patent must be filed within one month
after the first public disclosure, but in the U.S., there is a one year "grace
period." Thus, in the U.S., Nidek would not benefit from this technicality.
- Second, the patents themselves differ by country, even when much the same
technology which is covered. Many of VISX's strongest patents in the U.S. are
method patents, which are not even applicable in most other countries.
- We do expect Nidek to receive FDA approval this quarter and to begin marketing
in the U.S. without a license from VISX and without charging a procedure fee to
its customers. We also believe that VISX may be able to obtain a preliminary
injunction against Nidek, which would be a huge victory for VISX. If VISX is not
able to take Nidek off the market right away, VISX will have to convince
potential Nidek customers that the risk of treble damages due to willful
infringement is too great to justify the purchase of a Nidek laser without a
VISX license. At stake is VISX's ability to maintain or grow its market share
and to charge a $250 fee per procedure in a market where a competitor is not
charging a per-procedure fee at all.
- We believe that VISX has a broad and deep patent portfolio which should
position the company well with respect to new competitors in the U.S., such as
Nidek. However, we acknowledge that the controversy which will result from both
Nidek's U.S. approval and the start of the FTC's hearing regarding allegations
of patent fraud by VISX could make for an uncertain climate for the stock over
the near term.
- ecommendation: We maintain our Strong Buy rating on VISX stock based on
the belief that the company will prevail in the patent-related issues at hand.
We anticipate that dips like the one we saw yesterday, if based on confusion
over complex patent issues, could create buying opportunities.
VISX, Inc. develops, manufactures, and markets excimer lasers for the correction
of refractive disorders of the eye, such as nearsightedness and astigmatism.
The company owns the most fundamental intellectual property in the industry, is
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