MedWatch

Hearing aid giants in courtroom stand-off

The stage has been set for a global legal showdown between the two Danish hearing devices groups GN ReSound and Oticon following yesterday’s verdict in the Danish Maritime and Commercial High Court.

The lines have been drawn for a massive legal showdown between the two Danish hearing devices companies Oticon, owned by the William Demant group, and GN ReSound, which is a part of GN Store Nord, following a verdict Tuesday from the Maritime and Commercial High Court in Denmark.

Oticon had tried to block its rival from marketing and distributing certain products relying on wireless technology, saying these violated patents owned by Oticon. But the court found in favor of GN, ordering Oticon to pay legal costs and damages amounting to DKK 3 million to its rival within the next 14 days.

The court called the dispute “an extraordinarily big case”, and GN had estimated the value loss for the group at around DKK 100 million had the court agreed to block the products.

Not backing down

But Oticon is gearing up for another legal stand-off with GN relating to patent violation, demanding damages and royalties from the sale of a number of hearing devices, including flagship products from GN’s wireless Linx range, Oticon CEO Søren Nielsen tells MedWatch.

“We are now suing on grounds of patent infringement, asking for some form of damages to be paid. It’s the next natural step,” he says.

Although it looks like Oticon has lost the first legal showdown with its rival, the CEO sees Tuesday’s court verdict as a positive for the group.

“The court looked at three things; whether or not our patent was valid – they found that it was – whether or not GN is violating our patent – they found that they are – and then they had to decide on the injunction against GN. We were not successful in securing that, but we won on two out of three points,” Søren Nielsen says.

No patent infringement

The Maritime and Commercial High Court said in its verdict that Oticon had proved beyond reasonable doubt that its patent is valid and that they had also proved beyond reasonable that GN has violated Oticon’s rights, but GN stresses that the case was about a possible injunction and not patent infringement.

“We firmly believe that we are not violating the patent and the Maritime and Commercial High Court is not a patent court. We have believed all along that we don’t infringe on their patent and we have cleared that with the proper authorities. The verdict deals with the legitimacy of an injunction and they thankfully found in our favor on that,” GN ReSound’s CEO, Anders Hedegaard, says, adding:

“We believe the case is unjust and that it should have never gone to court, so we expected to see the verdict we have now received. What’s important for us is that this case is now hopefully behind us, and that we don’t have to concern ourselves with this nonsense anymore. Oticon is kind of wasting our time with this.”

Should acknowledge invention

But from the look of things, Anders Hedegaard and GN are in for the long haul, legally speaking.

“It’s an important case, because we have made the invention, and we firmly believe that GN benefits greatly from it. Consequently, we obviously feel we should be rewarded for the rights we now hold,” Oticon’s Søren Nielsen explains.

“Hopefully a judge will reach the same conclusions and find that we hold a valid patent. It has to be tried again, but we feel confident,” he adds.

Søren Nielsen does not wish to comment on what kind of damages Oticon will seek from its domestic rival, but it would typically be a percentage of GN’s revenue from the relevant products, just as they might strike a deal concerning future sales.

Should step back

Søren Nielsen has announced they will launch a new case. What do you have to say to that?

“I think they should take a step back. We won the case they had launched and they were ordered to pay damages to us of DKK 3 million. We cannot fathom their reaction. First of all, we don’t believe their patent is valid as such, as we are talking about a technology solution that has been used for decades. So we are a bit surprised by the reaction. Moreover, we have thought all along that our case was solid, a notion the court supported,” Anders Hedegaard says, adding:

“But it often happens when someone hasn’t really won. You also see it with politicians when they lose seven mandates, but had expected to lose 15, they will act like they won the election. The fact is that we won the trial and we still believe their patent is invalid.”

So the fact that they want to take you to court doesn’t change your attitude about any of this?

“No, not at all; we remain calm. We had some talks with them early on about the possibility of striking a deal to avoid the whole thing coming to a head, and they refused. Then all of a sudden they sued us and now they want to sue again after losing the first time,” the GN chief says.

Offered royalties

What kind of deals were on the table before it came to this?

“Of course we had an early dialogue about an amicable deal, so we could avoid additional debate. That’s often how it works. You have to be aware that for technology-based companies there are often various disputes concerning patents and technology development. It’s normal and has been for many years in technology-leading industries. Then you engage in talks and we even offered them royalties to make ends meet. They didn’t want to go along and have now started a case,” he says, adding:

“We don’t believe their patent is valid. It’s back from the 40s and we don’t believe our technology matches up with the technology their patent pertains to either.”

What if they call again and open the door for a dialogue. Would you be ready to listen to avoid all this? I imagine the public focus annoys you?

“That’s very hypothetical. We are all reasonable people, but for the time being all I have to go by is what Søren told the press. I can only say that we will take it one step at a time, if that’s something he’s considering. We don’t believe he has case,” Anders Hedegaard says in conclusion.

Danish hearing aid giants in global showdown

WD chief: We are in a transition period

Morgan Stanley: Still potential in the GN share

- translated and edited by Martin Havtorn Petersen

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