Varian Medical Systems today is reporting that it has settled patent litigation with the University of Pittsburgh. Varian will pay a lump sum of approximately $35 million to fully settle this matter. The settlement will be largely recorded in the financial results for the company's second and third quarters of fiscal year 2014.
The University of Pittsburgh initiated a patent infringement lawsuit against Varian in 2007 regarding the company's Real-time Position Management™ technology, which is used to account for breathing motion during delivery of radiation therapy. In 2012, the United States District Court for the Western District of Pennsylvania ruled against Varian, ordering payment of approximately $102 million in damages, enhanced damages, interest and fees as well as ongoing royalty payments. Varian challenged that ruling in the United States Court of Appeals for the Federal Circuit, which published its opinion today.
Earlier, during the second quarter of fiscal year 2014, Varian and the University of Pittsburgh reached a settlement agreement that was dependent upon today's ruling from the appeals court. Under this pre-negotiated settlement, Varian will not owe any future royalty payments associated with the sale of Varian products that incorporate the patent at issue. Varian customers will continue to have full use of these products.
Varian is reviewing the accounting treatment of this settlement. A portion of the settlement will be expensed in the second quarter with the balance to be recorded as a prepaid royalty in the third quarter.