Jury Awards $6 Million Plus in Avid Pet Microchip Trial; Avid Prevails on Claims of False Advertising and Patent Infringement

SAN DIEGO--()--June 5, 2006--A leading maker of microchips for pets -- Avid Identification Systems, Inc. -- scored a significant litigation victory last week when a jury found two competitors liable for infringing Avid's technology and making false advertising claims that harmed consumers. The jury awarded Avid more than $6 million in the lawsuit against European-based Datamars SA and its wholly owned U.S. subsidiary, Crystal Import Corporation. Avid was represented by Fish & Richardson, with Juanita Brooks as lead counsel.

The jury unanimously found that Datamars and Crystal not only infringed, but willfully infringed three patents held by Avid for its core RFID technology, predominantly used today by Avid for identifying pets and reuniting lost pets with their families.

The jury also found Datamars and Crystal liable for false advertising under the Lanham Act for making false claims about the effectiveness of their ISO products in locating and reuniting lost pets with their owners.

Two other defendants in the lawsuit, Philips Semiconductors Inc. and Philips Semiconductors Manufacturing Inc., settled with Avid during the second day of trial after agreeing to purchase a license to Avid's patents-in-suit. Philips' license does not extend to the pet market.

The products found to infringe Avid's patents include ISO 134.2 kilohertz pet identification microchips and readers, which are manufactured and sold by Datamars and Crystal under the names CrystalTag, iMax and iMax Plus.

Last year, a Superior Court in San Diego, California, stopped Banfield, the Pet Hospital from selling the same ISO microchips due to "the risk of great, irreparable harm for which legal remedies are inadequate, specifically the increased potential for pets to be euthanized while their owners believe them to be safe."

The trial, which was held in U.S District Court, Eastern District of Texas in Marshall, Texas, lasted six days with the jury deliberating for less than five hours before delivering their unanimous decision.

Avid filed the lawsuit in May 2004, alleging that the accused RFID microchips and readers manufactured and distributed by Datamars, Crystal and Philips Semiconductors -- including those used for pets -- infringed three patents held by Avid. Avid holds numerous patents for technology relating to RFID microchips and readers applicable to both industrial identification and animal identification. Avid manufactures and distributes pet identification microchips and readers that operate on a 125 kilohertz frequency, the most commonly used operating system in the U.S.

Additionally, Avid claimed that statements made by Datamars and Crystal in advertising their products were false and harmful to consumers, and Avid sought damages under the Lanham Act. Datamars and Crystal made several false claims in promotional materials including, "if your pet becomes lost, any animal care facility can scan your pet," despite that the majority of scanners in use in shelters in the U.S. were unable to read the Datamars microchips.

The microchips sold by Datamars and Crystal operate on the European ISO technology based on a frequency of 134.2 kilohertz, which is incompatible with the American technology based on 125 kilohertz. In February 2004, when the infringing products were introduced into the U.S., Datamars and Crystal had distributed to shelters nationwide only 600 readers that were capable of reading the ISO microchips. In contrast, Avid and other manufacturers have supplied U.S. shelters and vets with approximately 100,000 readers that can read its 125 kilohertz microchips.

"The infrastructure to read pet microchips and ultimately return pets to their owners must be in place before a different product is introduced," says Dr. Hannis L. Stoddard III, president and founder of Avid as well as a practicing veterinarian and hospital owner. "Consumers trust that microchips will improve the probability of a safe return of lost animals and if a product doesn't do that, pets are put at risk. We expect the jury's verdict to further validate the 125 kilohertz based technology widely and commonly used by animal care providers in the U.S. for pet identification."

Several issues are still pending before the court, including a decision regarding an injunction against Datamars and Crystal that would prevent the companies from selling their infringing products in the U.S. A decision is expected sometime in July.

"A company's patents are assets of great value and must be protected, especially when another company willfully infringes them," says Juanita Brooks, lead trial counsel for Avid. "Pets are an important part of most American families and pet owners must be protected against false advertising particularly when their pets' lives are put at risk. The jury understood the significance of both of these issues and came to a fair and equitable decision." Brooks, a principal with the San Diego office of Fish & Richardson, has more than 25 years litigating high profile complex technology cases and more recently animal wellbeing issues.

Avid Identification Systems, Inc. is headquartered in Norco, California. For more information, visit www.avidid.com.

Fish & Richardson is the country's leading intellectual property, litigation and corporate law firm and has 10 offices throughout the U.S., including San Diego. For more information, visit www.fr.com.

Contacts

Avid Identification Systems, Inc.
Dr. Dan Knox, 314-487-5842
Avidsaveslives@AvidID.com
or
TW2 Marketing
Teresa Warren, 619-582-5750
twarren@tw2marketing.com

Contacts

Avid Identification Systems, Inc.
Dr. Dan Knox, 314-487-5842
Avidsaveslives@AvidID.com
or
TW2 Marketing
Teresa Warren, 619-582-5750
twarren@tw2marketing.com