Jury Finds Against Datamars: Claims of false advertising and patent infringement found valid


June 7, 2006

St. Louis, MO--
Avid Identification Systems, Inc. has won a significant litigation victory in the United States. A jury found that two competitors have infringed on Avid’s technology and had made false advertising claims that harmed consumers. The jury concluded that there was in excess of $6 million in damages caused by European based Datamars SA and its wholly owned U.S. subsidiary, Crystal Import Corporation.

The jury unanimously found that Datamars SA and Crystal Import Corporation 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 re-uniting lost pets with their families. The infringing products include ISO 134.2 kHz pet identification microchips and readers manufactured by Datamars and reported in DVM Magazine as being distributed in the United States by Bayer Health Care, Animal Health Division.

Banfield, the Pet Hospital had previously been enjoined from selling the same ISO products last year by the Superior Court in San Diego, California 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 jury also found Datamars SA and Crystal Import Corporation liable for false advertising under the Lanham Act for making false claims about the effectiveness of their ISO products in locating and returning lost pets with their owners.

During the second day of trial, two other defendants in the lawsuit, Philips Semiconductors Inc. and Philips Semiconductors Manufacturing Inc., settled their case and licensed Avid’s patents in suit for restricted applications (non companion animal).

The trial, which was held in U.S District Court, Eastern District of Texas in Marshall, Texas, lasted six days. The jury of unbiased citizens from varied backgrounds deliberating for less than five hours before delivering their unanimous decisions.

The microchip sold by Datamars SA and Crystal Import Corporation operate on the European ISO technology based on 134.2 kHz, which is not compatible with the American installed base of readers and microchips. In February 2004, when the products were introduced into the U.S., there were only 600 ISO microchip readers at shelters nationwide capable of reading the 65,000 pet microchips sold at the ISO 134.2 frequency. In contrast, Avid and other manufacturers have supplied U.S. shelters and vets with approximately 100,000 readers that can read America’s the installed base of microchips in more than 12 million pets, including dogs, cats, birds and horses.

"The infrastructure to read pet microchips and ultimately return pets to their owners must be in place before a different product is introduced," stated 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. ... The jury’s verdict also sends a cautionary message to microchip system users to carefully evaluate claims made about the 134.2 kHz RFID systems."

Several issues are still pending before the court, including a decision regarding an injunction against Datamars SA and Crystal Import Corporation that would prevent the companies from selling their infringing products in the U.S. A decision is expected no later than mid-July. Avid was represented by Fish & Richardson, with Juanita Brooks as lead counsel. "A company’s patents are an asset of great value and must be protected, especially when another company willfully infringes them," says Ms. Brooks. "Pets are an important part of most American families, and pet owners must be protected against false advertising, particularly when their pet’s lives are put at risk. The jury understood the significance of both of these issues and came to a fair and equitable decision," concludes Ms. Brooks, who has more than 25 years litigating high profile complex technology cases and more recently animal wellbeing issues.

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