Healthcare Industry News:  IRIDEX 

Devices Litigation

 News Release - July 10, 2006

Synergetics Responds to Iridex Press Release on the Markman Ruling in Its Pending Patent Case Against Synergetics

O'FALLON, Mo., July 10 (HSMN NewsFeed) -- Synergetics USA, Inc. (Nasdaq: SURG ) announced today its response to the recent Markman ruling delivered in the pending patent infringement lawsuit brought by IRIDEX Corporation against Synergetics relating to IRIDEX's U.S. Patent No. 5,085,492. A Markman hearing is a part of every patent lawsuit. During the Markman hearing, the court interprets, as a matter of law, the definition and scope of the written claims within the patent. Contrary to Synergetics' arguments, the judge interpreted 13 claim limitations from the 24 claims in the patent more broadly than the Company believes is appropriate. While the Markman ruling is more favorable to IRIDEX, such a ruling is only the first step in the overall infringement analysis. The lawsuit is not set for trial until the Spring of 2007.

According to Gregg D. Scheller, President and Chief Executive Officer of Synergetics, "While we believe the claims of IRIDEX's patent should have been construed more narrowly, the outcome of the Markman hearing is just one element of a multifaceted lawsuit." Counterclaims against IRIDEX relating to alleged false statements made by it in the marketplace about the Company's products, false advertising, and defamation remain in the case and have not yet been addressed by the court."

Synergetics continues to believe that IRIDEX filed this lawsuit based on the inaccurate belief that Synergetics' laser probe sales onto IRIDEX lasers currently exceed $12 million per year. In fact, the total sales over the entire six year period barely exceed this number. Further, even if IRIDEX were successful in this lawsuit, Synergetics expects that any damages to which IRIDEX would be reasonably entitled would be a small fraction of these total sales. "I find it surprising that IRIDEX has the desire to sustain this lawsuit, at this level, based on the sales numbers that they have been provided," said Scheller.

An additional defense that the Company expects to employ in this lawsuit is the defense of "laches and estoppel." Essentially, this defense prevents a claimant from sitting on their claims for a long period of time without bringing a lawsuit where such delay prejudices the party being sued. Specifically, IRIDEX knew of Synergetics' product for over six years before acting. In 2002, Synergetics filed a declaratory judgment lawsuit against IRIDEX on this very same topic. In that suit, Synergetics asked the court to declare that its product did not infringe the IRIDEX patent. The case was dropped when IRIDEX agreed not to pursue any claim at that time.

As result of this pending lawsuit, Synergetics has already successfully launched a new connector system that connects the IRIDEX lasers with Synergetics' laser probes. The new connector system will allow the interface of Synergetics' probes onto most commonly available laser systems including those manufactured by IRIDEX. According to Scheller, "This move not only consolidates catalog numbers within the Synergetics' product offering, it also replaces the connector system at issue in the lawsuit with a connector system that we believe is clearly non-infringing, allowing us to continue to sell our probes for use with IRIDEX lasers regardless of the outcome of the current lawsuit and without any future royalty payments to IRIDEX."

Scheller added: "We continue to believe in the strength of our case, both as it relates to the patent claim and Synergetics' counterclaims. We also believe that IRIDEX's estimate of potential damages is grossly inflated and that it has a significant hurdle with regard to our laches and estoppel defense. The new connector system ensures our remaining in the marketplace with no business interruption. This lawsuit now pertains to a largely obsolete product. The bottom line here is that we believe that even if we were to lose this lawsuit, given a realistic judgment, it would not materially impact our ability to continue our operations as currently conducted."

About Synergetics USA, Inc.

Synergetics USA, Inc. resulted from the September 2005 combination of Valley Forge Scientific Corp. and Synergetics, Inc., bringing together their respective unique capabilities in bipolar electrosurgical generators and design, manufacture and marketing of microsurgical hand instruments. Synergetics USA, Inc. designs, manufactures and markets medical devices for use primarily in ophthalmic surgery and neurosurgery and for other healthcare applications. Its products are designed and manufactured to support micro or minimally invasive surgical procedures. In addition to its surgical devices and equipment, it designs and manufactures disposable and non-disposable supplies and accessories for use with such devices and equipment. It also manufactures and sells bipolar electrosurgical generators and other generators, based on its DualWave(TM) technology, and complementary instrumentation and disposable products for use in neurosurgery, spine surgery, pain control and in dental applications. Synergetics sells its products primarily to hospitals, clinics and surgeons in approximately 70 countries.

Forward-Looking Statements

Some statements in this release may be "forward-looking statements" for the purposes of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by words such as "believe," "expect," "anticipate," "plan," "potential," "continue" or similar expressions. Such forward-looking statements are based upon current expectations and beliefs and are subject to a number of factors. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward- looking statements, including but not limited to: the effects of local and national economic, credit and capital market conditions on the economy in general, and on the medical device industry in particular, and the effects of foreign exchange rates and interest rates; the ability to timely and cost- effectively integrate the operations of Synergetics, Inc., now a wholly owned subsidiary of the Company, with the historical business of Valley Forge Scientific Corp.; the ability to realize the synergies and other perceived advantages resulting from our recently completed merger; the ability to attract new strategic partners for the distribution of our products and to maintain our relationships with existing distribution strategic partners; the ability to identify new product offering opportunities, which may include partnering with original equipment manufacturers (OEM) and to bring effectively such products to market and/or maintain our relationships with our existing OEM partners; the ability to attract and retain key personnel; the ability to meet all existing and new U.S. FDA requirements and comparable non- U.S. medical device regulations in jurisdictions in which the Company conducts its business; the ability of Synergetics to successfully execute its business strategies; the extent and timing of market acceptance of new products or product indications; the ability of Synergetics to procure, maintain, enforce and defend its patents and proprietary know how; changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; the ability of Synergetics to continue to increase customer loyalty; the ability to recoup costs of capital investments through higher revenues; the effects of environmental and structural building conditions related to the Company's properties; acts of war or terrorism incidents; the effects of operating and market competition; and other important factors disclosed previously and from time to time in Synergetics' filings with the SEC. Synergetics undertakes no obligation to update these forward-looking statements.

Source: Synergetics USA

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