Ipernica changes appeal stance

West Perth-based technology group ipernica has decided to not appeal against a German court's dismissal of one of the company's largest intellectual property litigation cases.

The Munich district court dismissed the case in January in which ipernica's European arm QPSX Europe claimed its SAR technology had been used by Deutsche Telekom and Siemens.

Ipernica had previously announced it would appeal the dismissal but in a statement released late on Thursday the company reversed its stance.

"In consideration of the potential costs and risks in commencing and pursuing an appeal or new proceedings, the ipernica group has decided to terminate the German SAR program and to focus its IP Assertion resources on other cases," the company said.

QPSX Europe has been ordered by the court to pay legal costs which amount to $1.9 million.

Full statement below:

Diversified technology and intellectual property group, ipernica ltd (ASX:IPR), today made the following announcement about its German SAR program.

Following the 15 January 2010 decision by the Munich District Court to dismiss QPSX Europe GmbH's ("QPSX Europe") infringement action against Deutsche Telekom and Siemens, QPSX Europe has now reviewed the reasons for the decision and has decided not to appeal.

The District Court's decision was made on technical grounds, as a result of the amendments to the patent which were ordered by the German Federal Court of Justice as part of QPSX Europe's successful appeal of Deutsche Telekom's nullity action in September 2008.

In its application to recommence the infringement proceedings, QPSX Europe sought to amend its infringement complaint to reflect the amendments to the patent.

The Court held that the amendments were sufficiently significant to make it procedurally inefficient for the amended complaint to be heard as part of the original proceedings. QPSX Europe was therefore not permitted to amend its complaint in the manner proposed as part of the current proceedings.

On the basis of this decision, and in consideration of the potential costs and risks of commencing and pursuing an appeal or new proceedings, the ipernica group has decided to terminate the German SAR program and to focus its IP Assertion resources on other cases and the growth of the portfolio.

As part of the process of closing this program, the group has made a decision to wind-up its wholly owned German subsidiary QPSX Europe (which has a net asset deficiency).

The likely consequences of this are that the group will save approximately A$1.1 million in cash and that the provision previously taken by the group for liabilities associated with QPSX Europe will then be reversed.

Upon reversal, a positive adjustment of approximately A$1.1 million would be reflected in the group's income statement.

In addition, the group is still liable for a net total of approximately A$1.9 million of adverse costs orders and other costs associated with the SAR program based on current exchange rates.

These amounts were provided for in the December 2009 Half-Year Financial Statements.

The SAR licensing program commenced in 2000 and generated A$30 million in revenue.

It related to the alleged use by leading European telecommunications companies of the group's patented Segmentation and Re-assembly ("SAR") technology. ipernica (then QPSX) developed and 2 commercialised the SAR technology in the late 1980s and early 1990s.

"The SAR program demonstrated ipernica's ability to generate material revenue and profit from its IP Assertion business (in total $65 million in revenue and $21 million in net profit before tax in the three years between FY 2007 and 2009)", said ipernica Managing Director, Graham Griffiths.

"From over a decade of experience in IP litigation, ipernica has developed deep skills and networks in this business and the Company is growing the portfolio by assisting additional organisations and individuals defend their IP rights", he added.