Itron Issues Update on Patent Infringement Litigation

Itron, Inc. reported that the United States District Court, District of Minnesota, has issued an order which addresses the timing and procedures for resolving certain outstanding issues in the Benghiat patent litigation.

As previously announced on Dec. 23, 2002, a jury in Minneapolis returned a verdict against Itron and found that Itron's manual entry handheld meter reading devices infringed a patent owned by Ralph Benghiat, an individual. The jury awarded Benghiat damages of $7.4 million. The jury also determined that Itron's infringement was willful, which entitles Benghiat to ask the court to triple the damages award and reimburse him for his reasonable attorney's fees.

Under the Court's Order dated Jan. 27, 2003, both parties have been requested to file a single brief by Feb. 10, 2003 addressing (1) the parties' motions for judgment on the issue of laches; and (2) whether and to what extent the Court should award increased damages for the finding of willful infringement. Responses by each party to those briefs are due by Feb. 24, 2003. The Court will decide these two outstanding issues as soon as practicable.

During the trial, Itron filed a motion under the doctrine of laches, claiming that Benghiat waited too long before accusing Itron of infringing his patent. If the court finds that laches applies, the court may limit damages to a reasonable royalty on infringing products sold from the date that Benghiat first claimed that our products infringed, which was April 1999 to Dec. 20, 2002, the date of the jury's award. We estimate this would reduce the damages award by approximately 60 percent.

The order also specifies that all other post-trial motions must be filed within ten days of the court's ruling on the above two issues, and responses to post-trial motions must be filed within 10 days after that. Final judgment in this matter will be entered after the court's ruling on post-trial motions.

Itron continues to believe that its products do not infringe the Benghiat patent and may appeal any final judgment. Appeals of the Court's final judgment must be made within 30 days of the judgment to the Federal Circuit Court of Appeals in Washington D.C. Payment of the final judgment award, after the posting of an appropriate bond, would not be due until any appeals have run their course, which we estimate would take approximately 18 to 24 months.

Itron expects to report a $7.4 million pre-tax charge for the amount of the jury's award when it reports fourth quarter and full year 2002 earnings next week. If the court issues a final judgment prior to the filing of its 2002 10K, which the company expects to file in mid March, it will adjust its 2002 financial results accordingly. Otherwise, adjustments, if any, will be made in future periods.

Itron, Inc.

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