Wabtec Corp. (WAB) said on Sunday that it has issued statement on an arbitration ruling, received December 24, involving claims filed against the company by Faiveley Transport Malmo AB, a Swedish subsidiary of Faiveley Transport.
In 1993, the company entered into a license agreement with SAB WABCO, then an affiliated company, in which SAB WABCO granted it a license to the intellectual property and know-how related to the manufacturing and marketing of certain transit braking components. In 2005, Faiveley Transport purchased SAB WABCO. The license agreement was terminated at the end of 2006 and Wabtec reverse-engineered the products at issue.
In 2007, Faiveley Transport Malmo filed a request for arbitration with the International Chamber of Commerce alleging breach of contract and trade secret violations relating to Wabtec's manufacture and sale of the limited number of transit braking components covered in the license agreement.
The Arbitral Tribunal's ruling entitles Wabtec to continue to manufacture and sell these components for current and future contracts using its reverse-engineered manufacturing drawings, and the ruling says that Wabtec should pay $3.9 million to Faiveley Transport Malmo as a reasonable royalty based on past and predicted future sales of these components through 2011.
In the fourth quarter of this year, the company would record a one-time charge for the royalty payment, which, due to the uncertain outcome and timing, was not included in its 2009 guidance for earnings of between $2.40-$2.50 per share. The company is pleased that the arbitration process is concluded and that the ruling would have no impact on its ability to provide products and services to its customers now and in the future.
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