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brought an action in Federal District Court seeking a declaratory
judgment as to the validity of Cascade's patents. In 1989,
Cascade filed a counterclaim against the Taiwanese manufacturer
and its U.S. distributor, and a complaint with the International
Trade Commission, claiming that the Taiwanese version of the
mattress infringed upon Cascade's patents.
In 1990, Cascade and Lea agreed to suspend the corporation's
obligation to make payments to Lea pending the resolution of the
litigation with the Taiwanese manufacturer. In 1991, at the
request of Cascade, the litigation was dismissed. As a result of
the dismissal, the Taiwanese manufacturer was allowed to continue
manufacturing the mattresses and to sell them in the United
States, and Cascade's patents retained their presumption of
validity. In 1992, Cascade paid Lea the amounts that had been
suspended pending the outcome of the litigation.
The 1982 agreement was amended on three occasions to reduce
the amount payable to Lea. Recognizing that the litigation with
the Taiwanese manufacturer had weakened, but not invalidated, the
patents, Cascade and Lea agreed in November 1992 to reduce the
payments from 5 to 4 percent of the gross selling price of the
products using the technology covered by those patents. In
January 1993, upon reassessment of the value of the patents after
the settlement of the lawsuit, Cascade and Lea agreed to reduce
the payments from 4 to 2.5 percent of the gross selling price of
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