**EXHIBIT 10.4****CONFIDENTIAL TREATMENT REQUESTED BY QLT INC.****Settlement Agreement**          This Settlement Agreement (“Agreement”) is entered into this 2nd day of March, 2007, by andbetween QLT INC. (“QLT”), a British Columbia corporation having a principal place of business at887 Great Northern Way, Vancouver, British Columbia, Canada, MASSACHUSETTS EYE AND EAR INFIRMARY(“MEEI”), a Massachusetts non-profit corporation having a principal place of business at 243Charles Street, Boston, Massachusetts, DR. JOAN W. MILLER, an individual residing at 40 WestlandAvenue, Winchester, Massachusetts; and DR. EVANGELOS S. GRAGOUDAS, an individual residing at 15Fairfield Drive, Lexington, Massachusetts.**Recitals**               WHEREAS:A.     QLT is currently manufacturing benzoporphyrin derivative (“BPD”);B.     QLT, MEEI and The General Hospital Corporation (“MGH”) are joint owners of United States PatentNo. 5,798,349 (the “‘349 Patent”) directed to methods of using BPD to treatneovasculature in the eye with photodynamic therapy;C.     OnApril 24, 2000, MEEI filed a lawsuit against QLT captioned, Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics, Inc., Civil Action No. 00-10783, in the United StatesDistrict Court for the District of Massachusetts (the “District Court”) (the “First Lawsuit”);D.     QLT asserted a counterclaim in the First Lawsuit seeking correction of inventorship of the ‘349Patent under 35 U.S.C. § 256 to add as an inventor Dr. Reginald Birngruber;
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E.     MEEI owns or controls certain patents and patent applications that claim certain methods ofusing BPD for the photodynamic therapeutic treatment of neovasculature in the eye, including UnitedStates Patent No. 6,225,303 (the “‘303 Patent”) which issued on May 1, 2001;F.     On May 1, 2001, MEEI filed a lawsuit against QLT and Novartis Ophthalmics, Inc., captionedMassachusetts Eye and Ear Infirmary v. Novartis Ophthalmics, Inc.and QLT Inc., CivilAction No. 01-10747, in the District Court (the “Second Lawsuit”);G.     On January 3, 2003, MEEI filed a lawsuit against Novartis Pharma AG captioned MassachusettsEye and Ear Infirmary v. Novartis Pharma AG, Civil Action No. 03-10023, in the District Court(the “Third Lawsuit”);H.     QLT asserted certain counterclaims in the Second Lawsuit against MEEI, DR. MILLER and DR.GRAGOUDAS, including counterclaims for declarations of non-infringement, invalidity andunenforceability of the ‘303 Patent, and counterclaims for damages for breach of contract,misrepresentation and unfair trade practices as well as a counterclaim seeking correction ofinventorship of the ‘303 Patent under 35 U.S.C. § 256 to add as inventors Dr. Tayyaba Hasan, Dr.Ursula Schmidt-Erfurth, and Dr. Reginald Birngruber and Dr. Julia Levy;I.     Dr. Levy has filly assigned to QLT any and all rights she has or may have in MEEI PATENTS, asdefined in Ex. E hereto;J.     Novartis Ophthalmics, Inc. asserted certain counterclaims in the Second Lawsuit against MEEIincluding counterclaims for declarations of non-infringement, invalidity and unenforceability ofthe ‘303 Patent, and counterclaims for damages for breach of contract;K.     MGH filed a complaint in intervention in the Second Lawsuit seeking correction of inventorshipof the ‘303 Patent under 35 U.S.C. § 256;
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L.     Dr. Hasan and Dr. Schmidt-Erfurth have fully assigned to MGH, and Dr. Birngruber iscontractually obligated to fully assign to MGH, any and all rights she or he has or may have inMEEI PATENTS, as defined in Ex. E hereto;M.     During the course of trial in the First Lawsuit, MEEI made certain representations to the Courtregarding its patent rights; andN.     QLT, MEEI, MILLER, and GRAGOUDAS now desire to resolve QLT’s correction of inventorshipcounterclaim in the First Lawsuit and all other disputes described in the pleadings of the SecondLawsuit;          NOW, THEREFORE, in consideration of the premises herein, the parties hereto agree as follows:     1.     Dismissal of the Second and Third Lawsuits. On or before March 2, 2007, all of theparties to the Second Lawsuit and the Third Lawsuit shall, through their respective counsel,execute and cause to be filed with the District Court in each of the Second Lawsuit and the ThirdLawsuit to which he, she or it is a party the Stipulations of Dismissal attached hereto as ExhibitsA and B, respectively.     2.     Stipulation of Dismissal of QLT’s Inventorship Claim in the First Lawsuit. On orbefore March 2, 2007, the parties shall, through their respective counsel, execute and cause to befiled in the First Lawsuit the Stipulated Order of Partial Dismissal Without Prejudice attachedhereto as Exhibit C.     3.     Resolution of Claims for Correction of Inventorship. QLT and MEEI hereby agree that, nosooner than thirty (30) days after the exhaustion of any and all appeals in the First Lawsuit,QLT’s claims for correction of inventorship under 35 U.S.C. § 256 in the First Lawsuit and QLT’sand MGH’s claims for correction of inventorship in the Second Lawsuit shall be
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submitted to final and binding arbitration under 35 U.S.C. § 294 in accordance with theprocedures set forth in the Arbitration Agreement among QLT, MEEI and MGH, a copy of which isattached hereto as Exhibit D. The parties mutually covenant not to sue any other party to thisAgreement in any forum to challenge or relitigate inventorship of the MEEI PATENTS as defined inExhibit E attached hereto, provided, however, that the binding effect of such arbitration asbetween the parties shall not prevent any party from invoking the remedy of correction ofinventorship under 35 U.S.C. § 256 in the event that an unaffiliated third party hereaftersuccessfully challenges inventorship of the patents-in-suit. A proceeding under the FederalArbitration Act, 9 U.S.C. §§ 1 et seq. in connection with the arbitrator’s decision shall not bedeemed relitigation of the inventorship claims for purposes of the preceding sentence.     4.     **[**]**.     5.     **[**]**. MEEI shall, concurrently with the execution of this Settlement Agreement,execute the agreement in the form attached hereto as Exhibit E.     6.     Stipulation of the Parties in the First Lawsuit. The parties shall, through theirrespective counsel, execute and cause to be filed in the First Lawsuit the Stipulation of theParties attached hereto as Exhibit F. The parties expressly incorporate herein by reference theprovisions of Exhibit F. Moreover, the parties agree and confirm that except as expressly providedherein, all claims and defenses pending in the First Lawsuit as of the date of this SettlementAgreement remain pending.     7.     Representations and Warranties. The parties make the representations andwarranties set forth in this Section 7. In making these representations and warranties, eachparty is making such representations and warranties as to itself, himself or herselfand is not making such representations and warranties jointly with any other party. ** Portions of this exhibit have been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
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(a)     Authority. Each party represents and warrants that (i) he, she or it has thefull legal right and power to enter into and perform his, her or its obligations under thisSettlement Agreement; (ii) the execution, delivery and performance by such party has beenduly and validly authorized and approved by all necessary actions; and (iii) this SettlementAgreement has been duly executed and delivered by such party.(b)     No Assignment of Claims. Each party represents and warrants that he, she or ithas not sold, assigned, conveyed, pledged or encumbered or otherwise in any way transferredto any person or entity any claim dismissed pursuant to this Settlement Agreement and hasnot agreed to do any of the foregoing.(c)     No Other Claims. Each party represents and warrants that as of the date hereofhe, she or it has not filed (or caused to be filed through a third party) any legal oradministrative proceedings of any kind or nature against the other parties to thisSettlement Agreement involving the facts and circumstances alleged in the First, Second, andThird Lawsuits and other than the First, Second, and Third Lawsuits.     8.     Release. Dr. Miller and Dr. Gragoudas waive any and all claims that could havebeen brought against QLT on or before the date of this Agreement. QLT waives any and all claimsthat could have been brought against Dr. Miller or Dr. Gragoudas on or before the date of thisAgreement, other than those claims that are the subject of QLT’s correction of inventorship-relatedclaims in the First and Second Lawsuits which are to be addressed pursuant to the parties’Arbitration Agreement attached as Exhibit D. MEEI and QLT waive any and all claims arising from thefacts and circumstances described in the pleadings in the First and Second Lawsuits that could havebeen brought against the other on or before the date of this Agreement, other thanthose claims that are the subject of MEEI’s claims in the First Lawsuit and QLT’sinventorship-related claims in the First and Second Lawsuits.
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     9.     Benefits and Burdens. This Settlement Agreement shall be binding upon the partiesto this Settlement Agreement and their respective heirs, executors, administrators,representatives, successors and assigns. Except as otherwise expressly set forth herein, thisSettlement Agreement shall be for the sole benefit of the parties hereto and their respectivesuccessors and assigns and shall not be construed to provide any benefits to any third parties, noris anything in this Settlement Agreement intended to relieve or discharge the obligation orliability of any third persons to any party to this Settlement Agreement, nor shall any provisiongive any third persons any right of subrogation or action against any party to thisSettlement Agreement.     10.     Entire Agreement. This Settlement Agreement (including Exhibits A-F) constitutesthe entire settlement agreement of the parties with respect to the subject matters contained hereinand may not be amended, altered or modified except in a subsequent writing signed by both of theparties. The parties have fully informed themselves of the terms, contents, conditions, and effectsof this Settlement Agreement, and warrant that no promise or representation of any kind has beenmade except as expressly stated in this Settlement Agreement. In making and signing this SettlementAgreement, the parties represent and certify that they have read this Settlement Agreement anddiscussed it with their attorneys and that they fully understand and voluntarily accept the termsof this Settlement Agreement. The parties also represent and certify that they are entering intothis Settlement Agreement in good faith based solely and completely upon their own judgment and theadvice of their attorneys following their good-faith assessment of pending claims.
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     11.     Choice of Law. This Settlement Agreement is entered into in the Commonwealth ofMassachusetts and shall be construed and interpreted in accordance with its laws.     12.     Limitation. Neither this Settlement Agreement (including Exhibits) nor any of thestatements or communications made by the parties, or any of their respective agents, during thenegotiations leading to this Settlement Agreement shall be considered admissions of liability by oron behalf of any of them, or used in any way in connection with the First Lawsuit. The partiesagree, however, that Exhibits C and F shall be filed with the Court in the First Lawsuit.     13.     Execution by Counterparts. This Settlement Agreement may be executed in one ormore counterparts, each of which will be deemed an original once all parties have signed one of thecounterparts. Facsimile execution and delivery of this Settlement Agreement by any of the partiesshall be legal, valid and binding execution and delivery of such document for such purposes.     14.     Contingency. This Settlement Agreement is contingent on execution of theagreements attached hereto as Exhibits A-F.
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          IN WITNESS WHEREOF, the Parties have caused their authorized representatives to sign thisAgreement.        QLT INC.