Court Dismisses Infringement Suit against Stryker

The U.S. District Court for the District of Oregon has dismissed a suit against Stryker Corp. in a case involving a proximal humeral nail used to treat certain bone fractures. The court ruled that a patent infringement claim filed by Acumed LLC (Hillsboro, OR) against Stryker is barred by res judicata, which prohibits litigation in a subsequent action of any claims that were raised or could have been raised in the prior action.

In May 2006, Acumed filed a complaint against Stryker Corp., Stryker Sales Corp., Stryker Orthopaedics, and Howmedica Osteonics Corp. The complaint alleged that Stryker's T2 Long proximal humeral nail infringes U.S. Patent 5,472,444, which covers Acumed's proximal humeral nails marketed and sold under the name Polarus. The T2 Long is a longer version of Stryker's T2 proximal humeral nail, which is the device named in a lawsuit filed by Acumed against Stryker in 2004.

The original case is currently still on appeal. However, during discovery for that case, Stryker provided Acumed with manufacturing drawings, development documents, and other information about the T2 Long. Acumed argued at the time that the device was substantially similar to the T2 proximal humeral nail and, therefore, also might infringe its patent. However, before the case went to trial, Acumed was offered and declined the opportunity to litigate any patent-infringement claims related to the T2 Long.

In the more recent case, Stryker Corp. argued that Acumed's complaint should be dismissed on the grounds that the company is barred by res judicata from bringing the action because it failed to litigate its claim relative to the T2 Long in the earlier case. Acumed argued that res judicata applies only to cases in which the accused product in a second case is substantially identical to those litigated in the first case.

The court ruled that Stryker was not required to prove that its T2 proximal humeral nail and T2 Long are essentially the same in order for res judicata to apply. The court also ruled that Acumed's infringement claims against Stryker's T2 proximal humeral nail and T2 Long involved substantially the same alleged violation of the patent in question. It noted that Acumed was presented with a full and fair opportunity to bring its claim against the T2 Long into the first trial yet chose not to do so for reasons unrelated to any formal barrier to litigation.

McAndrews, Held & Malloy attorneys Greg Vogler, Sharon Hwang, and Dennis H. Jaskoviak Jr. represented Stryker in the case.

"We are very pleased that the Court granted our motion to dismiss," said Hwang, a shareholder with McAndrews, Held & Malloy. "Our client should never have had to deal with this second matter, and we are happy to have disposed of it rapidly on their behalf."

Manufacturers Partner to Market Rapid HIV and Other Tests

Inverness Medical Innovations Inc. (Waltham, MA), Chembio Diagnostic Systems Inc. (Medford, NY), and StatSure Diagnostic Systems Inc. (Framingham, MA) have entered into a series of agreements that provide Inverness with exclusive worldwide marketing rights to Chembio's FDA-cleared, point-of-care, rapid test for the detection of antibodies to HIV.

The test utilizes Inverness's proprietary lateral-flow technology and StatSure's patented barrel technology, which is designed to maximize ease of use and minimize exposure to infectious agents. In addition, Inverness obtains exclusive U.S. marketing rights to Chembio's HIV 1/2 Stat-Pak, a proprietary lateral-flow cassette test for antibodies to HIV. The addition will complement Inverness's Determine rapid HIV test, which is only sold outside the United States.

"We are very pleased to be able to work with Chembio and StatSure to market these products," said Ron Zwanziger, CEO of Inverness. "The recently published revised HIV testing recommendations from the Centers for Disease Control and Prevention point to the need for screening all adults aged 13–64, as well as for routine testing for pregnant women and persons at high risk of infection."

Both Chembio HIV tests are cleared by FDA for use with fingertip blood, whole blood, serum, or plasma for the detection of HIV-I and HIV-II antibodies. Both tests achieved a sensitivity of 99.7% and a specificity of 99.9% in clinical trials.

In conjunction with the agreement, Chembio and StatSure will equally share in the profits relating to the application of the barrel technology and have settled past litigation between them. The settlement combines each company's HIV barrel intellectual property, including an exclusive manufacturing license from StatSure to Chembio for its barrel patent for all HIV applications.

"We are pleased to end the litigation with StatSure and enter this new agreement so that we can deploy our capital more productively," said Lawrence Siebert, president of Chembio. "We look forward to working together with StatSure and Inverness to capitalize on the significant global opportunity for the HIV barrel product."

"Litigation is always a time-consuming, expensive win-lose battle," said Steve Peltzman, president of StatSure. "Our settlement represents an authentic win-win-win for each of the parties involved and certainly jump-starts our ability to commercialize this important technology."

As a part of the new agreements, Inverness has granted Chembio a license to its lateral-flow technology that allows the company to manufacture and market the Chembio cassette HIV product and a Chembio dipstick HIV test outside the United States, and to manufacture and market certain defined veterinary and emerging disease tests. Inverness—which has invested $2 million in a Chembio financing—will also receive nonexclusive worldwide marketing rights under Inverness brands to this latter group of products.

"This is a significant milestone for our company as we believe Inverness will be able to achieve widespread distribution of our products," said Siebert.

In addition, Inverness will also grant to StatSure a license to its lateral-flow technology for an HIV cassette product and certain other products.

"Great technology, when married to outstanding manufacturing and Inverness's marketing, can produce extraordinary results," said Peltzman. "We believe this team will deliver those results as customers around the world recognize their needs for rapid HIV testing are best served by these new product entries."

The agreements further strengthen the Inverness line of point-of-care testing products. The company reports that rapid HIV testing is an expanding area with strong growth potential in Inverness's key markets of physician offices and hospital testing, and has the potential to be sold through retail channels. The HIV products will be introduced in the United States as soon as FDA clearance is received for the use of Inverness labeling.

IntraLase Corp. Files Lawsuit against Carl Zeiss AG

On November 9, IntraLase Corp. (Irvine, CA), manufacturer of a femtosecond (FS) laser for use in refractive and corneal surgery, announced that it had filed a lawsuit in the Superior Court for the State of California, County of Orange, against Carl Zeiss AG (Jena, Germany), its subsidiary Carl Zeiss Meditec Inc. (CMZ; Dublin, CA), and certain affiliates.

The lawsuit alleges that Carl Zeiss breached an intellectual property agreement with IntraLase by improperly using confidential and proprietary information that Zeiss wrongfully induced IntraLase to disclose. Among other things, the suit seeks damages for breach of contract and payment to IntraLase of all revenues and profits derived by Zeiss from the sale and use of its laser.

"We believe the marketplace rather than the courthouse is the appropriate arena for honest and spirited competition," said Robert J. Palmisano, IntraLase president and CEO. "However, we have a duty to protect our intellectual capital and feel we have no alternative but to take the necessary legal action to protect our interests and ensure that any competition we face is fair competition.

"The IntraLase FS laser has already been used for approximately one million corneal flap procedures, the first step to the laser-assisted in situ keratomileusis (LASIK) surgery, resulting in superior safety and clinical outcomes," he added. "We remain confident that our advanced technology will continue to be the technology of choice for corneal surgeons worldwide. We intend to litigate this matter vigorously."

In response, Carl Zeiss stated that it was surprised by the decision of Intralase Corp. to file such legal action. At press time, the company reported that it had not yet seen the lawsuit and that it only learned of the action through an IntraLase press release.

"We have investigated Intralase's allegations thoroughly, and we have determined that these claims are completely baseless," said Jim Taylor, president and CEO of Carl Zeiss Meditec. "CZM has not breached any agreement or other obligation to Intralase, nor has CZM otherwise acted improperly.

"Not only do we find Intralase's filing to be without merit, but it is also in direct contradiction to the values and culture of the entire Carl Zeiss organization," Taylor added. "We are a company that has always operated carefully and ethically, and one that respects its agreements with and obligations to third parties, as well as any valid third-party intellectual property rights."

Taylor said that Intralase's action was timed to coincide with CZM's demonstration of advanced femtosecond technology at the American Academy of Ophthalmology meeting, held November 11–14 in Las Vegas. Taylor said the action was an obvious effort to disrupt that event. He added, "CZM will take all necessary steps to defend itself aggressively against these false claims."

Medtronic Wins Appeals Court Ruling on Largest Pedicle Screw Lines

Late this month, Medtronic Inc. reported that its spinal division won a major patent case involving its largest lines of pedicle screws.

In the case of DePuy Spine Inc. and Biedermann Motech GMBH v. Medtronic Sofamor Danek Inc., the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the District Court of Massachusetts that Medtronic's CD Horizon M8 and CD Horizon M10 multiaxial screws do not infringe the DePuy ‘678 patent. The decision also applies to Medtronic's CD Horizon Legacy multiaxial screws.

DePuy Spine Inc. (Raynham, MA) is a division of Johnson & Johnson Inc., and Biedermann Motech is a German orthopedics company that operates an international joint venture business with DePuy.

The court of appeals also affirmed the district court's determination that Medtronic's Vertex reconstruction system screws, for use in the upper thoracic spine, do not literally infringe the ‘678 patent. However, the court ruled that there is an issue of fact as to infringement under the doctrine of equivalents that can proceed to trial. Medtronic reports that it is confident in its position on the Vertex system and expects to prevail in a jury trial.

The court also ruled that an older version of Medtronic's Horizon screws did infringe. The company reports that the products are no longer sold in the United States and that it has already reserved $24.3 million to pay for the jury's finding.

"We are pleased that the court has ruled that our biggest-selling multiaxial screws do not infringe DePuy's patents," said Pete Wehrly, senior vice president and president of the spinal and biologics business at Medtronic. "We respect the intellectual property of others and expect them to do the same. We are also confident that when a jury hears our position on the Vertex system, we will prevail on that complaint as well."

No court date has been set on the Vertex system trial.

VNUS Claims Favorable Markman Ruling

According to medical device maker VNUS Medical Technologies Inc. (San Jose), in a Markman hearing held earlier this month, a federal judge ruled in favor of the company on the meaning of several claims in a lawsuit against several rival companies.

In July 2005, VNUS filed a patent infringement lawsuit against Diomed Holdings Inc. (Andover, MA). In October 2005, VNUS served an amended complaint, adding suits against AngioDynamics Inc. ( Queensbury, NY) and Vascular Solutions Inc. ( Minneapolis).

All of the company's suits pertain to devices that use lasers to burn away tissue inside veins. VNUS accused the defendants of infringing four patents principally directed toward the company's method for treating varicose veins. The VNUS patents describe a procedure for treating venous disease using an electrode catheter that delivers radio-frequency (RF) energy directly to the inner wall of the vein. The lawsuits ask for an injunction and monetary damages.

The decision by Judge Maxine Chesney of the U.S. District Court for the Northern District of California determined the meaning of certain words and phrases in the lawsuit. According to VNUS, the court's ruling was favorable to the company.

But not everyone saw the ruling in the same light.

"In Markman hearings such as these, judges offer interpretations of patent claims in order to provide the jury a yardstick with which to clarify ambiguous language within a patent," commented David Swank, CFO of Diomed. "This claim construction ruling clears the way for Diomed to proceed with its defenses that the VNUS patents are not infringed by Diomed's EVLT methodology and, further, that the VNUS patents-in-suit are deficient and should be struck down."

AngioDynamics president and CEO Eamonn P. Hobbs said, "These patents are clearly intended to cover VNUS's RF procedures only. By pursuing a claim construction that covers forms of energy other than RF, we believe that VNUS has put the validity of the patents at significant risk. We strongly believe that Judge Chesney or a jury will hold that the patents are invalid and are not infringed."

In a press release issued after the November ruling, Diomed indicated that it expects to file motions for summary judgment of noninfringement and invalidity "at an appropriate time in 2007." Summary judgment motions require that the judge determine whether certain issues can be resolved by the court as a matter of law without the need for trial.

AngioDynamics similarly commented that it "will have opportunity to file summary judgment motions prior to the trial," which is currently scheduled for October 2007.

Whatever the meaning of the court's ruling, investors found support for each company's established market direction. After trading between $5.93 and $9.30 over the previous 52 weeks, shares of VNUS (Nasdaq: VNUS) rose 46 cents, or 6%, to $8.16. Shares of Diomed (Amex: DIO) fell 9 cents, or 9.3%, to a new 52-week low of 88 cents. The company's previous year low of 91 cents was set earlier in November. Meanwhile, shares of AngioDynamics (Nasdaq: ANGO) rose 34 cents to $22.13, while Vascular Solutions (Nasdaq: VASC) rose one cent to close at $7.56.

© 2006 Canon Communications LLC

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