IP Watch: Settlement Another Win for Medinol

Last year, Boston Scientific (Natick, MA) paid $750 million to settle patent litigation with its former business partner, Medinol Ltd. (Tel Aviv, Israel), over the design of cardiac stents. Earlier this month, Medinol got another windfall when Abbott Laboratories agreed to settle a similar lawsuit over cardiac stent design. Financial terms of the settlement were not disclosed, but the deal opens the door for Abbott to move forward with the European launch of its Xience drug-eluting stent later this year.

Abbott entered the legal fray with Medinol by virtue of its purchase of the vascular intervention and endovascular business unit of Guidant Corp., a part of the company spun off when Guidant was acquired by Boston Scientific last April. With the purchase, Abbott acquired Guidant's Vision bare-metal stent and the related Xience drug-eluting stent.

Medinol originally filed the suit against Guidant in 2003, alleging that the company's Vision stent infringed on five Medinol patents. Earlier this year, Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York ruled that Guidant's devices infringed one of the patents. Announcement of the recent settlement came while the jury was deliberating its judgment over the final patent still at issue.

According to Medinol lawyer Rory O. Millson, a partner in the litigation department of Cravath, Swaine & Moore (New York City), “Judge Scheindlin encouraged the parties from the beginning of the case to appear before Magistrate Judge Freeman as a mediator. The parties had several such sessions with Judge Freeman and met after the last of the scheduled sessions with Judge Freeman.”

On the day the settlement was reached, Judge Scheindlin again asked if the parties were still interested in settling, says Millson. “When the answer was yes, Judge Scheindlin arranged for more time with Judge Freeman. Judge Freeman then worked with the parties and their counsel until 7:00 pm, when we had a deal.” The parties agreed to keep the financial terms of the settlement confidential.

According to Millson, Abbott was motivated to seek a settlement in order to pave the way for launch of the Xience stent. Through the agreement, Millson told Dow Jones, “They are buying, they hope, peace for the Xience on that claim.”

After launching the Xience stent in Europe, Abbott expects to file for FDA approval to enter the U.S. market. The company expects to launch the stent in the United States during the first half of 2008.

Settling Up

Abbott and Medinol weren't the only medtech companies talking settlement this month. The previous week, ophthalmology specialists Alcon Inc. (Fort Worth, TX) and Advanced Medical Optics (AMO; Santa Ana, CA) announced that they had reached a global settlement to resolve all of the pending lawsuits between the companies.

Under the terms of the settlement, Alcon will pay AMO $121 million. In return, AMO will request that a judgment and injunction previously entered against Alcon by the U.S. District Court in Delaware be vacated, and the corresponding appeals will be dismissed. Because Alcon had previously accrued $242 million in connection with the Delaware judgment, the company will realize a second quarter pretax benefit in operating income of approximately $121 million.

Jim Mazzo, AMO chairman, president, and chief executive officer, commented, “We invest substantial resources and energies to develop new ophthalmic technologies and are pleased to bring these legal matters to a swift and successful close for the benefit of our stockholders and customers.”

The settlement ends a number of suits and countersuits related to the two companies' surgical systems and various viscoelastic products. It permits both companies to continue marketing their current phacoemulsification product lines on a royalty-free basis and also contains provisions designed to reduce the likelihood of patent disputes on future product offerings.

Advising AMO during the settlement talks was attorney A. James Isbester, founder and principal of Isbester & Associates LLP (Berkeley, CA), a boutique firm that offers intellectual property counsel for high-technology companies.

“This comprehensive settlement resolves numerous complex patent issues involving our two companies,” said Cary Rayment, Alcon's chairman, president, and CEO. “Alcon will continue to market all existing phacoemulsification platforms while focusing our development efforts on technological advancements that will continue to revolutionize cataract surgery.”

Although the two companies worked hard to eliminate current and future sources of IP friction, don't expect to see them joining forces anytime soon. According to Steve Chesterman, AMO's corporate communications manager, “There is no contemplation of alliances or joint projects at this time.”

Deal Confirmed

At the beginning of the month, Applera Corp. (Norwalk, CT) and Beckman Coulter Inc. (Fullerton, CA) announced their definitive agreement to resolve all outstanding legal disputes between the parties, confirming settlement terms previously announced in April.

The companies had been engaged in several lawsuits regarding claims to certain Beckman Coulter patented capillary electrophoresis technology and polymerase chain reaction (PCR) instrumentation technology and Applera's allegations of breach of contract of certain licensed technology.

Among other things, the terms of the settlement call for each side to grant royalty-bearing licenses to the other. Beckman Coulter will grant Applera licenses to its patents for replaceable gels for capillary electrophoresis instruments and DNA sequencers and to its patent for a heated lid for thermal cyclers. Applera will grant Beckman Coulter licenses conferring rights in the diagnostics market to its patents for nucleic-acid sequencing and real-time PCR thermal cycling.

Additionally, Applera's Applied Biosystems Group will pay Beckman Coulter $35 million for release of claims of infringement to DNA sequencer and thermal cycler products. Beckman Coulter will pay $20 million over 10 quarters to Applera's Celera Genomics Group for rights in the diagnostics market to the Applera technology.

Explaining the terms of the settlement last April, Beckman Coulter president and CEO Scott Garrett commented, “This agreement will provide both companies with access to important patents and technologies required for continued success in the rapidly growing field of nucleic-acid sequencing and molecular diagnostic testing.” According to Garrett, the worldwide market for molecular diagnostics testing is estimated to be about $2 billion, growing at more than 15% per year.

“Our company leads the industry in simplifying and automating complex clinical laboratory processes,” added Garrett. “Access to real-time thermal cycling provides a key technology needed for our plans to fully automate high-value molecular diagnostic testing from sample preparation through final analysis.” The agreement will permit Beckman Coulter to add nucleic-acid sequencing to the menu of molecular diagnostic tests available on its Vidiera NsD capillary electrophoresis systems and CEQ family of instruments.

Beckman Coulter reported 2005 annual sales of $2.44 billion, 71.5% of which was generated by recurring revenue from supplies, test kits, services, and operating-type lease payments. Applera Corp. comprises Applied Biosystems Group (Foster City, CA) and Celera Genomics Group. Applied Biosystems reported sales of nearly $1.8 billion during fiscal 2005.

Preacquisition Settlement

At the end of June, Gen-Probe Inc. (San Diego) and Bayer HealthCare LLC (Leverkusen, Germany), a member of the Bayer Group, entered into a binding agreement to end a series of disputes involving multiple patent litigations and contract arbitrations. Announcement of the agreement was made just a week before Bayer revealed that it would be selling its diagnostics business unit to Siemens AG (Munich, Germany).

Under the terms of the settlement, Gen-Probe agreed to withdraw its patent litigation against Bayer and to grant Bayer immunity from lawsuits with respect to all existing and future Gen-Probe patents for all of Bayer's current nucleic-acid diagnostic products. Further, future Bayer products will be immune from suit under four specified Gen-Probe patent families.

In return, Bayer agreed to grant Gen-Probe immunity from suit under certain Bayer patents with respect to Gen-Probe's current Tigris instrument and future instruments. As part of the agreement, Bayer will pay Gen-Probe certain lump sum royalties over the next 18 months.

Finally, the companies also reached a decision in the separate arbitration related to their collaboration for viral products. This decision incorporates interim awards previously assigned by an arbitrator. However, Bayer is not required to reimburse Gen-Probe $2 million for legal expenses, as originally ordered by the arbitrator.

“We are pleased to have concluded our legal disputes with Bayer, and to gain additional revenue that will enable us to invest in commercially attractive, previously unfunded development projects that will drive future growth,” said Henry L. Nordhoff, Gen-Probe's chairman, president, and chief executive officer.

Not So Amicable

Bucking this month's apparent trend in favor of litigation settlements, July wasn't a great month for executives at ICU Medical Inc. (San Clemente, CA).

ICU Medical is a manufacturer of disposable medical connection systems for use in intravenous therapy applications. Early in the month, the medical manufacturing services division of Medegen LLC (Scottsdale, AZ) filed a federal patent infringement lawsuit against ICU Medical. The suit alleges that two of the company's valve products , CLC-2000 and TEGO, infringe on Medegen's U.S. Patent 5,730,418, which covers the company's proprietary valve technology.

The '418 patent covers a number of Medegen inventions in luer-activated valves, including the use of positive displacement technology, which reduces the occurrence of common vascular access device-related complications such as catheter occlusion. Medegen uses t he patented technology in its Maximus product line, which it manufactures and distributes to the acute- and alternate-care provider markets and to original equipment manufacturers.

Filed in California, the suit asks ICU Medical to pay damages to Medegen, and asks the court to issue a permanent injunction preventing further sale of the products by ICU Medical.

“Medegen was the pioneer in positive displacement valve technology and we are a company committed to innovation in research and development,” said Jeff Goble, president of Medegen's medical manufacturing services division. “Our patents are critical to the success of our company and protect our ability to continue to provide enhanced products to hospitals, and ultimately patients. As such we must aggressively enforce our patent portfolio and defend our intellectual property.”

And, as if that filing weren't enough, a week later ICU Medical got the news that it had lost the battle in a summary judgment hearing for yet another infringement case.

In that case, ICU Medical was the plaintiff, having filed a patent infringement suit against Alaris Medical Systems Inc. (San Diego), a business unit of Cardinal Health Inc., in 2004. The case involves four patents relating to a needle-free valve that can transfer drugs, blood, and other fluids to and from a patient through intravenous tubing. ICU Medical's suit alleged that Alaris' SmartSite valve and SmartSite Plus valve infringed on ICU's patents.

On June 21 and 22, a Markman hearing was held in the U.S. District Court for the Central District of California, and the court heard extensive oral arguments from both parties. Alaris was represented by attorneys from the law firm of McAndrews, Held & Malloy (MH&M; Chicago): Timothy J. Malloy, David D. Headrick, Scott P. McBride, Wilhelm L. Rao, and Stephen F. Sherry.

In its ruling, issued July 18, the court granted partial summary judgment of noninfringement on behalf of Alaris—a ruling the MH&M attorneys hailed as “a major victory.”

The MH&M attorneys were able to prove that three of the four patents in question had not infringed. Regarding the fourth patent, the court entered a series of claim construction rulings that were favorable to Alaris.

Still In Progress

At the end of May, Given Imaging (Yoqneam, Israel) acknowledged that it had been named in a patent infringement suit filed in the U.S. District Court for the Eastern District of Pennsylvania on behalf of Olympus Corp. (Tokyo) and its subsidiaries Olympus Medical Systems Corp. and Olympus America Inc.

Given's PillCam is a disposable, miniature video camera contained in a capsule that is ingested by the patient. The Olympus suit alleges that Given's PillCam infringes U.S. Patent 5,010,412 entitled “High Frequency, Low Power Light Source for Video Camera.” The '412 patent, which expires in December 2008, was bought by Olympus Medical from the Boeing Co. in July 2005.

According to Given, Boeing offered to grant it a license to the '412 patent in November 2002, but Given declined on the grounds that its product does not infringe or use any invention claimed in the patent. Following communications between Boeing and Given Imaging, Boeing abandoned its pursuit of the issue early in 2004.

“ We were aware of this patent from Boeing which we addressed in 2003 that expires in 2008,” said Homi Shamir, president and CEO of Given Imaging. “We are confident about the strength of our broad IP portfolio and our leadership position.”

Olympus has developed its own capsule endoscopy system, the Endo Capsule, which was launched in Europe at the end of 2005. After completing clinical trials and receiving FDA clearance, the company intends to market the Endo Capsule in the United States.

In the recent court filing, Olympus is seeking a declaratory judgment that its Endo Capsule system does not infringe Given Imaging's U.S. Patent 5,604,531. In April, the U.S. Patent and Trademark Office issued a decision confirming the validity of 13 of the original 17 claims of Given's '531 patent.

Progress Slowed

At the end of June, Judge Richard G. Stearns of the U.S. District Court in Massachusetts recused himself from presiding in the patent infringement case filed by Diomed Inc. (Andover, MA) against AngioDynamics Inc. (Queensbury, NY). The action led to postponement of a summary judgment hearing in the case.

In January 2004, Diomed filed a lawsuit alleging patent infringement related to AngioDynamics' VenaCure product line. VenaCure is a laser system used for the treatment of severe varicose veins. The lawsuit involves U.S. patent 6,398,777, covering a specific method of endovascular laser treatment of varicose veins. A hearing of the parties' respective summary judgment motions was originally scheduled for June 1.

That hearing was postponed when Judge Stearns revealed that he had recently been referred to and consulted with a physician concerning a proposed laser treatment. The consulting physician had been engaged by Diomed as an expert witness in the case.

In his order of recusal, Judge Stearns acknowledged that a reasonable person “might harbor doubts about my impartiality.”

Once a new judge has been assigned to the case, a schedule will be established for future proceedings. “We estimate that this change will likely delay resolution of the case by at least several months,” Stearns said.

“We were ultimately comfortable leaving the recusal decision in Judge Stearns' hands and respect his decision to recuse himself under these unusual circumstances,” said Eamonn P. Hobbs, president and CEO of AngioDynamics. “We remain confident in our positions on noninfringement, invalidity, and unenforceability, and look forward to the case being finally resolved by the court.”

© 2006 Canon Communications LLC

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