ADT 2005 Annual Report Download - page 197

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments and Contingencies (Continued)
Beginning on August 29, 2005 with Natchitoches Parish Hospital Service District v. Tyco
International, Ltd., ten consumer class actions have been filed against Nellcor in the United States
District Court for the Central District of California. The remaining nine actions are Allied Orthopedic
Appliances, Inc. v. Tyco Healthcare Group, LP., and Mallinckrodt Inc. filed on August 29, 2005, Scott
Valley Respiratory Home Care v. Tyco Healthcare Group LP, and Mallinckrodt Inc. filed on October 27,
2005, Brooks Memorial Hospital et al v. Tyco Healthcare Group LP filed on October 18, 2005, All Star
Oxygen Services, Inc. et al v. Tyco Healthcare Group, et al filed on October 25, 2005, Niagara Falls
Memorial Medical Center, et al v. Tyco Healthcare Group LP filed on October 28, 2005, Nicholas H.
Noyes Memorial Hospital v. Tyco Healthcare and Mallinckrodt filed on November 4, 2005, North Bay
Hospital, Inc. v. Tyco Healthcare Group, et al filed on November 15, 2005, Stephen Skoronski v. Tyco
International Ltd, et al filed on November 21, 2005 and Abington Memorial Hospital v. Tyco Int’l Ltd.;
Tyco Int’l (US) Inc.; Mallinckrodt Inc.; Tyco Healthcare Group LP filed on November 22, 2005. In all
nine complaints the putative class representatives, on behalf of themselves and others, seek to recover
overcharges they allege they paid for pulse oximetry products as a result of anticompetitive conduct by
Nellcor in violation of the federal antitrust laws. At this time, it is not possible to estimate the amount
of loss or probable losses, if any, that might result from an adverse resolution of these matters. The
Company will respond to these complaints and intends to vigorously defend the actions.
As previously reported in the Company’s periodic filings, Applied Medical Resources Corp.
(‘‘Applied Medical’’) v. United States Surgical (‘‘U.S. Surgical’’) is a patent infringement action that was
filed in April 1999 in which U.S. Surgical, a subsidiary of Tyco, is the defendant. In February 2002, the
United States District Court for the Central District of California held that U.S. Surgical’s
VERSASEAL universal seal system, contained in certain surgical trocar and access devices
manufactured by U.S. Surgical, infringed certain of the plaintiff’s patents. The district court entered a
permanent injunction against U.S. Surgical based upon infringement of one of the three patents
involved in the suit. The United States Court of Appeals for the Federal Circuit affirmed the district
court’s permanent injunction ruling in September 2003 for the VERSASEAL product, which is no
longer on the market. In October 2003, the district court ruled in U.S. Surgical’s favor, holding that
two other patents involved in the case were invalid. A trial on damages for the earlier infringement
ruling in the district court concluded on July 27, 2004. The jury awarded Applied Medical $44 million
in damages and returned a finding that the earlier infringement was willful, giving the district court
discretion to enhance those damages to up to treble the damages awarded to Applied Medical by the
jury. On October 1, 2004, the district court issued post-trial rulings that (i) denied U.S. Surgical’s
motion to set aside the jury’s finding on willfulness; and (ii) granted Applied Medical’s motion for
enhanced damages, enhancing the jury’s damages award by 25%, or $11 million. On January 27, 2005,
the district court awarded Applied Medical $10 million in costs, prejudgment interest and attorneys’
fees. Thus, Applied Medical’s total award is $65 million. U.S. Surgical has appealed the damages award
and the willfulness finding to the Court of Appeals for the Federal Circuit. Briefing for the appeal has
concluded and oral argument has not yet been scheduled. Tyco has recorded a liability related to this
matter and does not expect to incur material losses beyond what has already been accrued.
On July 31, 2003, Applied Medical filed another patent infringement suit against U.S. Surgical in
the United States District Court for the Central District of California. The complaint alleges that U.S.
Surgical’s VERSASEAL Plus trocar product infringes Applied Medical’s U.S. Patent No. 5,385,533.
Applied Medical seeks injunctive relief and unspecified monetary damages, including enhanced
damages for alleged willful infringement. Applied Medical filed a motion for a preliminary injunction,
which the district court denied on December 23, 2003. On February 7, 2005, the district court granted
2005 Financials 121