ADT 2006 Annual Report Download - page 196

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Commitments and Contingencies (Continued)
District Court for the Central District of California. The remaining eleven 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, Abington Memorial Hospital v. Tyco Int’l Ltd.; Tyco
Int’l (US) Inc.; Mallinckrodt In.; Tyco Healthcare Group LP filed on November 22, 2005, South Jersey
Hospital, Inc. v. Tyco International, Ltd., et al filed on January 24, 2006 and Deborah Heart and Lung
Center v. Tyco International, Ltd., et al filed on January 27, 2006. In all twelve 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. The Company will respond to these complaints and intends to vigorously defend
the actions. 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.
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 the United States District Court for the Central District of California in April 1999 in which
U.S. Surgical, a subsidiary of Tyco, is the defendant. In February 2002, the district court 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 denied U.S. Surgical’s motion
to set aside the jury’s finding on willfulness and 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 was $65 million. U.S. Surgical appealed the damages award and the
willfulness finding to the Court of Appeals for the Federal Circuit. On January 24, 2006, the Court of
Appeals issued a decision affirming the award to Applied Medical. On February 17, 2006, Tyco, on
behalf of U.S. Surgical, paid Applied Medical $66 million which includes post-judgment interest
accrued during the appeal. Tyco previously recorded a liability of $66 million related to this matter.
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. 5,385,553.
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,
134 2006 Financials