ADT 2006 Annual Report Download - page 95

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,
which the district court denied on December 23, 2003. On February 7, 2005, the district court granted
U.S. Surgical’s motion for summary judgment. Applied Medical appealed the summary judgment ruling.
On May 15, 2006, the United States Court of Appeals for the Federal Circuit issued a decision on the
appeal vacating the district court’s grant of summary judgment and remanding the case for further
proceedings. The district court has scheduled trial in this case for July 10, 2007.
Environmental Litigation
As previously disclosed, we have been in discussions with the U.S. Environmental Protection
Agency and the New Jersey Department of Environmental Protection regarding historic environmental
compliance issues at a facility sold by Tyco in 2000. In a letter dated February 10, 2006, the U.S.
Environmental Protection Agency proposed a penalty of $1,750,000 for alleged violations at this facility.
The Company has discussed this matter in detail with the Environmental Protection Agency and is
seeking a negotiated resolution.
Commercial Litigation
Sensormatic v. Winner and Bagnara, Inc. is a franchise dispute for which Sensormatic originally filed
a complaint in 1999 in the United States District Court for the Western District of Pennsylvania
seeking declaratory relief. On June 28, 2004, the district court entered a stipulated judgment fixing the
amount of the defendant’s past damages and commissions for royalties allegedly owed under the
franchise agreement in the amount of $28 million, plus $5 million in pre-judgment interest, and the
entry of an injunction requiring Sensormatic to tender the franchise to the defendant. The judgment
stayed the imposition and payment of these damages and injunctive relief until resolution of an appeal
of the district court’s underlying rulings on liability to the United States Court of Appeals for the Third
Circuit. On June 29, 2004, Sensormatic filed its Notice of Appeal to the court of appeals. On
August 31, 2005, the appellate court affirmed the district court judgment. A request for re-hearing
before the entire Third Circuit was denied. No further appeals have been taken and the judgment was
satisfied on October 20, 2005. The Company does not expect to incur material losses beyond what has
already been accrued and paid.
Asbestos Matters
As previously reported in our periodic filings, Tyco and some of its subsidiaries are named as
defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials. The
majority of these cases have been filed against subsidiaries in Healthcare and Engineered Products and
Services. Each case typically names between dozens to hundreds of corporate defendants. The
Company will continue to vigorously defend these lawsuits and the Company has not suffered an
adverse verdict in a trial court proceeding related to asbestos claims. When appropriate, the Company
settles claims. However, the total amount paid in any year to settle and defend all asbestos claims has
been immaterial. As of September 29, 2006 there were approximately 15,500 asbestos liability cases
pending against the Company and our subsidiaries.
2006 Financials 33