Medtronic 2008 Annual Report Download - page 89

Litigation with Johnson & Johnson and Cordis Corporation
On February 20, 2006, an arbitration panel issued a final, non-appealable
award concluding that Medtronic Vascular’s S670, S660, S540, S7 and
Driver stents, which were formerly the subject of a patent infringement
dispute between J&J and Cordis and Medtronic Vascular, are licensed
under a 1997 agreement between the two companies and subject to
a covenant not to sue contained within a 1998 amendment to the 1997
agreement. Cordis since initiated two arbitration proceedings against
Medtronic Vascular alleging that certain of the products infringe certain
patents of J&J and Cordis, and is seeking royalties for such infringement,
if any. Medtronic Vascular believes it has meritorious defenses to these
allegations and intends to assert these defenses vigorously. Hearings on
the two arbitration proceedings have been scheduled for December
2008 and March 2009. The Company has not recorded an expense
related to damages in this matter because any potential loss is not
currently probable or reasonably estimable under SFAS No. 5.
Litigation with Abbott Cardiovascular Systems Inc.
On December 24, 1997, Abbott Cardiovascular Systems Inc. (ACS), a
subsidiary of Abbott Laboratories, sued Medtronic Vascular in U.S.
District Court for the Northern District of California alleging that certain
models of Medtronic Vascular’s bare metal stents infringe the Lau stent
patents held by ACS, and seeking injunctive relief and monetary
damages. Medtronic Vascular denies infringement. In February 2005,
following trial in Delaware federal district court, a jury determined that
the ACS Lau stent patents were valid and that Medtronic’s Driver, GFX,
MicroStent, S540, S660, S670, Bestent2 and S7 stents (the bare metal
stents) infringe those patents. Medtronic Vascular made numerous post-
trial motions challenging the jury’s verdict of infringement and validity.
In August 2005, the Court had issued an order continuing a stay of any
further proceedings on the questions of damages or willfulness.
On March 30, 2007, the District Court denied the motions, and on
April 24, 2007, the District Court decided that the patents were
enforceable. The District Court entered judgment in favor of ACS and
against Medtronic Vascular on the issues of validity, infringement and
enforceability of the Lau patents in May 2007. ACS filed a motion for
injunction in the District Court on June 29, 2007 on both the bare metal
stents and the Endeavor drug-eluting stent, which had never previously
been named as an accused product in the lawsuit. On July 6, 2007,
Medtronic filed its motion to stay ACS’s June 29, 2007 motion for a
permanent injunction pending arbitration under a 2002 Abbott/
Medtronic agreement providing Medtronic with a license that Medtronic
asserted precludes the ACS injunction motion. On February 12, 2008,
the District Court conducted a hearing on the motion for permanent
injunction on Medtronic’s bare metal stents. Once the District Court has
ruled on the motion for injunction, Medtronic will appeal the May 2007
judgment. Issues of damages have been bifurcated from the liability
phase of the proceedings. On May 18, 2007, the District Court again
confirmed that it would not hold a trial on damage issues until the U.S.
Court of Appeals for the Federal Circuit has reviewed the underlying
liability issues concerning alleged infringement, invalidity and
inequitable conduct.
On August 6, 2007, the Delaware District Court granted Medtronic’s
July 6, 2007 motion to stay, in part, permitting arbitration to proceed
on Medtronic’s assertion that it has a license to practice the Lau patents
in its Endeavor stent. On February 26, 2008, an arbitrator concluded that
the Company was not licensed to practice the Lau patents in its
Endeavor stent. ACS filed a sealed motion with the District Court
seeking to lift the July 6, 2007 stay of proceedings on ACS’s motion for
an injunction as to Endeavor. Medtronic intends to oppose that motion.
The District Court has not set a hearing date with respect to the motion
to lift the stay.
On June 18, 2008, Abbott started legal proceedings in the Netherlands
against Medtronic BV, Medtronic Trading NL BV and BV Medtronic FSC
asserting that Medtronic’s Driver, Endeavor and Endeavor Resolute
stents infringe an Abbot European Lau patent issued on June 18, 2008.
A hearing is scheduled for August 7, 2008 in the Netherlands district
court in The Hague to consider Abbott’s request for a preliminary
injunction against infringement in the Netherlands. The European Lau
patent remains subject to challenges to the patent’s validity in
opposition proceedings in the European patent office as well as in the
proceedings in court in the Netherlands.
In response to Medtronic’s Request for Reexamination for each of the
four Lau patents, in December 2006, the USPTO issued an initial “office
action” finding that the claims which Medtronic products were
previously found to have infringed were not patentable. The USPTO
granted a second petition to reexamine each of the four Lau patents.
On February 11, 2008, the USPTO again determined that all claims of
two of the Lau patents that Medtronic was found to have infringed
were invalid with the exception of a single claim of one of those patents.
The patent holder will have an opportunity to challenge the USPTO’s
determinations in further proceedings in the reexaminations. On
March 3, 2008, the USPTO again determined that all claims of a third Lau
patent that Medtronic was found to infringe were invalid with the
exception of a single claim of that patent. This third patent is involved
in a reexamination proceeding, which allows Medtronic to participate
in the USPTO proceedings. The USPTO has not acted again on the
fourth Lau patent; thus, all of the claims in the fourth patent that
Medtronic was found to infringe are invalid at present. Until these
reexaminations are concluded, their potential impact upon the claims
relating to the Lau patents in the above proceeding remains unknown.
85Medtronic, Inc.