Medtronic 2011 Annual Report Download - page 97

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Medtronic, Inc.
are the subject of the lawsuit, that could require significant
expenditures or result in lost revenues. In accordance with U.S.
GAAP, the Company records a liability in the consolidated financial
statements for these actions when a loss is known or considered
probable and the amount can be reasonably estimated. If the
reasonable estimate of a known or probable loss is a range, and
no amount within the range is a better estimate than any other,
the minimum amount of the range is accrued. If a loss is possible
but not known or probable, and can be reasonably estimated,
the estimated loss or range of loss is disclosed. In most cases,
significant judgment is required to estimate the amount and
timing of a loss to be recorded. While it is not possible to predict
the outcome for most of the matters discussed, the Company
believes it is possible that costs associated with them could have
a material adverse impact on the Company’s consolidated
earnings, financial position, or cash flows.
Litigation with Wyeth and Cordis Corporation
On February 22, 2008, Wyeth and Cordis Corporation (Cordis) filed
a lawsuit against the Company and its subsidiary, Medtronic AVE,
Inc., in U.S. District Court for the District of New Jersey, alleging
that Medtronic’s Endeavor drug-eluting stent infringes three U.S.
“Morris” patents alleged to be owned by Wyeth and exclusively
licensed to Cordis. A trial date has been set for January 9, 2012.
The Company is indemnified for the claims made by Wyeth
and Cordis. The Company has not recorded an expense related
to damages in connection with these matters because any
potential loss is not currently probable or reasonably estimable
under U.S. GAAP.
Litigation with Edwards Lifesciences, Inc.
On March 19, 2010, the U.S. District Court for the District of
Delaware added Medtronic CoreValve LLC (CoreValve) as a party
to litigation pending between Edwards Lifesciences, Inc. (Edwards)
and CoreValve, Inc. In the litigation, Edwards asserted that
CoreValve’s transcatheter aortic valve replacement product
infringed three U.S. “Andersen” patents owned by Edwards. Before
trial, the court granted summary judgment to Medtronic as to
two of the three patents. Following a trial, on April 1, 2010 a jury
found that CoreValve willfully infringed a claim on the remaining
Andersen patent and awarded total lost profit and royalty
damages of $74 million. On May 28, 2010, Edwards filed a motion
seeking an injunction against CoreValve. On February 7, 2011,
the trial court ruled on post-trial motions, denying Edwards’
motions for an injunction, enhanced damages and attorneys’ fees
and denying Medtronic’s motions to overturn the jury’s verdict.
Medtronic has appealed to the U.S. Court of Appeals for the
Federal Circuit.
On March 12, 2010, Edwards served a second lawsuit in the
Delaware court upon CoreValve, Medtronic Vascular, and
Medtronic, asserting that Medtronic’s transcatheter aortic valve
replacement product from CoreValve infringed three U.S.
Andersen patents owned by Edwards, including two of the
patents that were the subject of the first lawsuit. Medtronic filed
a motion to dismiss or stay the second lawsuit on May 24, 2010.
Edwards also previously asserted that the CoreValve product
infringed an Andersen patent in Germany and the United
Kingdom, which is a counterpart to the U.S. Andersen patents.
Courts in both countries found that the CoreValve product does
not infringe the European Andersen patent. On February 11, 2010,
a German appellate court issued its opinion affirming the trial
court ruling that the CoreValve product does not infringe the
Andersen patent in Germany. On June 30, 2010, the United
Kingdom appellate court affirmed a trial court ruling that the
CoreValve product does not infringe the Andersen patent in the
United Kingdom. Both cases have been dismissed.
The Company has not recorded an expense related to damages
in connection with these matters because any potential loss is not
currently probable or reasonably estimable under U.S. GAAP.
Marquis/Maximo/InSync Matters
On February 10, 2005, Medtronic voluntarily began to advise
physicians about the possibility that a specific battery shorting
mechanism might manifest itself in a subset of implantable
cardioverter defibrillators (ICDs) and cardiac resynchronization
therapy-defibrillators (CRT-Ds). These included certain Marquis
VR/DR and Maximo VR/DR ICDs and certain InSync I/II/III CRT-D
devices. Subsequent to this voluntary field action, a number of
lawsuits were filed against the Company alleging a variety of
claims, including individuals asserting claims of personal injury
and third-party payors alleging entitlement to reimbursement.
These United States lawsuits were settled in 2008, and only a
small number of individual cases remain. One third-party payor,
Kinetic Knife, dismissed its original action without prejudice and
on November 5, 2008 filed a putative class action relating to the
same subject matter. Medtronic removed the case to the United
States District Court for the District of Minnesota. On April 19,
2011, the court dismissed on preemption grounds the majority of
plaintiff’s claims. In June 2011, the Company settled the remaining
claims for final resolution of this matter.