Medtronic 2014 Annual Report Download - page 131

Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
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, as of that time, of $74 million. On November 13, 2012, the Court of Appeals for the Federal Circuit upheld the jury
verdict and remanded to the District Court to reconsider issuing an injunction. Medtronic petitioned for certiorari to the U.S.
Supreme Court, but the petition was denied on October 7, 2013. Medtronic recorded an expense of $245 million related to
probable and reasonably estimated damages for this matter in the second quarter of fiscal year 2013, of which $84 million was
paid on February 28, 2013. 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.
On January 15, 2014, the Delaware court found that the CoreValve transcatheter aortic valve replacement product willfully
infringed on a “Cribier” patent, with a jury award in the amount of $394 million.
Edwards has also brought actions in Europe alleging patent infringement. Edwards 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 and
dismissed both cases. On August 30, 2012, Edwards commenced a proceeding in Mannheim, Germany, alleging that
Medtronic’s CoreValve transcatheter valve infringes three European patents and seeking injunctive and other relief. On June 14,
2013, the Mannheim court dismissed Edwards’ case on the merits that Medtronic’s CoreValve transcatheter valve infringes the
“Cribier” patent. On July 12, 2013, the Mannheim court found that Medtronic’s CoreValve transcatheter valve infringes the
“Spenser” patent and issued an injunction against Medtronic’s sale or use of the CoreValve product in Germany. Medtronic
appealed the court’s finding of infringement. On August 26, 2013, Edwards posted a 50 million Euro bond, as mandated by the
court, to enforce the injunction. On November 14, 2013, the appeals court in Karlsruhe stayed the injunction based on the
likelihood that the “Spenser” patent would be found to be invalid. On March 5, 2014, the European Patent Office (EPO)
determined the “Spenser” patent was invalid. The Mannheim court stayed a third proceeding that had been scheduled for trial on
December 20, 2013, involving a related “Cribier” patent, until EPO proceedings conclude regarding the validity of the first
“Cribier” patent which was revoked by the Opposition Division of the EPO on December 17, 2013.
On May 19, 2014, Medtronic and Edwards agreed to settle all pending litigation, and the parties will dismiss with prejudice all
claims in the pending matters. The settlement agreement provided for a one-time payment of $750 million from Medtronic to
Edwards. The agreement also requires ongoing royalties for Medtronic sales of its CoreValve transcatheter valve with minimum
annual payments of $40 million through April 9, 2022. As a result, Medtronic recognized a $589 million expense (net of
existing accrual) in fiscal year 2014. The $750 million was paid on May 23, 2014. The parties also agreed to cross license the
relevant patents in the litigations, and covenanted not to sue each other for eight years in the field of transcatheter valves and
related accessories.
Sprint Fidelis Product Liability Matters
In 2007, a putative class action was filed in the Ontario Superior Court of Justice in Canada seeking damages for personal
injuries allegedly related to the Company’s Sprint Fidelis family of defibrillation leads. On October 20, 2009, the court certified
a class proceeding but denied class certification on plaintiffs’ claim for punitive damages. Pretrial proceedings are underway.
The Company has not recorded an expense related to damages in connection with this matter because any potential loss is not
currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range
of loss, if any, that may result from this matter.
INFUSE Product Liability Litigation
As of the end of fiscal year 2014, plaintiffs filed approximately 750 lawsuits against the Company in the U.S. state and federal
courts, reflecting approximately 1,200 individual personal injury claims from the INFUSE bone graft product. Certain law firms
have advised the Company that they may bring a large number of similar claims against the Company in the future. The Company
estimates those law firms represent approximately 3,600 additional unfiled claimants. The Company recorded an expense of $140
million in fiscal year 2014, related to probable and reasonably estimated damages in connection with these matters.
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