Johnson and Johnson 2011 Annual Report Download - page 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 59
PRODUCT LIABILITY
Certain of Johnson & Johnson’s subsidiaries are involved in numerous
product liability cases. The damages claimed are substantial, and
while these subsidiaries are confident of the adequacy of the warn-
ings and instructions for use that accompany the products at issue, it
is not feasible to predict the ultimate outcome of litigation. The
Company has established product liability accruals in compliance
with ASC 450-20 based on currently available information, which in
some cases may be limited. Changes to the accruals may be required
in the future as additional information becomes available.
Multiple products of Johnson & Johnson’s subsidiaries are sub-
ject to product liability claims and lawsuits in which claimants seek
substantial compensatory and, where available, punitive damages,
including LEVAQUIN®, the ASR™ XL Acetabular System and DePuy
ASR™ Hip Resurfacing System, the PINNACLE® Acetabular Cup
System, RISPERDAL®, pelvic meshes, the CYPHER® Stent and
DURAGESIC®/fentanyl patches. As of January 1, 2012, there were
approximately 3,800 claimants with pending lawsuits regarding
injuries allegedly due to LEVAQUIN®, 4,700 with respect to the
ASR™ XL Acetabular System and DePuy ASR™ Hip Resurfacing
System, 860 with respect to the PINNACLE® Acetabular Cup
System, 420 with respect to RISPERDAL®, 480 with respect to
pelvic meshes, 95 with respect to the CYPHER® Stent, and 60 with
respect to DURAGESIC®/fentanyl patches.
In August 2010, DePuy Orthopaedics, Inc. (DePuy) announced
a worldwide voluntary recall of its ASR™ XL Acetabular System and
DePuy ASR™ Hip Resurfacing System used in hip replacement sur-
gery. Claims for personal injury have been made against DePuy and
Johnson & Johnson, and the number of pending lawsuits continues
to increase. The Company continues to receive information with
respect to potential costs associated with this recall. In the fourth
quarter of 2011, the Company increased its accruals for the DePuy
ASR™ Hip recall program and related product liability after the
Company completed an analysis of new information, including the
number of expected claims, recently updated revision rates of the
recalled products and product liability expense per case. Changes
to these accruals may be required in the future as additional
information becomes available.
The Company believes that the ultimate resolution of these
matters based on historical and reasonably likely future trends is not
expected to have a material adverse effect on the Company’s finan-
cial position, annual results of operations and cash flows. The resolu-
tion in any interim reporting period could have a material impact on
the Company’s results of operations and cash flows for that period.
INTELLECTUAL PROPERTY
Certain of Johnson & Johnson’s subsidiaries are subject, from time
to time, to legal proceedings and claims related to patent, trademark
and other intellectual property matters arising out of their business.
The most significant of these matters are described below.
PATENT INFRINGEMENT
Certain of Johnson & Johnson’s subsidiaries are involved in lawsuits
challenging the coverage and/or validity of the patents on their
products. Although these subsidiaries believe that they have sub-
stantial defenses to these challenges with respect to all material
patents, there can be no assurance as to the outcome of these
matters, and a loss in any of these cases could potentially adversely
affect the ability of these subsidiaries to sell their products, or
require the payment of past damages and future royalties.
In October 2004, Tyco Healthcare Group, LP (Tyco) and U.S. Surgi-
cal Corporation filed a lawsuit against Ethicon Endo-Surgery, Inc.
(EES) in the United States District Court for the District of Connecti-
cut alleging that several features of EES’s HARMONIC® Scalpel
infringed four Tyco patents. In October 2007, on motions for sum-
mary judgment prior to the initial trial, a number of claims were
found invalid and a number were found infringed. However, no claim
was found both valid and infringed. Trial commenced in December
2007, and the court dismissed the case without prejudice on
grounds that Tyco did not own the patents in suit. The dismissal
without prejudice was affirmed on appeal. In January 2010, Tyco
filed another complaint in the United States District Court for the
District of Connecticut asserting infringement of three of the four
patents from the previous lawsuit and adding new products. Tyco
is seeking monetary damages and injunctive relief. This case is
scheduled to be tried in May 2012.
Starting in March 2006, Cordis Corporation (Cordis) filed
patent infringement lawsuits in the United States District Courts
for the Districts of New Jersey and Delaware, against Guidant
Corporation (Guidant), Abbott Laboratories, Inc. (Abbott), Boston
Scientific Corporation (Boston Scientific) and Medtronic Ave, Inc.
(Medtronic) alleging that the Xience V™ (Abbott), Promus™
(Boston Scientific) and Endeavor® (Medtronic) drug eluting stents
infringe several of Cordis’s Wright/Falotico patents. Cordis sought
monetary relief. In January 2010, in one of the cases against Boston
Scientific, the United States District Court for the District of
Delaware found the Wright/Falotico patents invalid for lack of writ-
ten description and/or lack of enablement. In June 2011, the Court of
Appeals for the Federal Circuit affirmed the ruling, and in September
2011, it denied Cordis’s motion for a re-hearing.
In October 2007, Bruce Saffran (Saffran) filed a patent infringe-
ment lawsuit against Johnson & Johnson and Cordis in the United
States District Court for the Eastern District of Texas alleging
infringement on U.S. Patent No. 5,653,760. In January 2011, a jury
returned a verdict finding that Cordis’s sales of its CYPHER® Stent
willfully infringed a patent issued to Saffran. The jury awarded
Saffran $482 million. In March 2011, the Court entered judgment
against Cordis in the amount of $593 million, representing the jury
verdict, plus $111 million in pre-judgment interest. The District
Court has denied Cordis’s motion to overturn the jury verdict and to
vacate the judgment. Cordis has appealed the judgment. Because
the Company believes that the potential for an unfavorable outcome
is not probable, it has not established an accrual with respect to
the case.
In November 2007, Roche Diagnostics Operations, Inc., et al.
(Roche) filed a patent infringement lawsuit against LifeScan, Inc.
(LifeScan) in the United States District Court for the District of
Delaware, accusing LifeScan’s entire OneTouch® line of blood
glucose monitoring systems of infringement of two patents related
to the use of microelectrode sensors. In September 2009, LifeScan
obtained a favorable ruling on claim construction that precluded a
finding of infringement. The Court entered judgment against Roche
in July 2010 and Roche appealed. The Court of Appeals reversed the
District Court’s ruling on claim construction and remanded the case
to the District Court for new findings on the issue. Roche is seeking
monetary damages and injunctive relief.
Starting in February 2008, Cordis filed patent infringement
lawsuits in the United States District Court for the District of New
Jersey against Guidant, Abbott, Boston Scientific and Medtronic
alleging that the Xience V™ (Abbott), Promus™ (Boston Scientific)
and Endeavor® (Medtronic) drug eluting stents infringe several of
Wyeth’s (now Pfizer Inc.) Morris patents, which have been licensed
to Cordis. Cordis sought monetary relief. In January 2012, the Dis-
trict Court granted the defendants’ motion to invalidate the Morris
patents for lack of enablement and failure to adequately describe
MEDICAL DEVICES AND DIAGNOSTICS