Medtronic 2010 Annual Report Download - page 100

96 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
2009. The Company exercised its early buyout option in fiscal year
2010 which resulted in converting the lease to a term loan. The
balance of the related term loan at April 30, 2010 was $46 million.
17. Contingencies
The Company is involved in a number of legal actions. The
outcomes of these legal actions are not within the Company’s
complete control and may not be known for prolonged periods of
time. In some actions, the claimants seek damages, as well as
other relief, including injunctions barring the sale of products that
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 not been set. 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. Trial started on March 23, 2010 on
Edwards’ claims of infringement on the remaining patent. 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. Medtronic
has filed motions with the trial court judge to overturn the jury’s
verdict and will defend Edward’s injunction motion.
On March 12, 2010, Edwards served a second lawsuit in Delaware
upon Medtronic CoreValve LLC, 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 May 11, 2010, a United Kingdom appellate court
issued an oral ruling from the bench affirming a trial court ruling
that the CoreValve product does not infringe the Andersen patent
in the United Kingdom. Edwards can seek leave for further appeals
in Germany and the United Kingdom.
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.
Many of these lawsuits were settled, and in the third quarter of
fiscal year 2008, the Company recorded an expense of $123
million relating to the settlement in accordance with U.S. GAAP as