A U.S. District Court jury in Delaware yesterday dealt a blow to Boston Scientific Corp. finding that it infringed two cardiac stent patents of its main competitor in the field, Johnson & Johnson. BSX could be forced to pay damages to J&J although the exact amount will not be set until August at a separate trial.
Morgan Stanley expects that it will cost between $1 billion and $1.5 billion but the amount could triple if a court later finds the infringement was willful and awards treble damages. BSX said it will probably appeal the verdict.
Stents are tiny wire-mesh tubes used to prop open arteries after they have been cleared of blockages through a procedure known as angioplasty. The latest versions from both companies are drug-coated stents, which slowly release medication that prevents vessels from reclogging after procedures to open them up.
The benefits apparently last for years, and even very big blockages in very small vessels can be fixed this way. The devices work so well that when an older stent clogs, it’s better to put a new drug-coated one inside it than to treat the problem with radiation as has been done in the past.
Johnson & Johnson argued that Boston Scientific products, including Taxus drug-coated cardiac stents, are based on stent designs it licensed partly from Julio Palmaz, an academic physician in Texas. Apparently, Boston Scientific turned down Palmaz’s $40 million request in the early 1990s so he went to Johnson & Johnson.
The jury found in favor of Johnson & Johnson’s claims that its patent rights to the Palmaz patent were violated. It also sided with Johnson & Johnson’s claim that Boston Scientific’s newest bare-metal stent design, called Liberté, violates another patent related to flexible stents.
The dispute dates back to 1997 when Johnson & Johnson claimed that a stent Boston Scientific previously sold violated the Palmaz patent. In 2000, a jury awarded Johnson & Johnson $324 million in damages but the award was set aside.
Meanwhile, BSX is now pursuing its own patent infringement case against J&J, leading some observers to predict an eventual settlement. However, BSX could face a court injunction to pull its best performing stent off the market, the Liberté. While difficult, it would not be impossible for J&J to prevail.
Boston Scientific last year reported $5.6 billion in revenue, with nearly half of it driven by sales of Taxus drug-coated cardiac stents, the focus of Johnson & Johnson’s patent-litigation claims.
