Boston Scientific to pay J&J $1.73 billion in patent settlement

Boston Scientific is once again paying a heavy price to rival Johnson and Johnson (J&J) on patent infringement claims, this time $1.73 billion to settle three patent disputes that date back to 2003 involving heart stents.

The settlement comes as the Natick, Massachusetts-based Boston Scientific is making a concerted effort to reduce the number of litigations. It has already settled 17 lawsuits with J&J, as well with other competitors and the government.

In September, Boston Scientific paid $716 million to settle more than a dozen lawsuits involving J&J, including the Palmaz-NIR suit, (See: Boston Scientific and Johnson & Johnson settle patent disputes and in December paid $22 million to settle the US Department of Justice charges that the company's unit Guidant paid kickbacks to doctors to get them to use its heart devices. (See: Boston Scientific pays $22 million to settle DOJ probe on kickbacks)

Boston Scientific said yesterday that it has reached an agreement with Cordis Corporation, a J&J subsidiary resolving two litigations related to Cordis's Palmaz and Gray patents and its own Jang patents.

Under the terms of the agreement, Boston Scientific will pay Cordis $1 billion immediately and the remainder on or before the first week of January 2011 to settle the patents dispute, which was scheduled to go on trial yesterday in the US District Court in Delaware.

Boston Scientific, which had a revenue of $8.05 billion in 2008, said that it plans to post a $745 million letter of credit, which will cover the $725 million balance and interest and fund the remaining $725 million from cash on hand.

The first dispute between the two drug makers involved a claim by J&J that Boston Scientific's Express, Taxus Express and Liberte stents infringed its Palmaz and Gray patents.

The second involved a claim by Boston Scientific that J&J's Cypher, BX Velocity and Genesis stents infringed its Jang patent.

In 2005, there were liability trials on these two matters, and both companies were found to have infringed the other's patents. Those findings were upheld on appeal and damage claims were set to be decided by two jury trials this month. Boston Scientific said that the trials will no longer take place.

The third dispute involved a claim by J&J that Boston Scientific's Taxus Liberte stent infringed its Gray patent. That matter was scheduled to be tried in September; that trial also will no longer take place.

Ray Elliott, president and CEO of Boston Scientific said in a statement, ''We believe today's settlement - while substantial - is in the best interest of the company and its shareholders. It resolves major litigation without exposing Boston Scientific to the uncertainties of a jury trial and a potential damages award that was impossible to predict.

''While we still have a number of litigation matters remaining, this recent settlement has materially reduced our financial risks going forward. We will continue to manage carefully our outstanding litigation, as part of our ongoing and comprehensive effort to reduce risk. With the resolution of these matters, there are now no material judgments or jury verdicts pending against the Company," he added.