Texas judge gives, takes away from Smith & Nephew in Arthrex patent suit

SNN, Arthrex logos

A federal judge in Texas handed Smith & Nephew (NYSE:SNN) a mixed blessing in its ongoing patent infringement fracas with Arthrex Inc., granting an injunction against further infringement but giving Arthrex a stay pending appeal.

The dispute began in 2007, when Smith & Nephew’s Andover, Mass.-based endoscopy division sued Naples, Fla.-based Arthrex in 2007 in the U.S. District Court for Eastern Texas, accusing it of violating a pair of patents covering techniques for attaching anterior cruciate ligament grafts to bone. The companies agreed to dismiss the charges relating to one of the patents, according to court documents, but allowed a jury to decide about the other patent.

That decision went against Arthrex, to the tune of nearly $5 million, after the jury found that its RetroButton femoral fixation device infringed the remaining patent covering Smith & Nephew’s EndoButton fixation device. The jury later added nearly $473,000 in pre-judgment interest, for a total award to Smith & Nephew of nearly $5.2 million, according to court documents.

SNN then sought an injunction preventing Arthrex from selling any more RetroButton products. For its part, Arthrex said at the time that its plans include an appeal and no cessation in RetroButton sales.

Judge T. John Ward granted Smith & Nephew’s motion for an injunction, ruling that the company suffered irreparable harm because the two devices are in direct competition in the market for femoral cortical ACL graft fixation devices.

“Further, Arthrex designed its infringing RetroButton product to compete directly with Smith & Nephew’s EndoButton product and Arthrex has employed marketing and sales tactics to target Smith & Nephew’s customers,” Ward wrote. “Arthrex’s arguments to the contrary, focusing on the adequacy of monetary damages as relief, are not persuasive. Accordingly, the Court finds that Smith & Nephew will suffer irreparable injury absent an injunction.”

But Ward also found that the injunction would irreparably harm Arthrex if it goes into effect before all appeals are exhausted.

“Arthrex argues that customers who leave Arthrex are not likely to switch products yet again once Arthrex prevails on appeal and that the damage to Arthrex’s reputation is likely to be permanent and irreparable. Such loss is not easily measured by money damages and hence qualifies as ‘irreparable harm,'” the judge wrote. “Arthrex has established, and the Court finds, that Arthrex will be irreparably harmed absent a stay.”

The stay doesn’t come without a cost to Arthrex, however. Ward ruled that the company must pay a 36 percent royalty on each RetroButton sale during the duration of the stay. The company must also refrain from making or sponsoring presentations at medical conferences about the RetroButton and EndoButton, eschew comparative advertising and marketing of the products and suspend all sales incentive programs for the RetroButton.

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