St. Jude Medical (NYSE:STJ) might have a slight edge on Volcano (NSDQ:VOLC) in their contentious dispute over fractional flow reserve technology, according to an analyst at Leerink Swann.
That’s because St. Jude patents are older and more detailed than Volcano’s, wrote Leerink analyst Danielle Antalffy, making them easier to defend.
The case, which is the consolidation of 2 lawsuits filed in the U.S. District Court for Delaware, is entering the key claim construction phase, during which Judge Richard Andrews will set the parameters of each patent’s claims.
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The firms sued each other over the FFR technology, which measures arterial blood flow, in 2010, with St. Jude accusing Volcano of violating its IP for the PressureWire FFR device and Volcano alleging the same for its PrimeWire FFR system.
The roughly 6-week claims construction phase could prove crucial, as it’s the most likely time for a settlement, an un-named patent law expert told Antalffy. A trial is scheduled for Oct. 15.
The STJ/VOLC grudge – the companies have been wrangling for years over optical coherence tomography imaging technology – might preclude a settlement, however.
"Based on the court transcripts and documents he has reviewed, the behavior of the parties stands out to the specialist as both have adopted a scorched earth approach in the discovery phase. It appears that the parties and their lawyers don’t like each other at an intense level," Antalffy wrote. "Both St. Jude and Volcano appear to be arguing over everything possible, which tends to drag out the case and prolong timelines. If the parties were to settle, the specialist highly doubts that St. Jude would accept a straight cross-license agreement and would likely expect some royalty flow in its direction.
"If one party was found to infringe, the most likely penalty is an ongoing royalty as a % of sales, likely in the 5%-10% range, with treble damages (3x) possible if found to willfully infringe. The royalty would be a floor on damages, with the winner able to seek compensation for lost profits and possibly ill-gotten gains by the loser. We estimate that a 7.5% royalty on Volcano’s U.S. FFR sales would have a $0.05 and $0.07/share impact in 2013 and 2014, or 15% and 11% of our current estimates," she wrote.
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