Insulet (NSDQ:PODD) said it reached a cross-licensing deal with Medtronic (NYSE:MDT) to put to rest a patent infringement lawsuit that alleged infringement by Insulet’s OmniPod of patents owned by Medtronic’s MiniMed subsidiary.
Insulet CFO Brian Roberts told MassDevice.com today that the company expects the deal and its legal costs to run as much as $10 million, with much of that coming during the 3rd quarter.
The agreement removes the "overhang" of litigating the lawsuit and clears Insulet to continue developing its flagship device, Roberts told us. More than a million OmniPods roll out of the company Bedford, Mass., facility each month, he said.
"It does eliminate the distraction of any ongoing litigation," Roberts said. "[The agreement] provides us with a pretty clear highway to iterate off of the pod."
The deal also includes a pact between the diabetes rivals not to sue each other for patent infringement "based on any existing product, or any feature, element or component in any currently existing commercially available products," according to a press release.
“Medtronic’s ability to develop life-saving and life-enhancing medical technologies is predicated on the protection of our intellectual property,” a spokeswoman for that company told MassDevice.com via email.
"We are satisfied to have settled this patent infringement lawsuit with Medtronic," Insulet president & CEO Duane DeSisto said in prepared remarks. "This agreement allows us to maintain our focus on the launch of the new OmniPod, which continues to receive an enthusiastic response from both customers and healthcare professionals. In addition, the agreement provides us significant freedom to continue developing the products in our pipeline, including an OmniPod System for the Type II diabetes market and an OmniPod with integrated continuous glucose monitoring."
Medtronic MiniMed sued Insulet a year ago last week in the U.S. District Court for Central California, alleging that Bedford, Mass.-based Insulet’s OmniPod, a wireless insulin delivery system for diabetes, trespasses on a pair of patents that are licensed to Medtronic MiniMed. Both the so-called "’276 patent" and the "’878 patent" are called "External Infusion Device With Remote Programming, Bolus Estimator And/Or Vibration Alarm Capabilities."
Yesterday’s settlement agreement gives Insulet access to the Medtronic patents claimed in the lawsuit and related patents in the U.S. and abroad, plus patents covering "the use of nitinol to effect the delivery of a fluid via an ambulatory external pump" and patents covering "the integration or interaction of continuous glucose monitoring with other medical devices, including insulin delivery devices," according to a regulatory filing.
"The license does not extend to claims covering closed loop implementation, functionality, design or algorithms. ‘Closed loop’ is defined as an insulin pump and CGM system in which adjustments are ultimately made to insulin delivery without any action by a human," according to the filing.
Medtronic also gains access to Insulet’s IP covering the use of nitinol in ambulatory pump fluid delivery, plus "the automatic insertion of a needle, cannula or sensor" and "the integration or interaction of two or more of ambulatory external drug delivery pumps, blood glucose monitoring devices, infusion sets and insertion devices," Insulet said.
"The license does not extend to the manufacture or sale of a 1-piece ambulatory external drug delivery pump which adheres to the body, has no controls on the pump itself, is operated via a hand-held remote, and is disposed of in its entirety after use," according to the filing. "Medtronic agrees not to cause or ask Flextronics to design or manufacture a 1-piece ambulatory external drug delivery pump that adheres to the body."
Insulet and Medtronic "expect to promptly move to dismiss the pending lawsuit," Insulet said in the filing.
PODD shares were up 2.7% today to $36.15 apiece as of about noon.