A federal judge in New York ordered Johnson & Johnson’s Ethicon to pay $76.6 million after a contract breach with ChemImage.
Judge Jesse M. Furman of the Southern District of New York issued the ruling this week after the court in May found that Ethicon breached the contract.
In 2019, ChemImage contracted with Ethicon to develop AI-based light imaging technology for use in surgical procedures. The companies agreed for ChemImage to meet certain developmental and regulatory milestones. These milestones corresponded to substantial potential payments, according to the May ruling.
However, the court says that, in 2023, the project fell behind schedule. Ethicon terminated the agreement “for cause” on March 6, 2023, citing the failure to achieve a milestone. ChemImage claimed that Ethicon breached the contract and filed a claim against J&J for tortious interference with the contract.
The court concluded that ChemImage was entitled to, among other things, damages related to the impairment of intellectual property. However, the court agreed that Ethicon should be discounted to account for the failed partnership.
Ethicon sought a discount rate of 40%, while ChemImage argued for a 17% rate. The court sided with ChemImage on the rate. In total, the company received a $40 million termination fee and is entitled to just over $37 million and IP impairment damages, adjusting for $510,000 that the companies agree ChemImage obtained through asset sales. Accounting for all that, the court ruled that J&J’s Ethicon owes a total of $76,559,521.
