California patient monitoring systems maker Masimo (NSDQ:MASI) posted a big boost to its bottom line after successfully reversing a $5.4 million reward to paid to pair of whistleblowers.
A California court last month vacated the award after Masimo won summary judgment to dismiss the lawsuit. The new ruling put a total of $8 million back in Masimo’s pocket, including the $5.4 million in damages and $2.6 million that the company had to pay its insurance carrier.
The reps have moved to appeal their loss, but the ruling at least temporarily puts boosts Masimo’s earnings and reverses the $8 million write-down the company took in Q4. Masimo reported a 38% increase in profits for its 1st quarter, driven largely by the returned funds.
The former employees had accused Masimo of promoting off-label uses of its Pronto and Pronto-7 devices, improperly billing government insurance programs, withholding sales records and interfering with subpoenas. Masimo went a few rounds in court and in October won summary judgment to dismiss the lawsuit, a decision that the reps have appealed, according to Masimo filings. Orange County, Calif., arbitrator sided with the reps and ordered the company to pay Ruhe and Catala damages, a decision that is subject to court confirmation.
Masimo is still fighting on other legal fronts, including a battle with onetime partners Mindray (NYSE:MR) and Shenzhen Mindray Bio-Medical Electronics Co, which Masimo sued in December 2012 for patent infringement, breach of contract and other claims. The complaint originally alleged that Mindray broke a more than 10-year-old deal to incorporate Masimo’s pulse oximetry technology into its Beneview device and violated 9 Masimo patents in the process. Mindray has moved to dismiss the case in light of Masimo’s related action against Shenzhen Mindray Bio-Medical Electronics Co, Ltd., which is proceeding in California.
Over the past year Shenzhen Mindray has filed counterclaims and managed to win dismissal of the Masimo’s patent complaints, but remains on the hook for the non-patent claims. The companies have gone back and forth adding amendments and counterclaims to the lawsuit, which is scheduled to go to trial in November this year.
Masimo is also fighting another sometime partner, accusing Philips Healthcare (NYSE:PHG) of patent infringement for its FAST pulse oximeter and certain patient monitors. Philips responded with antitrust and patent infringement counterclaims, which Masimo served back with complaints of fraud and "intentional interference with prospective economic advantage."
The court ultimately constrained the lawsuit to 4 allegedly infringed patents for Masimo and 3 for Philips, pushing additional claims to a separate trial. After several more rounds with the court, Masimo and Philips requested a September 2014 trial date.
