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Home » UPDATE: Covidien sues J&J unit Ethicon over ultrasound devices

UPDATE: Covidien sues J&J unit Ethicon over ultrasound devices

January 15, 2010 By MassDevice staff

Tyco Healthcare v. Ethicon Endo-Surgery is becoming a grudge match for the ages.

Two years after a federal court judge essentially declared their long-running patent fight a tie — siding with Ethicon by dismissing the case but also telling Tyco it was free to re-file — Covidien plc, Tyco Healthcare’s successor company, is now doing exactly that.

Covidien (NYSE:COV) late Thursday it was filing suit against Ethicon Endo-Surgery, a Johnson & Johnson (NYSE:JNJ) medical device subsidiary, alleging Ethicon’s Harmonic line of ultrasonic surgical devices infringe on three patents underpinning Covidien’s AutoSonix surgical tools.

The lawsuit, to be filed in U.S. District Court for Connecticut, is a rematch of a complaint entered by Tyco in October, 2004. But it’s also the latest salvo in a fight over various parcels of intellectual property extending to at least the late 1990s.

The stakes are high for both companies. Ethicon Endo-Surgery has long been a solid profit center for Johnson & Johnson, generating $3.2 billion in revenues through the first nine months of 2009, a 2.9-percent gain over comparable year-ago levels. Medical device sales likewise are by far the largest segment at Covidien, producing $6.1 billion in revenues — or nearly 60 percent of total company sales — during the fiscal year that ended in September, 2009.

The fight, however, didn’t start with Covidien, which debuted in 2007 when Tyco International split off its operating units into separate companies. Nor is it even Tyco Healthcare’s orginal fight; it inherited the bad blood between Ethicon and U.S. Surgical Corp. when Tyco acquired USSC in May, 1998.

The corporate genealogy is important because it became the basis for much of U.S. District Court Judge Janet Bond Arterton’s decision to dismiss Tyco’s case without prejudice in January, 2008. Without expressly ruling on whether Ethicon’s Harmonic line stepped on patents acquired by USSC in 1998, Arterton wrote that Tyco’s (and by extension, Covidien’s) legal team failed to establish ownership of the three patents, by asserting USSC’s claims without also connecting the line between USSC and its succession of corporate parents.

The plaintiff case also was muddled by a pair of April 1999 agreements — one in which USSC settled five other intellectual-property disputes with Ethicon, and another intra-company pact by which USSC transferred several patents and other assets to another Tyco Healthcare subsidiary — except for “patents and patent applications relating to any pending litigation involving USSC.” The two sides argued whether the patents-in-suit were included in the so-called “contribution agreement” or the contemporaneous “settlement agreement;” in the end, Arterton ruled that either way, the result still left Tyco/Covidien with no standing to sue.

The decision wasn’t all bad for Covidien, however. In dismissing the case without prejudice, the judge wrote that “Tyco could cure the standing defect by obtaining valid assignment of the patents in suit and then re-filing.”

Both parties quickly appealed. In its decision last month, the Second Circuit Court upheld the decision to dismiss without prejudice, clearing the way for Covidien to re-file. Johnson & Johnson and Ethicon almost certainly will counter-sue, as the entities did in the original case, although court records from the Connecticut venue were not available late Jan. 14.

Filed Under: Business/Financial News, Legal News, News Well Tagged With: Covidien, Ethicon, Johnson and Johnson

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