A $4 million patent infringement win for Smith & Nephew (FTSE:SN, NYSE:SNN) over Hologic (NSDQ:HOLX) and its MyoSure fibroid tumor device will stand, but any damages owed by Hologic to the British medical products giant can’t be determined yet, a federal judge in Boston ruled yesterday.
The lawsuit, the consolidation of 2 cases filed by the British orthopedic devices giant against Interlace and its subsequent acquirer Hologic, alleges infringement of a pair of patents covering the MyoSure technology. Interlace developed the MyoSure device, a hysteroscopic system designed to remove fibroids – benign tumors of the uterus – in an out-patient procedure, using a high-speed cutting blade.
A jury last September awarded $4 million in damages to cover Smith & Nephew’s lost profits from the infringement. Further damages, however, can’t yet be decided because the jury’s verdict was too vague, according to Judge Rya Zobel of the U.S. District Court for Massachusetts.
"The problem is that it is impossible to determine from the jury’s verdict what fraction of Hologic’s sales the award of $4 million in lost profits was intended to cover. For example, if the lost profits were intended to cover ¼ of Hologic’s infringing sales, then S&N would additionally be entitled to about $3.9 million in reasonable royalties on the other ¾ of Hologic’s sales (a 16% royalty on $24.6 million, which is ¾ of Hologic’s $32.8 million revenue base). On the other hand, if the lost profits award was intended to cover ½ of Hologic’s sales, then the reasonable royalty damages would only be about $2.6 million (a 16% royalty on $16.8 million, which is the other ½ of Hologic’s revenue base). The mixed award returned by the jury is thus hopelessly ambiguous," Zobel wrote, according to court documents. "Unfortunately, I am left without any measure of what damages to award. To rectify the situation, 3 options present themselves. First, the parties could simply agree on an appropriate measure of damages; 2nd, the court could hold a bench trial limited to determining the correct amount of damages; or 3rd, the court could hold a jury trial limited to determining the correct amount of damages. The parties shall confer on this issue and report on how they wish to proceed."
Zobel also shot down Hologic’s move to dismiss the verdict and dismissed inequitable conduct claims against Smith & Nephew.
And she had harsh words for Smith & Nephew’s in-house counsel, Norman Hainer, according to the documents, finding his testimony during a bench trial "not credible" on his knowledge of an Olympus (PINK:OCPNY) endoscope used for the prototype MyoSure device.
"As the in-house counsel responsible for S&N’s patents in this field, Hainer’s employment responsibilities specifically entailed having some basic knowledge of what S&N’s innovations were based on and what prior art they competed with. His claim that he was not aware of the Olympus endoscope is not believable," Zobel wrote. "Hainer’s testimony is further discredited by his regrettable performance at the bench trial and at his deposition. At the trial, Hainer’s uncooperative demeanor on the stand raised serious doubts regarding his truthfulness."
The first lawsuit, filed against Interlace in 2010, accused former Interlace chief technology officer Ronald Adams, an SNN employee from 2002 to 2006, of bringing the technology with him when he jumped ship for the then-startup. Smith & Nephew sued Hologic, along similar grounds, after its Interlace buyout last year.
Interlace won 510(k) clearance for the device in October 2009, raising $21 million in June 2010 in a Series C round aimed at commercializing the MyoSure system. The company also won a $75,000 tax break from the Mass. Life Sciences Center to foster the creation of 10 permanent life science jobs in the Bay State. In 2009, Interlace landed a $300,000 tax break from the Commonwealth.