Back to Main

Patent Infringement War Continues Between Covidien and J&J Unit - Analyst Blog

Posted: 6/25/2014 1:15:00 PM
Referenced Stocks: MDT;COV;JNJ;OSUR

Adding to the history of patent wars between the two companies, Covidien plc ( COV ) leveled another lawsuit against Johnson & Johnson ( JNJ ) subsidiary Ethicon Endo-Surgery Inc. Filed in the U.S. District Court for the District of Connecticut, the lawsuit alleges that Ethicon's latest ultrasonic surgical product - Harmonic ACE+7 - infringes three Covidien patents.  

The patent infringement lawsuit asks the court to order Ethicon to terminate production and sale of the Harmonic ACE+7 devices and grant damages for the same.

In 2010, Covidien accused that Ethicon's Harmonic line of ultrasonic surgical devices infringed three of the company's patents. In Mar 2013, the U.S. District Court held that Covidien's patents were valid, enforceable and infringed by Ethicon.

The 2010 lawsuit resulted in a $176.5 million verdict against Ethicon. The amount of the verdict, which is currently under appeal, is based on an 8% royalty rate on infringing sales through Mar 2012, plus prejudgment interest.

In Dec 2011, Ethicon also brought infringement charges against Covidien's Sonicision cordless ultrasonic dissection system. According to a ruling issued by the U.S. District Court for the Southern District of Ohio on Jan 22, 2012, Covidien did not infringe any of the seven Ethicon patents in dispute.

In the 2012 ruling, the Court declared that five of Ethicon's patents were not valid. Based on this judgment, Ethicon's patent infringement action was dismissed and Covidien was allowed to continue selling its Sonicision system.

Earlier this month, medical technology giant, Medtronic Inc. ( MDT ) announced its plans to acquire Covidien for $42.9 billion. Medtronic's rationale behind this merger is to offset the impact of high U.S. corporate tax rate by shifting its tax base overseas, to Ireland. Subject to certain customary conditions, the acquisition is expected to close in the fourth quarter of 2014 or early 2015.

Post-merger, the combined entity will be known as Medtronic plc and will boast a comprehensive product portfolio, a diversified growth profile and broad geographic reach. On successful completion of the transaction, Medtronic plc is expected to report at least $850 million of annual pre-tax cost synergies by the end of fiscal 2018.

Presently, Covidien carries a Zacks Rank #3 (Hold). OraSure Technologies, Inc. ( OSUR ) is a better-ranked stock in the medical products industry with a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MEDTRONIC (MDT): Free Stock Analysis Report

COVIDIEN PLC (COV): Free Stock Analysis Report

JOHNSON & JOHNS (JNJ): Free Stock Analysis Report

ORASURE TECH (OSUR): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research