Boston Scientific Settles with Medinol for $750 Million
Boston Scientific Corp. (Natick, MA) earlier this month agreed to pay $750 million to Medinol Ltd. (Tel Aviv, Israel) in order to resolve a long-standing dispute over the manufacture and sale of coronary stents. Under the terms of the out-of-court settlement, the two companies also terminated all agreements and existing claims against one another in both Europe and Israel, particularly with respect to Boston Scientific’s Express and Taxus stents.
Additionally, Boston Scientific agreed to return its 22% stake in the Israeli medtech manufacturer. For its part, Medinol stipulated that any future dispute involving alleged patent infringement by Boston Scientific would be settled through an established arbitration process and that any relief would be limited to reasonable royalties. Medinol also agreed not to seek an injunction against the sale of Express or Taxus stents.
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Medinol founders Kobi (top) and Judith Richter: Settling big. |
The dispute between the two companies stemmed from a contractual relationship established in 1995, in which Boston Scientific agreed to use its worldwide marketing clout to distribute the Nir stent manufactured by Medinol. The agreement ran into difficulty early on, as Boston Scientific began to express concern about Medinol’s reported difficulties in meeting its manufacturing commitments. As the dispute simmered, a U.S. Department of Justice investigation involving a product recall inadvertently uncovered the fact that Boston Scientific had set up a secret stent production facility in Ireland in 1997, known within the company as “Project Independence.” In 2000, Boston Scientific CEO James Tobin was forced to acknowledge the existence of its Ireland facility to Medinol.
Shortly after learning about the clandestine manufacturing operation, Medinol accused Boston Scientific of copying its stent and sued for breach of contract in 2001. Boston Scientific countersued, claiming that Medinol was “abusive,” failed to increase production capacity to meet demand, and threatened to withhold deliveries. Boston Scientific’s suit claimed these actions resulted in loss of sales. Boston Scientific also asserted that its Ireland-based manufacturing facility was permitted under the terms of its 10-year contract with Medinol.
As the case worked its way through the courts, both sides were able to cite some victories. Medinol initially won a ruling that would have prohibited Boston Scientific from selling its Express or Taxus stents in the Netherlands while requiring the company to pay huge royalty payments, but it was subsequently overturned on appeal.
The current settlement was the culmination of a trial that began this June in the U.S. District Court in Manhattan. Medinol’s attorneys reportedly sought $4.5 billion at the start of the hearing. Boston Scientific, claiming lost business due to Medinol’s actions, countersued for $400 million. After hearing some preliminary testimony, Judge Alvin Hellerstein called for a recess in August and urged the two litigants to reach a settlement.
Commenting on the settlement—the largest ever paid by Boston Scientific—company senior vice president for corporate communications Paul Donovan said, “We’re pleased to close this chapter and put this matter behind us. We can now direct our full attention to developing our lifesaving products and technologies.”
Kobi and Judith Richter, founders and principals of privately held Medinol, did not publicly comment on the settlement. But Rory O. Millson, lead attorney representing the company, said, “With the help of the judge, we have received a full and fair settlement for what Boston Scientific did to us.”
In spite of the agreement, Millson hinted that Medinol is likely to pursue additional claims against Boston Scientific’s next-generation coronary stent, Liberté, which just this month received the CE Mark from European regulators. Without providing any detail, Millson said, “There’s going to be a lot of activity over our intellectual property.”
The amount of the settlement is generally in line with what industry analysts had anticipated.
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