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EXHIBIT 10.3
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into as of
this 29th day of July, 2006, by and between Boston Scientific
Corporation, a corporation organized and existing under the laws of
the State of Delaware ("BSC"), Guidant Corporation, a corporation
organized and existing under the laws of the State of Indiana
("Guidant"), Cardiac Pacemakers, Inc., a corporation organized and
existing under the laws of the State of Minnesota ("CPI"), Guidant
Sales Corporation, a corporation organized and existing under the
laws of the State of Indiana ("GSC"), and Advanced Bionics
Corporation, a corporation organized and existing under the laws of
the State of Delaware ("ABC"), on the one hand (hereinafter
collectively referred to as the "BSC Parties"), and St. Jude
Medical, Inc., a corporation organized and existing under the laws
of the State of Minnesota ("St. Jude"), St. Jude Medical S.C.,
Inc., a corporation organized and existing under the laws of the
State of Minnesota ("SJMSC"), Pacesetter, Inc., a corporation
organized and existing under the laws of the State of Delaware
("Pacesetter"), and Advanced Neuromodulation Systems, Inc., a
corporation organized and existing under the laws of the State of
Texas ("ANS"), on the other hand (hereinafter collectively referred
to as the "St. Jude Parties"). The BSC Parties and the St. Jude
Parties shall collectively be referred to as the "Parties" in this
Agreement.
RECITALS
WHEREAS, there currently are pending between the BSC Parties and
the St. Jude Parties the following cases:
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1.
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Cardiac Pacemakers, Inc.et al. v. St. Jude
Medical, Inc. et al. , Civil Action No. 1-96-cv-1718
DFH/TAB, (S.D. Ind.) (the "Indiana case");
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2.
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Pacesetter, Inc. et al. v. Cardiac Pacemakers,
Inc.et al. , Case No. 02-1337 DWF/SRN, (D. Minn.) (the
"Minnesota Pacesetter case");
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3.
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Cardiac Pacemakers, Inc. et al. v. St. Jude
Medical, Inc. et al. , Civil Action No. 04-1016 JMR/FLN (D.
Minn.) (the "Minnesota CPI case");
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4.
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Guidant Corp. et al. v. St. Jude Medical, Inc.
et al. , Civil Action No. 04-0067-SLR (D. Del.) (the
"Delaware case");
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5.
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Pacesetter, Inc. et al. v. Intermedics, Inc.
et al. , Case No. CV 06-3166 GHK(FFMx) (C.D. Cal.) (the
"California case");
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6.
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Advanced Neuromodulation Systems, Inc. v.
Advanced Bionics Corp. , Civil Action No. 4:04cv131 (E.D.
Tex); Advanced Bionics Corp. v. Advanced Neuromodulation
Systems, Inc. , Civil Action No. 4:04cv131 (E.D. Tex.); and the
Advanced Neuromodulation Systems, Inc. v. Advanced Bionics
Corp arbitration, Institute for Conflict Prevention and
Resolution Case No. G-06-08A (the "ANS/ABC cases");
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all of which are collectively referred to herein
as the "Litigation";
WHEREAS, the BSC Parties and the St. Jude Parties entered into
discussions in an effort to resolve the Litigation;
WHEREAS, in connection with the discussions with
the BSC Parties (and with their permission), the St. Jude Parties
entered into discussions with representatives of MFV (as defined
below) in an effort to resolve the Indiana case and the Delaware
case, but the St. Jude Parties’ efforts at negotiating a
resolution of those cases with the representatives of MFV were
unsuccessful;
WHEREAS, the Parties now wish to settle certain cases of the
Litigation and to limit the issues remaining in the rest of the
Litigation, upon the terms and conditions set forth in this
Agreement (and the Exhibits hereto);
NOW, THEREFORE, in consideration of the promises and of the
mutual covenants hereinafter set forth, and of the good and
valuable consideration flowing from each party to the other, the
Parties hereto, intending to be legally bound hereby, covenant and
agree as follows:
ARTICLE I
Definitions
Section 1.01. Affiliates . "Affiliates" as used herein shall
have the meaning set forth in the CRM License Agreement.
Section 1.02. CRM License Agreement. "CRM License
Agreement" as used herein shall mean the license agreement relating
to cardiac rhythm management products by and between Boston
Scientific Corporation and St. Jude Medical, Inc., dated July 29,
2006, an executed copy of which is attached hereto as Exhibit
A.
Section 1.03. SCS License Agreement. "SCS License
Agreement" as used herein shall mean the license agreement relating
to spinal cord stimulation products by and between Boston
Scientific Corporation and St. Jude Medical, Inc., dated July 29,
2006, an executed copy of which is attached hereto as Exhibit
B.
Section 1.04. Medtronic Action. The "Medtronic Action" as
used herein shall mean the litigation captioned Medtronic, Inc.
v. Guidant Corporation, et al ., case number 05-1515, currently
pending in the U.S. Court of Appeals for the Federal Circuit, and
any continuation of that action at the district court or appellate
court levels following the issuance of a mandate by the Federal
Circuit.
Section 1.05 MFV.
"MFV" as used herein shall mean
Mirowski Family Ventures, LLC, a limited liability company
organized under the laws of the State of Maryland. MFV is also a
plaintiff adverse to the St. Jude Parties in the Indiana case and
the Delaware case.
Section 1.06. SCS Field. "SCS Field" as used herein shall
have the meaning set forth in the SCS License Agreement.
Section 1.07 . Derivative Product . "Derivative
Product" as used herein shall mean any product subsequently
approved by applicable regulatory authorities for use in spinal
cord stimulation to manage chronic pain of the trunk and limbs that
is of substantially equivalent design and functionality as a
product that is commercially marketed and sold as of the Effective
Date. In the interest of clarity, a future product shall be
considered a "Derivative Product" unless it is covered by a patent
(other than the Licensed Patents) that does not cover a product
commercially
marketed and sold as of the Effective Date.
Whether a future product is a "Derivative Product" shall be
determined on a patent-by-patent basis; a future product that is
not a "Derivative Product" with respect to one patent shall not be
exposed to claims of infringement based on any other patent for
which the product is a "Derivative Product."
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Section 1.08. Effective Date .
"Effective Date" as used herein shall mean July 29, 2006.
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ARTICLE II
Dismissal of Certain Cases and Narrowing of
Issues In Remaining Cases
Section 2.01 . Contemporaneously
with the execution of this Agreement, the Parties shall execute and
promptly file with the appropriate courts the following
documents:
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a.
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A stipulation for dismissal with prejudice of the
Minnesota Pacesetter case in the form of Exhibit C;
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b.
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A stipulation for dismissal with prejudice of the
Minnesota CPI case in the form of Exhibit D;
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c.
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A stipulation for dismissal with prejudice of the
California case in the form of Exhibit E;
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d.
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A stipulation for dismissal with prejudice of the
ANS/ABC cases in the form of Exhibits F and G;
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The foregoing cases constitute the "Dismissed
Litigation." Those cases not so dismissed pursuant to this Section
2.01 constitute the "Remaining Litigation."
Section 2.02 . The Parties further
agree that the issues remaining to be litigated in the Remaining
Litigation shall be circumscribed and continue only within the
following parameters:
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i.
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In consideration for the St. Jude Parties’
covenants and agreements in Sections 2.02, 2.03 and 2.04 of this
Agreement, the BSC Parties covenant and agree that plaintiffs in
the Indiana case shall withdraw and/or not further pursue any
damages claim for lost profits, price erosion, an "up front"
royalty payment, prejudgment interest, or attorneys’ fees
against the St. Jude Parties. In addition, the BSC Parties covenant
and agree that plaintiffs in the Indiana case shall only pursue a
damages claim based on pulse generators and leads which plaintiffs
contend infringe the patent claim asserted in the Indiana case, and
will withdraw and/or not pursue any damages claim based on other
products, whether through a "convoyed sales" theory or otherwise.
Notwithstanding such covenant and agreement, it is understood that
the defendants in the Indiana case shall continue to be free to
argue that damages are not warranted due to non-infringement,
invalidity and/or other defenses, except as set forth in Section
2.02(a)(ii), below. The BSC Parties further covenant and agree that
plaintiffs in the Indiana case shall limit any claim for damages to
a reasonable royalty theory, with a royalty that shall not
exceed
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three percent (3%) of the net sales revenue from
any sales found to infringe the patent in suit, and that plaintiffs
shall not be entitled to receive any payment in connection with the
Indiana case, by way of judgment or otherwise, that exceeds three
percent (3%) of the net sales revenue from any sales found to
infringe the patent in suit.
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ii.
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In consideration for the BSC Parties’
covenants and agreements in Sections 2.02, 2.03 and 2.04 of this
Agreement, the St. Jude Parties covenant and agree that they will
withdraw and/or not further pursue their fraud claim and any claim
for attorneys’ fees. In addition, the St. Jude Parties
covenant and agree not to seek to introduce any evidence of Guidant
product recalls; provided, however, that the BSC Parties covenant
and agree to ensure that plaintiffs will not seek to introduce any
evidence of St. Jude product recalls. The St. Jude Parties further
covenant and agree that (1) defendants in the Indiana case will not
seek discovery on or introduce any evidence in pleadings or court
relating to Dr. Bourland’s conduct or plaintiffs’
conduct vis a vis Dr. Bourland in connection with the trial of
this matter in June 2001 and related information revealed after
that trial; and (2) defendants in the Indiana case will not pursue
any claim or defense (e.g., unclean hands, inequitable conduct,
unenforceability, estoppel, misuse, and/or fraud) based, in-whole
or in-part, on Dr. Bourland’s conduct in connection with
the trial of this matter in June 2001 or based, in-whole or
in-part, on plaintiffs’ conduct vis a vis Dr. Bourland
in connection with the trial of this matter in June 2001 and
related information revealed after that trial. Defendants will
remain free to pursue any defense (including, but not limited to,
inequitable conduct, unenforceability and misuse) to the extent
that such defense is not based in whole or in part on
Dr. Bourland’s conduct in connection with the trial of
this matter in June 2001 or based, in-whole or in-part, on
plaintiffs’ conduct vis a vis Dr. Bourland in connection
with the trial of this matter in June 2001 and related information
revealed after that trial; and plaintiffs will remain free to argue
that any such defense is not warranted or is not properly before
the Indiana court, whether based on law of the case, waiver,
failure of proof, judgment as a matter of law, or other
ground.
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i.
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In consideration for the St. Jude Parties’
covenants and agreements in Sections 2.02, 2.03 and 2.04 of this
Agreement, the BSC Parties covenant and agree that plaintiffs in
the Delaware case shall withdraw and/or not further pursue any
damages claim for lost profits, price erosion, an "up front"
royalty payment, enhanced damages ( i.e. , treble damages
and/or attorneys’ fees), or prejudgment interest, against the
St. Jude Parties. In addition, the BSC Parties covenant and agree
that plaintiffs in the Delaware case shall only pursue a damages
claim based on pulse generators and leads which plaintiffs contend
infringe the patent claims asserted in the Delaware case, and will
withdraw and/or not pursue any damages claim based on other
products, whether through a "convoyed sales" theory or otherwise.
Notwithstanding such covenant and agreement, it is understood that
the defendants in the Delaware case shall continue to be free to
argue that damages are not warranted due to
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non-infringement, invalidity and/or other
defenses, except as set forth in Section 2.02(b)(ii), below. The
BSC Parties also covenant and agree that plaintiffs in the Delaware
case shall withdraw their request for and/or not further pursue an
injunction until all appeals have been exhausted and any judgment
of infringement is final and no longer appealable. The BSC Parties
further covenant and agree that plaintiffs in the Delaware case
shall limit any claim for damages to a reasonable royalty theory,
with a royalty that shall not exceed three percent (3%) of the net
sales revenue from any sales found to infringe the patent in suit,
and that plaintiffs shall not be entitled to receive any payment in
connection with the Delaware case, by way of judgment or otherwise,
that exceeds three percent (3%) of the net sales revenue from any
sales found to infringe the patent in suit.
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ii.
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In consideration for the BSC Parties’
covenants and agreements in Sections 2.02, 2.03 and 2.04 of this
Agreement, the St. Jude Parties covenant and agree that they will
withdraw and/or not further pursue their fourth ("no error"), sixth
("intervening rights"), and eighth ("claim splitting") affirmative
defenses, and any claim for attorneys’ fees. In addition, the
St. Jude Parties covenant and agree not to seek to introduce any
evidence of Guidant product recalls; provided, however, that the
BSC Parties covenant and agree to ensure that plaintiffs will not
seek to introduce any evidence of St. Jude product
recalls.
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iii.
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Notwithstanding any contrary outcome of the
Delaware case, the Parties agree that defendants in the Delaware
case shall not be placed in a position that is worse than that of
Medtronic as a result of the final resolution of the Medtronic
Action. In particular, should Medtronic obtain a final,
non-appealable judgment in the Medtronic Action invalidating one or
more patent claims which plaintiffs in the Delaware case have
asserted against the defendants in the Delaware case, the
Parties agree that defendants in the Delaware case shall owe no
damages or payments to the plaintiffs on any such patent claim(s).
In addition, the Parties agree that, should Medtronic agree to
a settlement with BSC and/or MFV of the Medtronic Action on terms
more favorable than the terms plaintiffs have sought from the
defendants in the Delaware case, then plaintiffs in the Delaware
case shall limit their pursuit of any claim for damages in the
Delaware case such that any damages claim is no less favorable for
the defendants in the Delaware case than the terms of the
settlement in the Medtronic Action are favorable for Medtronic, and
any damages or payments owed by the defendants in the Delaware case
shall be so limited.
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Section 2.03 . Further
Agreements . The BSC Parties agree that St. Jude and its
Affiliates shall be free to seek to negotiate an agreement with MFV
resolving the Indiana case and the Delaware case and that the BSC
Parties will take no action to interfere with the further efforts
of St. Jude and its Affiliates to negotiate with MFV a resolution
of such cases. In connection with, and contingent upon, MFV’s
settlement of the Indiana case and the Delaware case with St. Jude
and its Affiliates, the BSC Parties covenant, consent and agree to:
(1) license or sublicense the MFV patent portfolio to the St. Jude
and/or its Affiliates (as provided in Section 2.06 of the CRM
License Agreement) and/or permit MFV to provide St. Jude and/or its
Affiliates with such a license or
sublicense directly on the same or different
terms as St. Jude and MFV may agree; and (2) dismiss
the Indiana case and the Delaware case for no royalty or other
consideration payable to BSC (including, by way of example, no
payment of any settlement proceeds to BSC and no reimbursement of
the costs of litigation BSC or any of its Affiliates may have
incurred). The BSC Parties further covenant and agree that any
license or sub-license resulting from a settlement between St. Jude
and its Affiliates and MFV may be on different terms than those
terms under which BSC and/or its Affiliates are currently licensed
by MFV, but, in any event, shall not be on terms less favorable to
St. Jude and/or its Affiliates than the terms under which BSC
and/or its Affiliates are currently licensed by MFV. The BSC
Parties also covenant and agree to execute any further documents or
make any additional undertakings that may be necessary to
effectuate the provisions of this Section 2.03. The St. Jude
Parties covenant and agree that St. Jude and/or its Affiliates will
be solely responsible for any payments to MFV in connection with
any settlement with MFV resolving the Indiana case and the Delaware
case.
Section 2.04 . Conduct
of the Remaining Litigation . The BSC Parties and the St. Jude
Parties further covenant and agree to conduct remaining portions of
the Indiana case and the Delaware case as follows:
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a.
Scheduling of the Indiana Case . The BSC Parties and the St.
Jude Parties covenant and agree that plaintiffs and defendants will
cooperate in good faith to negotiate and make such adjustments to
the pre-trial and trial schedule in the Indiana case as are
mutually acceptable such that no party suffers prejudice in meeting
any applicable discovery, pretrial or trial deadlines. In order to
effectuate the foregoing, the Parties covenant and agree to develop
a jointly proposed pre-trial and trial schedule through good faith
negotiations and to jointly request that the Court in the Indiana
case vacate the existing pre-trial and trial schedule if they
cannot agree on a schedule that maintains the existing trial
date.
b.
Scheduling of the Delaware Case . The BSC Parties and the
St. Jude Parties covenant and agree that plaintiffs and defendants
will cooperate in good faith to negotiate and make such adjustments
to the pre-trial and trial schedule in the Delaware case as are
mutually acceptable such that no party suffers prejudice in meeting
any applicable discovery, pretrial or trial deadlines. In order to
effectuate the foregoing, the Parties covenant and agree to develop
a jointly proposed pre-trial and trial schedule through good faith
negotiations and to jointly request that the Court in the Delaware
case vacate the existing pre-trial and trial schedule.
c.
Use of This Agreement in the Remaining Litigation . The BSC
Parties and the St. Jude Parties covenant and agree that this
Agreement, along with all of the other agreements and stipulations
that are to be executed by the Parties as contemplated herein,
shall be protected under Federal Rule of Evidence 408 and any other
applicable state or federal privileges or immunities from use as
evidence with respect to settlements or offers to compromise and
that neither plaintiffs nor defendants shall seek to introduce this
Agreement or the CRM License Agreement as evidence in either the
Indiana case or the Delaware case for any purpose other than as may
reasonably be required to enforce and effectuate the provisions of
this Agreement.
d.
No Admissions . The BSC Parties and the St. Jude Parties
covenant and agree that nothing in this Agreement shall be
construed as an admission of liability by any party
and that neither plaintiffs nor defendants will
seek to use or construe this Agreement in the Indiana case or the
Delaware case as an admission of liability by any party.
Section 2.05 . Additional
Agreements Regarding the Lauro Arbitration . With respect to
the arbitration claims asserted by ANS against Bonaventura (Reno)
Lauro (International Institute for Conflict Prevention and
Resolution Case No. G-06-07A) (the "Lauro Arbitration"), the BSC
Parties additionally covenant and agree to deliver to St. Jude
within five (5) business days of the Effective Date, a signed,
written release and stipulation from Bonaventura (Reno) Lauro in
which Mr. Lauro has agreed to a mutual dismissal with
prejudice of the arbitration between ANS and Mr. Lauro that is
pending before the International Institute for Conflict Prevention
and Resolution, Case No. G-06-07A (the "Lauro Arbitration") and
releasing all related claims between Mr. Lauro and the St.
Jude Parties.
ARTICLE III
Cross Licenses
Section 3.01 . As part of the
consideration for entering into this Agreement, the Parties shall
execute contemporaneously with the execution of this Agreement the
CRM License Agreement and the SCS License Agreement. The Parties
further covenant and agree to cause each of their Affiliates that
holds any ownership interest in the Licensed Patents (as defined in
the CRM License Agreement or SCS License Agreement, as appropriate)
to execute and deliver to the other party within thirty (30) days
after the Effective Date a Consent and Agreement to be Bound by
License, substantially in the form of Exhibit I, hereto, with
regard to the CRM License Agreement, and the SCS License Agreement.
The Parties agree that their sole remedy for any failure by a party
to cause an Affiliate to execute and deliver a required Consent and
Agreement to be Bound by License pursuant to this Section 3.01
shall be limited to the provisions of Section 7.06 of this
Agreement.
ARTICLE IV
Mutual Releases
Section 4.01 . All claims and
counterclaims in the Dismissed Litigation shall be dismissed with
prejudice, and each party, for itself and its successors and
assigns, hereby releases, acquits, and forever discharges the other
party and its Affiliates, successors, and assigns, and all their
respective officers, directors, employees, agents, and
representatives from all such claims and counterclaims. Neither
these releases, nor the dismissal of the ANS/ABC Cases, are
intended to prejudice or impair the rights created or preserved in
the SCS License Agreement, and the Parties specifically agree not
to assert otherwise.
Section 4.02 . Each party, for itself
and its successors and assigns, and its Affiliates and their
respective successors and
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