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EXHIBIT 10.6
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. |
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. |
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. |
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. |
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. |
Advanced Neuromodulation Systems, Inc. v. Advanced Bionics
Corp. ,
Civil Action No. 4:04cv131 (E.D. Tex);
Advanced Bionics Corp. v. Advanced Neuromodulation Systems,
Inc
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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."
Section 1.08.
Effective Date .
"Effective Date" as used herein shall mean July 29,
2006.
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:
| 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. |
A
stipulation for dismissal with prejudice of the Minnesota CPI case
in the form of Exhibit D;
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| c. |
A
stipulation for dismissal with prejudice of the California case in
the form of Exhibit E;
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| d. |
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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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 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
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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. |
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
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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. |
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
non-infringement, invalidity and/or other defenses, except as set
forth in
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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. |
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. |
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
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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:
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 assigns, hereby
expressly waives any right that it may have under the laws or
statutes of any jurisdiction that limits the extension of a release
to certain types of claims, including, but not limited to,
California Civil Code § 1542, which provides that:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his or her favor at the time
of executing the release, which if known by him or her must have
materially affected his or her settlement with the
debtor."
ARTICLE V
Termination of Japanese Distribution Agreement
Section 5.01 .
The
Parties hereby agree that the Distribution Agreement by and between
Advanced Neuromodulation Systems, Inc. and Boston Scientific
Corporation dated June 20, 2002, (the "Japanese Distribution
Agreement") and the respective rights
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