Court Ends Legal Tiff Between St. Jude Medical Subsidiary and its Rival

Talk about obstinacy.

A state judge in Massachusetts has ended a bitter legal dispute between a St. Jude Medical Inc. subsidiary and Volcano Corp., but neither side is willing to admit defeat just yet. In fact, both companies are claiming victory.

“It is gratifying to have both the jury and the Court rule in LightLab’s favor…” Frank Callaghan, president of St. Jude Medical’s Cardiovascular Division, said in a Jan. 31 news release.

Scott Huennekens, president and CEO of Volcano Corp., countered Callaghan’s victory speech that same day with this vanquishing remark: “We are pleased with this ruling. Along with prior court decisions issued in October 2010 and December 2009, it confirms that Volcano/Axsun are not using LightLab’s purported trade secrets in our OCT development efforts.”

With the acrimonious history between these two rivals, it’s little wonder that neither is willing to concede a loss. The two companies have been battling each other in court January 2009, when LightLab Imaging Inc. sued one of its suppliers, Axson Technology, and Volcano (which acquired Axson in December 2008) over a supply agreement the two companies negotiated in October 2007 (and later amended). LightLab’s lawsuit accused Volcano of interfering with the supply agreement it drafted with Axsun, engaging in unfair competition, unfair or deceptive acts or practices and engaging in misappropriation and wrongful use of its “confidential information and trade secrets.” The complaint also accused Axsun of breaching its development and supply agreement with LightLab, breaching the “implied covenant of good faith and fair dealing,” misappropriating, wrongfully using and disclosing LightLab’s confidential information and trade secrets, engaging in unfair competition, and engaging in unfair or deceptive acts or practices.

The court found Volcano and Billerica, Mass.-based Axsun guilty of breaching certain terms of the development and supply contract with Westford, Mass.-based LightLab as well as misappropriating trade secrets. The decision by state Superior Court Judge Margaret Hinkle bars Volcano from finalizing its acquisition of Axsun until April 2014, but she denied LightLab’s request for an injunction against Axsun, upholding a ruling issued in October 2010 that rejected LightLab’s demands for the protection of five alleged trade secrets relating to laser technologies. In February 2010, a jury found Axsun guilty of violating its contract with LightLab to supply turnable lasers to the company for its optical coherence tomography (OCT) imaging system through 2016.

Hinkle ordered Volcano to pay LightLab $400,000 in damages and $4.5 million in legal fees, according to court documents. And while St. Jude (which acquired LightLab last May) praised Hinkle’s decision, Volcano executives noted the final ruling could have been much worse: LightLab initially sought more than $200 million in damages and $8.9 million in legal fees.

“After two-plus years of litigation, we are gratified by the court’s decision,” Huennekens said. “With LightLab’s trade secret allegations now behind us, we will continue to focus our energy on developing key products that improve patient care.”

St. Jude bigwigs called Hinkle’s decision a legal safeguard for its business interests.

“St. Jude Medical is pleased the court ruled in favor of LightLab and that key technology used in our OCT product platform is further protected from the inappropriate and unlawful conduct that was being orchestrated by Volcano and Axsun Technologies,” a company spokeswoman wrote in an email to MassDevice.