Boston Scientific to Pay $1.725 Billion in Patents Settlement

Boston Scientific Corp. will make a payment of $1.725 billion to Cordis Corp. (a division of Johnson & Johnson) in a settlement involving three patent disputes, according to the Natick, Mass.-based firm.

The disputes date back to 2003 and cover Boston Scientific’s Jang patent and J&J’s Palmaz and Gray patents, all of which involve intellectual property in the cardiovascular area.

“We think most investors will be surprised and concerned. And would think BSX [Boston Scientific] shares will be weak today simply because of the size of the settlement and the extra balance sheet/cash flow pressures involved. Recall that earlier this year, BSX settled another patent dispute with JNJ [Johnson & Johnson] and payed $700M in October,” commented Rick Wise, CFA, of healthcare investment bank Leerink Swann.

The first dispute involved a claim by J&J that Boston Scientific’s Express, TAXUS Express and Liberte stents infringed its Palmaz and Gray patents.

The second involved a claim by Boston Scientific that J&J’s Cypher, BX Velocity and Geness stents infringed its Jang patent.

In 2005, there were liability trials on these two matters, and both parties were found to have infringed the other’s patents. Those findings were upheld on appeal.

The third dispute involved a claim by J&J that Boston Scientific’s TAXUS Liberte stent infringed its Gray patent. That matter was scheduled to be tried in September; that trial also will no longer take place.

“We have recently made a concerted effort to mitigate risk throughout the company, including litigation risk,” said Ray Elliott, president and CEO of Boston Scientific. “In the past year, we have significantly reduced the volume of outstanding litigation, having now settled 17 lawsuits with J&J, as well as disputes with other competitors and the government.”

Seth Fischer, Cordis Corp. group chairman, said: “We are very pleased to resolve these long-standing patent disputes.”