Medical Device Lawsuit Watch - February 2006

This summary of key lawsuits affecting medical devices is provided by the Health Care Law Group of Crowell & Moring LLP, in collaboration with the firm’s Torts, Antitrust and Intellectual Property Law Groups.

Cases in this issue:

• HDC Medical, Inc. v. Minntech Corp.
• Cavitat Medical Technologies, Inc. v. Aetna, Inc.
• Applied Medical Resources Corp. v. US Surgical Corp.
• TMJ Implants, Inc. v. Aetna, et al.
• Miller v. Hypoguard
• Vitola v. Biomedical Tissue Services, Ltd., et al.
• In Re Medtronic Inc., Implantable Defibrillators Products Liability Litigation
• Stanger v. Smith & Nephew, Inc.
• FDA Warning Letter to Guidant Corp.
• Palomar Medical Technologies, Inc. v. Cutera, Inc.
  

HDC Medical, Inc. v. Minntech Corp. Civil No. 04-143 (D. Minn. 1/27.2006)

On January 27, 2005, a federal district judge granted summary judgment in favor of Minntech Corp., a dialyzer manufacturer, dismissing antitrust claims by HDC Medical, Inc. HDC Medical, also a dialyzer manufacturer, sued Minntech in 2003, for alleged violations of the Sherman and Clayton Acts.

The products at the heart of the suit, dialyzers, are filtration devices used in kidney dialysis procedures. Both HDC and Minntech manufacture multiple-use dialyzers, which require stringent methods of cleaning between uses. Multiple-use dialyzers are also heavily regulated, and dialysis clinics using the devices must comply with strict labeling and recordkeeping requirements of use and cleaning. In addition to manufacturing the devices themselves, both corporations also manufacture reprocessing devices, germicides for use in the reprocessing devices, and software programs that gather data and maintain records that meet federal regulatory requirements.

HDC claimed that Minntech began its allegedly predatory practices in 2000, by installing a barcode scanner on its reprocessing device which prevented its automated use unless the germicide used with the device was Minntech’s brand of germicide. Minntech also voided the reprocessing device’s warranty if its germicide was not used with the device, and provided free technical services, discounts on replacement parts, and offered preventative maintenance plans to users of its germicide. HDC argued these actions constituted an illegal tying arrangement under the Sherman Act, and Section 3 of the Clayton Act.

As to HDC’s Sherman Act allegations, the court held that Minntech had not committed a per se antitrust violation, nor had Minntech’s policy made the purchase of Minntech’s products the only viable economic option for consumers. First, the court found that the purchase of any of Minntech’s products at issue were not literally conditioned on the purchase of any other product, and several options existed for customers who wished to use other products with Minntech’s devices. The court also found that the undisputed facts demonstrated that purchasers had several economically viable options for using HDC and Minntech devices and products together. The court next found that, even if HDC was able to show a tying arrangement, HDC failed to show Minntech had sufficient market power to restrain competition.

HDC’s Clayton Act claim was premised on the tying of the warranty on Minntech’s reprocessing device to the use of Minntech’s germicide. As to this claim, the court noted that the Eighth Circuit had spoken clearly on this issue in Marts v. Xerox, 77 F.3d 1109 (8th Cir. 1996), when it held that the Clayton Act only applies when both the tying and tied product are goods, not services. Since a warranty is a service, not a good, there could be no Clayton Act violation.

Cavitat Medical Technologies, Inc. v. Aetna, Inc. Civil Action No. 04cv01849MSKOES (D.Colo. 1/27/06)

On January 27, 2005 a Colorado federal judge dismissed several counterclaims raised by Aetna Inc. in a lawsuit involving Cavitat Medical Technologies, Inc. (Cavitat), the manufacturer of the Cavitat sonar bone imagining instrument, and Robert Jones, the machine’s co-inventor and CEO of Cavitat. The counterclaims were filed in response to a lawsuit by Cavitat against Aetna, on claims that Aetna had unlawfully disparaged Cavitat and interfered with Cavitat’s business relationships. Aetna countersued, claiming that Cavitat and its co-founder, Mr. Jones, had committed insurance fraud, violated the Colorado Consumer Protection Act (CCPA), and committed a civil conspiracy.

Cavitat's bone-imaging scanners are used by some dentists to detect infected cavities in the jawbone that they say can cause facial pain and other ailments. Treatment involves the removal of healthy teeth and portions of a patient's jaw and is highly controversial in the medical community. This procedure’s controversy has grown over the last few years leading to several medical malpractice suits against doctors using the Cavitat device. Some dentists have claimed that the procedure practiced by those using the Cavitat machine is “bizarre” and “dangerous.”

Claiming that the procedure was unnecessary, experimental, and without sufficient supporting data, Aetna refused to insure any procedures using the Cavitat machine. That action by Aetna led to the initial lawsuit by Cavitat.

In its counterclaims, Aetna alleged that Cavitat improperly used the device to treat nondental conditions, that Cavitat made false representations to practitioners in promoting the sale and use of the device at Cavitat sponsored conferences, that Cavitat advised patients concerning medical care, and that Cavitat improperly encouraged practitioners to submit insurance claims for use of the device and pathology analysis. Aetna also claimed that Cavitat encouraged dentists to miscode insurance claims to make their questionable diagnoses and treatments look legitimate and therefore allow them to receive reimbursements.

Denver federal judge Marcia Krieger dismissed Aetna’s claims on the grounds that Aetna lacked standing to assert a claim under the CCPA and had failed to allege with enough specificity an actionable claim for fraud or civil conspiracy. Cavitat’s claims against Aetna are set for a three week trial scheduled to begin June 12, 2006.

Applied Medical Resources Corp. v. US Surgical Corp. No. 05-1149 (Fed. Cir. 1/24/06)

The U.S. Court of Appeals for the Federal Circuit upheld a $64.5 million judgment against U.S. Surgical Corp. for willful infringement of a device patent owned by Applied Medical Resources Corp. The patent is for a trocar, a device used as an access port to the abdomen during laparoscopic surgeries.

Applied Medical and U.S. Surgical have been in litigation over Applied Medical’s Versaport I and II trocar patents since 1996. After resolving various patent validity issues in 2003 (Applied I), the district court held a trial to determine the amount of damages owed to Applied Medical (Applied II). U.S. Surgical moved for summary judgment, arguing that the 7% royalty determined in Applied I should be applied to this case, under a theory of collateral estoppel. U.S. Surgical also moved to preclude evidence against it of willful infringement. The district court denied both motions, saying that it was up to the jury to make an independent determination of the royalty rate, and evidence that U.S. Surgical had infringed Applied Medical’s patent before was “probative of its intent to infringe” again. At the close of trial, the jury awarded Applied Medical $43,575,907. U.S. Surgical renewed its motion for judgment as a matter of law, and Applied Medical moved for enhanced damages. The district court granted Applied Medical’s motion, increased the damage award by 25%, and awarded fees and interest, for a total award of $64.5 million.

According to the Federal Circuit, collateral estoppel is appropriate only if: (1) the issue to be decided is identical to one decided in the first action; (2) the issue was actually litigated in the first action; (3) resolution of the issue was essential to a final judgment in the first action; and (4) the parties had a full and fair opportunity to litigate the issue in the first action. The Court held that the prior royalty rate determination was not the same, because the infringements requiring compensation began at “separate and distinct” times. The Court also held the infringements were not the same because they involved two different products, the Versaport I and the Versaport II, whose sales began at different times.

The Federal Circuit also upheld the district court’s refusal to overturn the jury verdict, agreeing that Applied Medical had produced evidence from which a jury could reasonably infer that U.S. Surgical desperately needed a universal seal trocar to remain competitive in the surgical business, that U.S. Surgical’s management did not properly oversee or adequately participate in the development of Versaport II, and that U.S. Surgical’s management placed intense time pressure on their engineers to create a new product, all of which supported the jury’s finding of willful infringement.

TMJ Implants, Inc. v. Aetna, et al. Civil Case No. 05-cv-00783-LTB-CBS (D.Colo. 12/13/2005)

On December 13, 2005, a Colorado district court dismissed claims by a temporomandibular joint device manufacturer, TMJ Inc. (TMJI), regarding allegedly defamatory and disparaging statements published by defendants Aetna, Inc., CIGNA Corp., and related parties. TMJI markets its devices used to treat temporomandibular disorders (TMD) and temporomandibular joint (TMJ) dysfunction. They were approved by the FDA in 2001.

TMJI’s complaint alleged that the defendants had published “clinical policy bulletins” or “coverage position documents” naming the plaintiff’s devices as “experimental,” “investigational,” and “unproven,” and citing “inadequate evidence” of the safety of plaintiff’s partial and total joint prostheses to treat TMD. One of defendant’s publications also compared TMJI’s devices to those of a competitor. The plaintiff sued for lost sales and profits.

TMJI’s claims included defamation, injurious falsehood (“commercial disparagement”), and tortious interference with both prospective business relations and contractual relations.

According to Judge Babcock’s opinion dismissing these claims, although the defendants’ statements may have deterred persons from dealing with the plaintiffs, a defamatory communication that consists of opinion is only actionable under Colorado law if it implies the allegation of undisclosed defamatory facts as the basis for the opinion. In this case, the defendants’ statements were not defamatory because (1) they were opinions based, at least in part, on factors not capable of being proved true or false and (2) a reasonable person reading them would conclude that the statements are opinion, not fact. Although the defendants disclosed some facts on which they based their opinion, such as the findings of certain empirical studies, the statements still qualified for Colorado’s fair comment privilege. To hold otherwise, the court found, would deter persons in the defendants’ position from disclosing facts that its customers would find most useful in measuring the reliability of their opinion.

The court also held that that the defendants’ statements enjoyed First Amendment protection because the efficacy of TMJI’s devices is a matter of public concern and they did not contain a “provably false factual connotation.” Finally, because the defendants’ publications were protected speech, the court held that they were not improper and could not give rise to claims for interference with TMJI’s contracts and prospective business relationships.

Miller v. Hypoguard S.D. Ill., No. 05-CV-0186-DRH (S.D.Ill. 12/20/2005)

On December 20, 2005, a federal district court in Illinois allowed a class action against a blood glucose monitor manufacturer and its parent company to go forward, in part. The action arises out of the manufacturing, marketing and sale of defendant Hypoguard’s “Advance Blood Glucose Monitor” and the “Assure” I, II, or III or Quick Tek blood glucose monitors. The complaint alleges that the defendants’ products were defectively designed or manufactured, resulting in inaccurate readings. Defendants also allegedly made material misrepresentations and concealed material facts in connection with the marketing, sale and warranty of the devices.

Judge Herndon dismissed the plaintiffs’ state claims of breach of implied and express warranty and claim of breach of implied warranty under the Magnuson-Moss Act because the plaintiffs failed to allege that they notified the defendants of problems with their monitors or that they believed the monitors breached any express or implied warranties. Although, under Illinois law, there are some instances when a buyer can fulfill the notice requirement without giving direct notice to the seller, the court found that neither exception to the notice requirement was met in this case. In so holding, the court dismissed the plaintiffs’ argument that the defendants should be estopped from arguing lack of notice because they deliberately failed to disclose the defect to the public and that the notice requirement should be relaxed in consumer class actions.

The court also dismissed the plaintiffs’ claims of statutory and common law fraud, holding that they failed to plead these claims with particularly, as required by the Federal Rules of Civil Procedure. The court found that the plaintiffs had not alleged the “who, what when where, and how” regarding the misrepresentations made by the defendants. The court’s ruling allows the plaintiffs to amend their complaint as to these claims.

The court upheld, however, the sufficiency of the plaintiffs’ breach of contract claim, holding that they had delineated facts sufficient to allow the court to understand the “gravamen of the complaint.”

Finally, the court dismissed the plaintiffs’ claims against the manufacturer’s parent company, Madisys, because the complaint did not allege anything specific to that defendant, aside from a statement that Medisys is the parent company of Hypoguard. According to the court, the allegations against Medisys were too scant to withstand dismissal.

Vitola v. Biomedical Tissue Services, Ltd., et al. No. unavailable (N.J. Super. Ct. 12/27/2005)

On December 27, 2005, Anthony Vitola filed a class action complaint in New Jersey Superior Court, alleging that he received body parts that allegedly were taken illegally from cadavers and not tested for diseases. The named defendants include Biomedical Tissue Services Ltd. (BTS), Lifecell Corp., Lost Mountain Blood and Tissue Center of Central Texas, and others.

According to the complaint, Vitola underwent an anterior cervical diskectomy fusion with cadaver bone in July 2005. Three months after the surgery, his doctor informed him that he had been the recipient of certain bone and tissue parts taken by Biomedical Tissue Services from corpses without authorization and without proper screening for infectious diseases.

The purported class action is estimated to include over one hundred persons, all of whom allegedly have received illegally obtained body parts through transplant surgery. The complaint seeks to limit the class to those who have not yet suffered personal injuries, and are in need of medical monitoring. Among the causes of action asserted in the complaint are violations of all fifty states’ consumer fraud acts, common law fraud, New Jersey products liability, breach of contract, breach of express and implied warranties, negligent and intentional infliction of emotional distress, medical monitoring and loss of consortium.

A complaint alleging similar facts and causes of action against Biomedical Tissue Services Ltd. and others was filed in New Jersey Superior Court by an individual plaintiff, Gary Pieper, on December 15, 2005.

In Re Medtronic Inc., Implantable Defibrillators Products Liability Litigation MDL Docket No. 1726, JPMDL; No. 05-1726 (D. Minn. 12/7/2005)

On December 7, 2005, the Judicial Panel on Multidistrict Litigation consolidated 25 complaints in 14 federal district courts that were pending against Medtronic Inc., a Minnesota based company and one of the worldwide leaders in the manufacture of implantable heart defibrillators. The panel found that all of the cases, which involve varies claims that Medtronic’s defibrillators were defective, were sufficiently related to justify consolidation. The cases were assigned to U.S. Judge James M. Rosenbaum of the District of Minnesota.

One consolidated case is Baker v. Medtronic, Inc., C.A. No. 3:05-440 (M.D. FL. 2005). In January 2004, the plaintiff Earl Baker received a Medtronic implantable defibrillator. After an announcement made by Medtronic in mid-2004 that there were possible battery depletion problems with its defibrillators, Mr. Baker underwent surgery to replace an allegedly defective battery in his implant. Following surgery, the plaintiff instituted a class action against Medtronic claiming, among other things, strict liability, negligence, breach of implied and express warranties, and fear of future product failure.

The Judicial Panel transferred all of the cases pending against Medtronic except for David Downes v. Medtronic, Inc. No. 05-80746, (S.D. Fla. 2005). Downes was deferred at the request of the U.S. District Court for the Southern District of Florida because the judge said he needed to rule on a pending motion.

According to the Baker complaint and other consolidated cases, there may be as many as 87,000 recipients of the Medtronic defibrillator in question, and the number of potential class members may run into the tens of thousands according to at least one of the complaints filed against Medtronic.

Stanger v. Smith & Nephew, Inc. No. 04-839 (E.D. Mo. 11/30/2005)

On November 30, 2005, a Missouri federal judge granted summary judgment in favor of plaintiff Linda Stanger, on her claim that Smith & Nephew Inc. (S&N) was strictly liable for its failure to warn her, post-sale, of subsequent failures associated with S&N knee implants of the kind she received in 2002. The judge, Henry Edward Autrey of the Eastern District of Missouri, however, granted summary judgment in favor of the defendants on almost all of plaintiff’s remaining claims.

Linda Stanger received an S&N Genesis I articular tibial insert during reconstructive knee surgery in April 2002. Less than one year later, the plaintiff had to receive revision knee surgery as a result of oxidation delamination (a process by which an implant begins to corrode and break down) that had occurred in her knee insert. The plaintiff’s original knee implant (which she received in April 2001) was constructed and sterilized in March 1991 and sold by S&N to Phelps County Regional Health Center who later conducted the plaintiff’s knee surgery. The implant had been sterilized using gamma irradiation, an industry standard in the early 90’s, but a process later found to have a shelf life of only five years. S&N later discovered that if left unimplanted for more than five years, the implants would begin to oxidize. The oxidization, in turn, caused the implants to break down and eventually fail. Gamma irradiated implants that were surgically inserted into a person less than five years after being sterilized were not at risk to oxidization, as such a process does not occur once surgically inserted into a person.

The tibial knee insert the plaintiff received had been gamma irradiated more than 5 years prior to her surgery and had begun oxidizing. After receiving corrective knee surgery, Linda Stanger brought suit against S&N claiming, inter alia, strict liability, failure to warn, negligence, and breach of an ongoing duty to warn.

Granting summary judgment for the defendant on most of plaintiff’s claims, the court found that it was not S&N’s method of sterilization (gamma irradiation) that caused the breakdown of the implants, but rather the later oxidization of the implants. Finding that the oxidization did not occur until after S&N placed its implants into the stream of commerce, Judge Autrey held that the product was not defective when it left S&N’s control and therefore the company could not be held to be strictly liable for the implants subsequent breakdown. Likewise, the judge held that because there was no government-mandated recall of the inserts, S&N had no duty to recall under Missouri law. Based on the defendant’s expert testimony, Judge Autrey also found that S&N was not negligent in its sterilization and sale of the implant in question because gamma irradiation was the industry standard in 1991 and S&N had no reasonable way of knowing that gamma irradiated implants had such a short shelf life.

Judge Autrey, however, granted the plaintiff’s summary judgment motion on her claim that S&N breached its duty to warn potential implant recipients of the dangers associated with gamma irradiated implants. The judge held that S&N’s status as an expert on its medical device meant that it had an ongoing duty to warn about risks associated with its medical product even after it had sold the product to an intermediary. S&N’s motion to reconsider is still pending and Judge Autrey has yet to set a date for a damages trial.

FDA Warning Letter to Guidant Corp. December 22, 2005

The Food and Drug Administration recently sent a warning letter to Guidant Corporation that will have an impact on the company’s ability to develop new products. The letter concerns the manufacturing procedures for Guidant’s cardiac defibrillators and pacemakers. Recently Guidant revealed that a design flaw in the defibrillators caused them to fail without warning, which has caused several patient deaths.

In August, FDA conducted an investigation of the plant where the devices are manufactured and identified several problems, including failure to adequately test the devices, failure to maintain adequate procedures to identify and correct product quality problems, and failure to maintain adequate documentation and device history records.

FDA imposed several sanctions on Guidant. It stated that all federal agencies are advised of the issuance of warning letters, and that agencies may take the information contained in the letter into account when considering the award of government contracts. FDA will not approve any pre-market applications for Class III devices to which the deficiencies contained in the letter are reasonably related. FDA will not grant any requests for Certificates to Foreign Governments. Finally, FDA warned that it may take regulatory action without further notice. The sanctions will remain in effect until the violations contained in the warning letter have been corrected.

Palomar Medical Technologies, Inc. v. Cutera, Inc. Civil Action No. 02-10258-RWZ (D. Mass. 12/12/2005)

The U.S. District Court of Massachusetts recently denied Cutera Inc.’s motion for summary judgment on whether its CoolGlide family of hair removal devices infringes Palomar Inc.’s patent. Palomar is the owner of US Patent No. 5,735,844, “Hair Removal Using Optical Pulses,” which describes a hair removal process using a combination of pressure and skin irradiation.

Palomar filed suit against Cutera, arguing that Cutera’s hair removal devices violated three claims under its patent. Cutera filed a motion for summary judgment on all three asserted claims on the grounds of invalidity and non-infringement.

Cutera argued that all three claims were invalid because they were anticipated by prior art, specifically 1967 and 1983 journal articles that discussed laser hair removal in association with skin removal techniques. The court disagreed with Cutera, finding that neither article taught the simultaneous removal of a plurality of hairs from a skin region, which was the technique claimed in Palomar’s patent. For these reasons, the court found the patent to be valid.

Next Cutera argued that its devices did not infringe Palomar’s patent. The claims at issue involved whether pressure was applied to the CoolGlide handpieces in order to achieve hair removal, whether the elements necessary to achieve optical radiation occur simultaneously, and the meaning of “coverge.” While Cutera argued that its devices were used and performed in distinctly different ways from the techniques described in Palomar’s patent, the court characterized all of Cutera’s arguments as attempts to read limitations into the patent claims that did not exist, and found that summary judgment was inappropriate.

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This material was prepared by Crowell & Moring LLP attorneys Chandra Westergaard Snyder, Jennifer Burdman, Jessica Hall, Lauren Kim and Heather Good. It is made available on the Crowell & Moring website for information purposes only, and should not be relied upon to resolve specific legal questions. If you have questions or want additional information, please call your regular Crowell & Moring contact or you may contact the editor of Medical Device Lawsuit Watch.