Medical Device Lawsuit Watch - February/March 2007

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:

• U.S. ex rel Poteet v. Zdeblick
• Medtronic Navigation, Inc. v. BrainLAB AG
• HDC Med. Inc. v. Minntech Corp.
• United States v. General Electric Co.
• MBO Laboratories, Inc. v. Becton, Dickinson & Company
• Dreyfus v. Advanced Medical Optics, Inc.
• Vitolo v. Mentor
• Thompson v. Medtronic, Inc.
  

U.S. ex rel Poteet v. Zdeblick No. 03-2979 (W.D. Tenn. 2/1/07)

The U.S. District Court for the Western District of Tennessee has denied a whistleblower’s motion to reconsider the Court’s dismissal of her False Claims Act suit against Medtronic Sofamor Danek and Medtronic, Inc. (collectively, “Medtronic”), holding that the whistleblower did not meet applicable legal standards for reconsideration. Ms. Poteet is a former employee of Medtronic Sofamor Danek.

The government’s investigations into the alleged False Claims Act violations were triggered by the filing of two qui tam lawsuits, one in 2002 by a different whistleblower, and Ms. Poteet’s suit in 2003. As part of a $40 million settlement of civil allegations, the United States agreed to seek dismissal of the two qui tam suits. Ms. Poteet’s suit was dismissed in 2006, apparently because it was duplicative of the 2002 suit and was based on prior public disclosures.

In Ms. Poteet’s motion to reconsider, she argued that the settlement agreement between Medtronic and the government clearly showed that the government had in fact proceeded with her lawsuit while simultaneously seeking to dismiss it, in order to deny her a share of the settlement proceeds. While the Court agreed that there are “serious issues as to the consistency of the government’s actions in the various proceedings”, Ms. Poteet had not cited an intervening change of law, introduced new evidence, or demonstrated a clear error of law that would justify the Court’s reconsideration of its dismissal of her case.

Ms. Poteet has filed notice that she will appeal the dismissal to the Sixth Circuit.

Medtronic Navigation, Inc. v. BrainLAB AG No. 06-1289 (Fed. Cir. 2/5/07)

The Court of Appeals for the Federal Circuit has upheld a district court’s holding of non-infringement and judgment as a matter of law for BrainLAB, and has affirmed the district court’s decision to set aside a $51 million jury verdict in Medtronic’s favor. Medtronic alleged that BrainLAB infringed four of its patents relating to image-guided surgery devices that track the location of instruments in a patient’s body during surgery.

Following a thirteen-day trial in 2005, the jury found that BrainLAB had infringed Medtronic’s patents under the doctrine of equivalents and awarded $51 million in damages. The district court granted BrainLAB’s motion to set aside the verdict, finding that Medtronic’s patents were for devices that used acoustic and electromagnetic tracking systems, and BrainLAB’s devices, which use an optical tracking system, did not infringe.

On appeal, the Federal Circuit agreed with the district court. First, the Federal Circuit concluded that the district court did not err in construing the claims at issue. The Federal Circuit also agreed that Medtronic was precluded by prosecution history estoppel from asserting infringement of one of its patents, noting that one of the inventors had clearly narrowed the scope of the patent in exchange for government approval, and had thus surrendered the very subject matter that Medtronic claimed BranLAB had infringed. Finally, the Federal Circuit agreed that the differences between BrainLAB’s optical tracking system and Medtronic’s acoustic system were not insubstantial, and therefore BrainLAB’s system did not infringe Medtronic’s under the doctrine of equivalents.

HDC Med. Inc. v. Minntech Corp. No. 06-1638 (8th Cir. 1/25/07)

The Eighth Circuit has held that a dialyzer reprocessing machine manufacturer failed to show that its competitor violated federal antitrust laws either by modifying its product or by limiting its product warranties.

HDC Medical, Inc. filed suit against Minntech Corp. in federal district court, alleging exclusionary and predatory conduct in violation of the Sherman Act. HDC and Minntech both manufacture dialyzer reprocessing machines. Starting in 2000, Minntech began modifying the design of its machine in a manner that HDC alleged rendered it incompatible with HDC’s formerly complementary reprocessing products. HDC also argued that Minntech’s policy of not honoring its one-year warranty if any reprocessing products other than its own were used on the machines was an antitrust violation.

The Eighth Circuit agreed with the district court and affirmed dismissal of the antitrust claims. On the monopolization claims, the court noted that HDC had not properly defined the relevant product market, and that HDC had not shown anticompetitive motivation by Minntech. Regarding the product modifications, the court noted that the changes were made with the valid business justification of ensuring patient safety and aiding consumers in keeping records in compliance with government regulations.

Likewise, as to the warranty claims, the court explained that “Minntech justified its warranty policy based upon its inability to predict how its machines would react to another manufacturer’s reprocessing solution.” The court found that to be a valid business justification. Because HDC did not show anticompetitive motives by Minntech and because Minntech offered valid business reasons for its actions, the Eighth Circuit held that the district court properly dismissed all of the antitrust claims asserted against Minntech.

United States v. General Electric Co. No. 07-0017 (D. Utah 1/12/07)

On January 12, 2007 General Electric Co. was sued by, and signed a consent decree with, the federal government relating to alleged violation of current good manufacturing practices (CGMPs) and misbranding in connection with certain X-ray surgical imaging systems.

The government’s suit alleges that GE OEC Medical Systems’ X-ray surgical imaging devices were adulterated and misbranded. The complaint named GE OEC Medical Systems, Inc., its parent company General Electric Company d/b/a GE Healthcare (collectively “GE”), and two of their executives, Joseph M. Hogan (Senior Vice President, General Electric Company and President and CEO, GE Healthcare) and Peter McCabe (President and CEO of GE OEC Medical Systems and GE Healthcare Surgery).

The complaint alleged that during follow-up FDA inspections of certain GE plants, the FDA found that GE failed to maintain adequate procedures for implementing corrective and preventative actions. The Utah facility was previously the subject of Warning Letters citing violations of CGMP requirements. That same day, the FDA announced that defendants had signed a consent decree agreeing to meet CGMPs, to comply with FDA regulations for reporting adverse events, malfunctions and device corrections, to hire an independent expert to inspect the plants and certify that corrections have been made, and to submit yearly audit inspections for four years.

MBO Laboratories, Inc. v. Becton, Dickinson & Company No. 06-1062 (Fed. Cir. 1/24/07)

On January 24, 2007 the Court of Appeals for the Federal Circuit affirmed in part and reversed in part the district court’s claim construction of disputed terms in MBO Laboratories’ patent for a hypodermic safety syringe. The patent describes the design of a hypodermic syringe intended to protect health care workers and bystanders from inadvertent needle sticks following an injection or drawing fluid. When the needle is removed from the patient, it is moved backwards until it is behind a “blocking flange.” The blocking flange is held in spring tension and prevents the needle from being inadvertently re-exposed.

The Federal Circuit agreed with the district court that the patent specification and prosecution history clearly indicated that “the invention provides, as an essential feature, immediate needle safety upon removal from the patient.” The term “immediately” was therefore construed to mean “simultaneously with the needle’s withdrawal from the patient.” The Federal Circuit, however, noted that certain claims did not contain the word “immediately” and therefore could not be read as containing that specific limitation.

The Federal Circuit reversed the district court’s ruling relating to the terms “relative movement” and “slidably receiving,” finding that in the patent reissue proceedings before the United States Patent and Trademark Office, MBO specifically sought to broaden the scope of its patent coverage by rewriting its claims to cover all relative movement, not just retraction of the needle. The Court noted that the issue of claim construction is separate from an invalidity analysis and left open the possibility that the reissue claims may violate the recapture rule (prohibiting a patentee from later claiming that which he specifically surrendered in order to obtain issuance of the original patent). The Federal Circuit determined that the terms “relatively moved,” “slidably receiving” and their cognates permit the needle and guard to slide in any manner.

The Federal Circuit remanded the case back to the District Court for the District of Massachusetts for further proceedings consistent with the revised claim construction.

Dreyfus v. Advanced Medical Optics, Inc. No. 06-585 (E.D. La. 1/12/07)

The district court for the Eastern District of Louisiana has partially denied summary judgment for intraocular lens manufacturer Advanced Medical Optics, Inc. (“AMO”), finding that a surgeon’s testimony that a lens was broken when it was implanted into a patient was sufficient evidence of a manufacturing defect.

Plaintiff filed suit under the Louisiana Products Liability Act, which permits recovery for design defect, manufacturing defect, failure to warn, and breach of express warranty. Plaintiff conceded, however, that all of these theories of recovery are preempted by the Medical Devices Amendment to the Food, Drug and Cosmetics Act, with the exception of manufacturing defect.

AMO moved for summary judgment on the manufacturing defect theory, noting that Plaintiff failed to file an “expert report” or any other documents supporting Plaintiff’s manufacturing defect claim, and arguing that a product defect cannot be presumed from the occurrence of an accident alone. The Court found AMO’s insistence on an expert report bordered on “frivolous”, stating that the surgeon’s testimony that he noticed the lens was broken right after he implanted it supported Plaintiff’s claim. The Court also pointed out that there was no suggestion that the device was damaged in shipment or by the doctor. Stating that even though the evidence of manufacturing defect was circumstantial and inferential, it could support a jury verdict in Plaintiff’s favor, and thus a genuine issue remained for determination at trial and summary judgment was inappropriate on the manufacturing defect theory.

Vitolo v. Mentor No. 06-1794 (2nd Cir. 1/3/07)

The Second Circuit affirmed a lower court’s grant of summary judgment to saline breast implant manufacturer Mentor H/S Inc., holding that New York law requires a plaintiff to prove, among other things, that “the challenged act or practice was consumer oriented.”

The Court held that the plaintiff failed to meet this element because the manufacturer’s alleged misrepresentation of the deflation rate of implants had no “broader impact on consumers at large” and it did not have the potential to “affect similarly situated consumers” because the misrepresentations were made to the plaintiff surgeon, in person. Additionally, the plaintiff failed to produce evidence that the manufacturer’s employees made such representations to other doctors or end users. The court also noted that no agency or consumer group was required to “undertake unnecessary investigations” or “divert [its] attention from its normal activities” as a result of the alleged misrepresentation.

Addressing the fraud claims, the Court held that the plaintiff failed to meet any of three elements for showing fraud. First, he failed to demonstrate that there was a public interest in assuring an enforcement of his contract that would give rise to a separate duty of care. Second, he failed to demonstrate a fraudulent misrepresentation that was collateral or extraneous to the contract because the deflation rate of the implants was directly related to the contract. Finally, the plaintiff did not seek special damages caused by the misrepresentation and unrecoverable as contract damages.

Thompson v. Medtronic, Inc. No. 06-0675-RCJ (D. Nev. 12/8/06)

The district court for New Jersey has held that a plaintiff did not assert colorable claims against a sales representative who merely supplied the phone number of an insulin pump manufacturer, thus preserving diversity of citizenship in federal court and precluding remand of the case back to state court.

Plaintiff Thompson’s physician prescribed him an insulin pump and referred him to a sales representative for Medtronic, Inc., an insulin pump manufacturer. The sales representative gave Thompson a 1-800 number to call to order the pump. The sales representative did not order Thompson’s pump for him, and the sales representative was on disability leave when Thompson purchased and used the pump.

After Thompson was hospitalized due to an alleged defect in the pump, he brought suit in state court for negligence, strict product liability, breach of warranty and failure to warn. Medtronic successfully removed the case to federal court. Thompson moved to remand, alleging a lack of diversity jurisdiction because joinder of the sales representative, a Nevada resident, defeated diversity jurisdiction.

The district court disagreed, holding that Thompson had asserted no colorable claims against the sales representative under Nevada state law. Accordingly, diversity jurisdiction was proper and the district court denied the motion to remand to state court.

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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.