Medtronic 2011 Annual Report Download - page 99

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Medtronic, Inc.
fulfilled, the ‘119 and/or ‘897 Patents are determined to be valid
and the Medtronic products are found to infringe the ‘119 and/or
‘897 Patents, Medtronic will be obligated to pay royalties to
Mirowski based upon sales of certain CRT-D products. A bench
trial concluded on March 13, 2010. On March 30, 2011, the trial
court entered a judgment of non-infringement in Medtronic’s
favor. Mirowski has appealed the decision to the United States
Court of Appeals for the Federal Circuit. As of April 29, 2011 the
amount of disputed royalties and interest related to CRT-D
products was $115 million. In accordance with U.S. GAAP, this
amount has not been accrued because the outcome is not
currently probable.
In addition, Medtronic is a licensee to the 4,407,288 Patent (‘288
Patent) owned by Mirowski relating to ICDs. Until November 2001,
Medtronic accrued and paid royalties under the license based on
a percentage of ICD sales. Medtronic and Mirowski dispute the
application of the ‘288 Patent to certain Medtronic ICD products.
In November 2001, Medtronic ceased paying royalties and entered
into an agreement with Mirowski to pay putative royalties into an
interest-bearing escrow account through the expiration of the
‘288 Patent in December of 2003. As of April 29, 2011, the current
balance in the interest-bearing escrow account was $91 million.
The parties also entered into a tolling agreement deferring and
conditioning any litigation of the obligation to pay royalties upon
certain conditions precedent. The conditions precedent have now
been fulfilled and the escrow balance was released to Mirowski
in May 2011.
Other Matters
On October 14, 2010, the Company received a subpoena issued by
the United States Attorney’s Office for the Western District of New
York pursuant to the Health Insurance Portability & Accountability
Act of 1996 (HIPAA), relating to the Company’s sales, marketing,
and reimbursement support practices regarding certain
neurostimulation devices. The Company is fully cooperating with
this investigation.
On March 12, 2010, the Company received a civil investiga tive
demand from the U.S. Department of Justice pursuant to the
federal False Claims Act seeking information regarding
the Company’s knowledge about claims to Medicare for the
implantation of ICDs, including reimbursement advice given
by the Company, payments to persons or entities involved in
decisions about implantation of ICDs, and the national coverage
determination relating to ICDs. The Company is fully cooperating
with this investigation.
On September 16, 2009, the Company received a subpoen a
from the Office of Inspector General for the Department of Health
and Human Services in the Eastern District of California requesting
production of documents relating to the Company’s cardiac
rhythm medical devices, including revenue, sales, marketing, and
promotional documents, documents relating to reimbursement
communications to customers pertaining to the devices,
documents relating to scientific studies and registries pertaining
to the devices, and documents relating to payments or items of
value provided to customers. The Company is fully cooperating
with this inquiry.
On June 16, 2009, the Company received an administrative
subpoena from the New Jersey Attorney General, Division of
Consumer Affairs, requesting production of documents relating to
the Company’s clinical studies, its financial arrangements with
certain physicians and health care providers, and clinical research
done by certain physicians and health care providers. The
Company is fully cooperating with this inquiry.
On April 13, 2009, the Company received an administrative
health care subpoena from the United States Attorney’s Office for
the Northern District of Indiana requesting documents relating to
the Company’s relationship with customers, as well as documents
relating to certain employees. The Company is fully cooperating
with this inquiry.
On February 9, 2009, the Company received letter notice that
the United States Department of Justice in the Southern District
of Texas is investigating marketing practices, reimbursement
advice of the Company, and appropriateness of therapy delivery
relating to the Company’s cardiac surgical ablation devices. On
July 2, 2009, the United States District Court for the Southern
District of Texas ordered the unsealing of a qui tam complaint
related to the same matter that was filed against Medtronic
on November 17, 2008. On August 21, 2009, the Department of
Justice decided not to intervene at that time but reserved the
right to intervene in the future. The qui tam complaint was served
on October 1, 2009. On December 16, 2009, Medtronic filed a
motion to dismiss the complaint. On October 1, 2010, the motion
was granted without prejudice with leave to amend.
On October 6, 2008, the Company received a subpoena from
the United States Attorney’s Office for the District of Massachusetts
pursuant to HIPAA requesting production of documents relating
to Medtronic’s INFUSE Bone Graft product. The Company has
since received supplemental subpoenas or document requests in
connection with INFUSE Bone Graft, including a December 18,