Medtronic’s Covidien, J&J’s Ethicon bury most of the hatchet in surgical shears spat

Medtronic (NYSE:MDT) subsidiary Covidien and Johnson & Johnson’s (NYSE:JNJ) Ethicon Endo-Surgery unit largely agreed to bury the hatchet in their longtime dispute over patents covering surgical shears.

The U.S. Court of Appeals for the Federal Circuit last year overturned a decision awarding $177 million to Covidien, after a Connecticut judge ruled that Ethicon Endo-Surgery’s Harmonic Ace +7 shears infringed surgical shears patents held by Covidien’s corporate predecessors, Tyco Healthcare and U.S. Surgical Corp.

The Federal Circuit vacated the damages award, ruling that an Ethicon prototype anticipated the Covidien devices “because Ethicon conceived of the prototype before Tyco’s January 1997 conception date and diligently reduced it to practice without abandoning, suppressing, or concealing it thereafter,” the appeals court ruled. “The district court improperly held that the Ethicon prototype could not be considered prior art … and erred in finding that the curved blade claims and dual [cam] claims would not have been obvious.”

Covidien posted a $5 million bond last October after briefly winning an an injunction barring sales of the Harmonic Ace +7 shears. The bond was intended to cover any Ethicon losses if the injunction were overturned, which happened when the Federal Circuit reversed the case. Ethicon asked the court to award it the full amount of the bond, according to court documents.

Yesterday the companies agreed to drop the case, with each side bearing its own legal costs. Ethicon agreed to drop its bid to recover Covidien’s $5 million bond, which was released to Covidien, and today Judge Janet Hall of the U.S. District Court for Connecticut dismissed the case with prejudice “provided, however, that in the event the Federal Circuit’s judgment of invalidity for any claims of the patents-in-suit in the Tyco Appeal is reversed or vacated in whole or in part, Covidien reserves its right to reassert infringement against Ethicon and Ethicon reserves its right to reassert its affirmative defenses and counterclaims,” accordingto the documents.

That means the case hinges on Covidien’s bid for review by the U.S. Supreme Court, where the company filed a petition for certiorari July 27, arguing that the Federal Circuit appeals court erred because the Ethicon prototype wasn’t complete or made public when Covidien patented its device.

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