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February 5, 2010 -- 8:40pm EST

Patent Spending
Big money surrounding legal issues for cars and stents this week. But most of us have only heard about the car part: Toyota, that is. Current estimates of Toyota's cost to make good on its brake problems run anywhere from one to two billion dollars! And the company's fortunes have been raked over the headlines in mythic proportions, such as "fall from grace" and "payback for stealing fire from the gods".

But no such hyperbole for this week's stent news. Instead, on Monday, Boston Scientific announced (rather quietly) that, rather than go to jury trial later this month on patent disputes with Johnson & Johnson / Cordis that date back to 2003, they've decided to just settle everything -- for a mere $1.725 billion!

Consider that this price tag is the same quantum as Toyota's hit, and consider that, as the Wall Street Journal points out, not only is this amount almost double J&J's total 2009 sales of drug-eluting stents, it may eclipse Boston's as well. So one might wonder why, other than a few scattered articles in the business press, there's been so little publicity regarding this major concession. After all, these disputes have been in the courts for years, and many millions already have been spent on lawyers' fees, etc.

One can only assume that Boston Scientific foresaw a worse outcome from a jury trial and so, decided on the option of settlement. Perhaps the company saw the futility of trying to challenge the original stent patents of Palmaz and Gray, patents that time and again have been upheld. But a worse outcome than $1.725 billion?

Julio Palmaz, MDJulio Palmaz, inventor of the original stent design, told me recently that, if you wanted to be an inventor, you'd better be prepared to spend a lot of time in court. Over the past two decades, Palmaz spent years sitting in courtrooms all over the world. In fact, he sold his patents to J&J in 1998 partly to eliminate the suspicion of personal gain when he testified on behalf of his invention. As he told the New York Times in a 2007 profile:

"I see my life in three phases. The early years in the lab, the middle years on the road training physicians, and the last third in court."

Ray Elliott, Boston's new CEO, stated that the company settled to "mitigate risk" and to resolve "major litigation without exposing Boston Scientific to the uncertainties of a jury trial and a potential damages award that was impossible to predict." But the price tag is very high and a stock analyst, quoted in Tuesday's WSJ, opined, "We think most investors will be surprised and concerned," by the new deal.

As for Dr. Palmaz, he will no doubt be relieved at being able to spend February and March elsewhere.

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