SETTLEMENT AGREEMENT
This is an agreement (hereinafter referred to as "Agreement")
dated and effective as of this 28th day of June, 1999 ("Effective
Date"), by and between the following parties:
a) Ethicon Inc., a corporation organized under the laws of the
State of New Jersey, having its principal xxxxxx xx X.X.
Xxxxx 00, Xxxxxxxxxx, XX 00000; Mitek Surgical Products, a
division of Ethicon, having its principal office at 00
Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000; Gynecare, a division of
Ethicon, having its principal office at 000 Xxxxxxxxxxxx
Xxxxx, Xxxxx Xxxx, XX 00000; and Gynecare, Inc., a
corporation organized under the laws of the State of
California, having its principal office at 000 Xxxxxxxxxxxx
Xxxxx, Xxxxx Xxxx, XX 00000 (collectively "Ethicon");
b) Gyrus Medical, Ltd., a corporation organized under the laws
of the United Kingdom, having a principal office at Xxxxxxx
Xxxx, Xx. Xxxxxxx, Xxxxxxx XX0 XXX, XX ("Gyrus"); and
c) ArthroCare Corporation, a corporation organized under the
laws of the State of Delaware having its principal office at
000 Xxxxx Xxxxxxxx Xxx., Xxxxxxxxx, XX 00000
("ArthroCare").
ARTICLE 1 - BACKGROUND
1.1 Ethicon and ArthroCare are presently parties to a pending
patent litigation (further defined below), that involves alleged
infringement arising from the manufacture and sale of Ethicon's VAPR(R)
and VersaPoint(R) electrosurgical products. ArthroCare and Ethicon wish to
fully settle this litigation through licenses and grants of immunity
from suit upon the terms and conditions set forth below.
1.2 Ethicon and ArthroCare further wish to establish and utilize
procedures for binding arbitration to resolve certain future patent-
related disputes between the parties.
NOW, THEREFORE, in consideration of the mutual promises contained
in this Agreement, the parties agree as follows:
ARTICLE 2 - DEFINITIONS
The following terms, when used with initial capital letters, shall
have the meanings set forth below.
2.1 "Affiliate" is any entity that directly or indirectly
controls, is controlled by, or is under common control with a Party, and
for such purpose "control" shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of the entity, whether through the ownership of
voting securities, by contract or otherwise.
2.2 "ArthroCare Patents and Applications" includes U.S.
patents and applications that contain claims or pending claims [***] and
are further defined by the following:
a. U.S. patents issued, and U.S. patent applications
pending in the United States Patent and Trademark Office ("PTO"), [***]; and
b. U.S. patent applications that are filed in the PTO after
the Effective Date that claim priority to any issued
patent or pending patent application identified in
clause (a) above, including any patents issuing from
such patent applications; and
c. U.S. patents issuing after the Effective Date that issue
from or claim priority to any issued patent or pending
patent application identified in clauses (a) or (b) 'above; and
d. Any reissues, renewals, substitutions, re-examinations
and extensions of any of the foregoing in clauses (a),
(b), or (c), above.
A list of the patents and patent applications in existence as of the
Effective Date that fall under the definition of "ArthroCare Patents
and Applications" is attached as Schedule A hereto.
2.3 "Arthroscopy Field of Use" means the use of radio
frequency (xxxxxxx 00 Xxxxxxxxx ("Xxx") and 20 Megahertz ("Mhz")) in
arthroscopy [***].
2.4 "Asserted Claims" means the following patent claims: [***]
2.5 "Calendar Quarter" is the usual and customary Ethicon
calendar quarter, used for
internal accounting purposes, of approximately three (3) months, in
which each of the first two months consist of four weeks and the third
month consists of five weeks.
2.6 "Controller(s)" shall mean a radio frequency power supply
that operates at any frequency between 10Khz and 20Mhz.
2.7 "Disposable Product(s)" shall mean medical instruments and
components of such medical instruments which may have one or more
electrode(s) and electrical connection(s) for coupling the electrode(s)
to a Controller(s).
2.8 "Established Current Net Selling Price" shall mean the
average selling price
("ASP") of a Licensed Product in the Territory in the applicable Field
of Use for the immediately preceding three (3) month period.
2.9 "Ethicon Patents and Applications" includes U.S. patents
and applications that contain claims or pending claims [***] and are
further defined by the following:
a. U.S. patents issued, and U.S. patent applications
pending in the United States Patent Office "PTO"), [***]; and
b. U.S. patent applications that are filed in the PTO
after the Effective Date that claim priority to any
issued patent or pending patent application identified
in clause (a) above, including any patents issuing
from such patent applications; and
c. U.S. patents issuing after the Effective Date that
issue from or claim
priority to any issued patent or pending patent
application identified in clauses (a) or (b) above;
and
d. Any reissues, renewals, substitutions, re-examinations
and extensions of any of the foregoing in clauses (a), (b), or (c),
above.
A list of the patents and patent applications in existence as of the
Effective Date that fall under the definition of "Ethicon Patents and
Applications," including but not limited to those Ethicon Patents and
Applications [***] is attached as Schedule B hereto.
2.10 "Ethicon Issued Patent" means an issued patent listed on
Schedule B, or a patent which issues from an application listed on
Schedule B, or a patent which issues from an application which claims
priority to a patent or application listed on Schedule B.
2.11 [***]
2.12 "Fields of Use" shall mean, collectively, the Arthroscopy
Field of Use and the
Gynecology Field of Use.
2.13 "Foreign Counterpart" means counterparts to the ArthroCare
Patents and Applications or counterparts to the Ethicon Patents and
Applications filed outside of the United States. Attached as Schedule D
hereto is a list of the currently pending Foreign Counterparts to the
ArthroCare Patents and Applications filed as of the Effective Date.
Attached as Schedule E hereto is a list of the currently pending Foreign
Counterparts to the Ethicon Patents and Applications filed as of the
Effective Date.
2.14 "Gynecology Field of Use" means the use of radio frequency
(between 10 Khz and 20 Mhz) in hysteroscopic [***]
2.15 "Licensed Product" includes [***]
2.16 "Litigation" shall mean ArthroCare Corporation v. Ethicon,
Inc., et al., U.S. District Court for the Northern District of California
Civil Action No. C98-00609 WHO.
2.17 "Material Change" shall be [***] The following examples
are only intended to assist the Parties and any appointed arbitrator(s)
under this Agreement in assessing whether a change is a Material Change.
The examples are not intended to act as a limitation on the stated
definition of "Material Change."
a. By way of example only and not limitation, [***]
b. In contrast, and by way of further example and not
limitation, [***]
2.18 "Net Sales" is [***] less the following amounts: [***]
2.19 "The Parties" to this Agreement are ArthroCare, Ethicon
and Gyrus.
2.20 "Surgical Kit" shall mean a plurality of products or
devices sold together with a single invoice price. Such products or
devices do not necessarily have to be used together in a surgical
procedure, or used in a surgical procedure at all, to be considered part
of the Surgical Kit.
2.21 "Technology" means radio frequency (between 10 Khz and 20
Mhz) medical devices for use in arthroscopy or hysteroscopic gynecology
[***].
2.22 "Territory" shall mean the United States of America,
including its territories and possessions.
2.23 "Valid Claim" is an unexpired issued claim of a patent
that has not been held invalid or unenforceable by a final decision of a court
or other governmental agency of competent jurisdiction, which final
decision is not appealable or appealed within the time allowed for
appeal, or by a decision from the arbitrator(s) as provided under
Article 14, herein, and which has not been admitted to be invalid or
unenforceable by the patent owner or its successors or assigns through
reissue or disclaimer.
ARTICLE 3 - DISMISSAL OF THE LITIGATION
3.1 Subject to the terms and conditions of this Agreement,
Ethicon and ArthroCare agree to promptly dismiss with prejudice all
claims and counterclaims in the Litigation, each side bearing its own
costs of suit and attorney fees. To effectuate this provision, those
Parties will sign the Stipulated Notice of Dismissal with Prejudice that
is attached hereto as Schedule F within 2 court days of the Effective
Date. Ethicon and ArthroCare shall, immediately upon execution thereof,
[***]
ARTICLE 4 - ARTHROCARE LICENSE GRANT AND RELEASE
4.1 Subject to the terms and conditions of this Agreement,
ArthroCare grants to Ethicon a [***] license [***] under the ArthroCare
Patents and Applications to make, have made, use, import, sell, have
sold, and offer for sale Licensed Products solely in the Arthroscopy
Field of Use solely within the Territory.
4.2 Subject to the terms and conditions of this Agreement,
ArthroCare grants to Ethicon a [***] license [***] under the ArthroCare Patents
and Applications to make, have made, use, import, sell, have sold, and offer
for sale Licensed Products solely in the Gynecology Field of Use solely
within the Territory.
4.3 Ethicon shall have the right to extend the licenses granted
herein to any of Ethicon's Affiliates, upon the terms and conditions of
this Agreement, provided that Ethicon provides ArthroCare with notice of
any such extension within sixty (60) days thereof and further provided
that Ethicon agrees in writing to be responsible for the performance by
such Affiliates of all of Ethicon's obligations hereunder, [***]
4.4 Subject to the terms and conditions of this Agreement,
ArthroCare forever releases and discharges Ethicon and Gyrus, and their
Affiliates, directors, officers, employees, suppliers and customers (the
"Released Parties") from and against all patent claims, liabilities,
damages, royalties and other expenses whatsoever [***]
4.5
(a) [***]
(b) [***]
(c) [***]
(d) [***]
(e) [***]
(f) [***]
(g) [***]
(h) [***]
(i) [***]
ARTICLE 5 - PAYMENTS
5.1 License Fee. Within two (2) business days of the Effective
Date, Ethicon will pay ArthroCare [***] as a license fee [***] This
license fee shall [***]
5.2 Royalty Payments. In further consideration for the licenses
and release granted to
Ethicon under Article 4 herein, Ethicon shall pay ArthroCare on a
quarterly basis pursuant to Article 6.1, below, royalties for the term
of the licenses granted in Article 4 as follows:
a. Ethicon shall pay ArthroCare a royalty of [***] on Net
Sales of the Licensed Products in the Arthroscopy
Field of Use in the Territory [***]
b. Ethicon shall pay ArthroCare a royalty of [***] on Net
Sales of the Licensed Products in the Gynecology Field
of Use in the Territory commencing on the Effective
Date.
c. Notwithstanding anything to the contrary in Articles
5.2(a) and (b), Ethicon shall pay ArthroCare a royalty
of [***]
d. [***]
No multiple royalties shall be payable because [***]
5.3 [***]
5.4 Surgical Kit Sales. In the event that a Licensed Product is
sold as part of a Surgical Kit and if, as such part, such Licensed
Product does not have a separate invoiced selling price, then for the
purposes of computing earned royalties, the following guidelines shall
apply:
a. Net Sales of such Licensed Product shall be
[***]
5.5 Payment in U.S. Dollars. Royalties and the license fee shall
be paid in United States Dollars. In the event Ethicon receives payment
for Licensed Products in a currency other than U.S. dollars, the payment
payable by Ethicon to ArthroCare shall be computed using the official
rate of exchange of the currency as quoted by the Wall Street Journal,
New York Edition, on the last business day of the calendar quarter for
which the royalties are payable.
5.6 Place for Payment. The payment of royalties and the license
fee shall be made
payable to ArthroCare Corporation, and sent to the following address:
ArthroCare Corporation, Attn. Xxxxxxxxx Xxxxx, Vice President, Finance
and CFO, 000 Xxxxx Xxxxxxxx Xxx., Xxxxxxxxx, XX 00000 or such address or
individual as ArthroCare provides Ethicon in writing under Article 15.4
below. The payment of the license fee shall be made by wire transfer to
the following account number:
[***]
5.7 [***]
ARTICLE 6 - ETHICON RECORD KEEPING AND REPORTS
6.1 Ethicon shall keep accurate books and records of the Net
Sales of the Licensed Product, and of all payments due ArthroCare
hereunder. Ethicon shall deliver to ArthroCare
written reports of Net Sales of the Licensed Products (including number
of units sold and revenue received) during the preceding Calendar
Quarter on or before the [***] day following the end of each Calendar
Quarter. Such report shall include a summary of the units sold and
revenue received for the relevant time period on a product-by-product
basis and, subject to the provisions of Article 5.8, shall be
accompanied by the monies due.
6.2 ArthroCare shall have the right at its own expense, after
[***] days advance written notice to Ethicon to nominate an independent
accountant acceptable to and approved by Ethicon (which approval shall
not be unreasonably withheld or delayed.) The independent accountant
shall have access to Ethicon's books and records during reasonable
business hours for the sole purposes of auditing the royalty reports
(and supporting books and records) and verifying the royalties payable
as provided for in this Agreement for the three preceding calendar
years. This right may not be exercised more than once in any calendar
year. During the inspection, ArthroCare shall solicit or receive only
information relating solely to the accuracy of the royalty report and
the royalty payments made according to this Agreement. Ethicon shall be
entitled to withhold approval of said accountant unless the accountant
shall agree to sign a reasonable confidentiality agreement with Ethicon
which shall obligate such accountant to hold the information it receives
from Ethicon in confidence except for information necessary for
disclosure to ArthroCare to establish the accuracy of the royalty
reports and payments. Although the fees and expenses of such
inspection/audit shall initially be borne by ArthroCare, if an
underpayment in royalties of more than [***] of the total royalties due
to ArthroCare hereunder for any Calendar Quarter is discovered, then
such fees and expenses shall be borne by Ethicon, and Ethicon shall
promptly pay ArthroCare any such delinquent royalty amounts with
interest thereon at the prime rate reported by the Bank of America, San
Francisco, plus [***], computed from the date such royalty amounts were
due until the date Ethicon pays such royalty amounts.
ARTICLE 7 - IMMUNITY FROM SUIT
7.1 Subject to the terms and conditions of this Agreement,
Ethicon and Gyrus hereby grant to ArthroCare and its directors,
officers, employees, distributors, sales agents, suppliers, and
customers ("the Immune Parties") in the Fields of Use in the Territory
immunity from suit for infringement (whether direct, contributory or
induced) under the Ethicon Patents and Applications, such immunity
extending [***]
7.2 (a) If any ArthroCare product incorporating, using, or made
using any of the Technology (other than those products identified in
Article 7.1) infringes a Valid Claim of an Ethicon Issued Patent,
ArthroCare shall be entitled to a [***] license in the Territory, [***]
in and to the infringed Ethicon Issued Patents in the Fields of Use, and
at a royalty rate to be determined by agreement or through mediation or
binding arbitration as set forth in Article 14, below. If Ethicon or
Gyrus grants such a [***] license to ArthroCare in the Territory for any
[***]
(b) At the time any license is granted under this Article
7.2, Gyrus and/or Ethicon (as appropriate) will enter into a separate
license agreement with ArthroCare reflecting its scope, terms and
provisions, which shall be negotiated by the Parties in good faith. The
[***] license(s) granted under this Article 7.2 will provide ArthroCare
with the right to make, have made, use, import, sell, have sold, and
offer for sale the licensed products in the Fields of Use within the
Territory.
(c) In the event that [***] under this paragraph shall be
limited to the U.S. patent applications and U.S. patents identified in
Article 2.7 of this Agreement that are owned by or assigned to [***] as
of the date of such transfer. In that event, ArthroCare's royalty
payments under such licenses will be made to [***]
(d) [***]
7.3 If ArthroCare receives a license as provided for under
Article 7.2, the following provision shall apply: In the event Ethicon
has granted or shall grant to any third party any license, release or
other right, including, but not limited to, a waiver of suit or
settlement of litigation under any Ethicon Issued Patents in the Fields
of Use for any period of time and such license, release or other right
includes a royalty based on sales of products covered by the Ethicon
Issued Patents in the Fields of Use (hereinafter "Third Party Grant,')
Ethicon shall, within [***] days of either the date of the license to
ArthroCare under Article 7.2 or the Third Party Grant, whichever is
earlier, provide written notice of the Third Party Grant to ArthroCare,
[***]
ARTICLE 8 - THIRD PARTY INFRINGEMENT
8.1 In the event that there is infringement on a Substantial
Commercial Scale by a third party of any Valid Claim of an ArthroCare
Patent covering a Licensed Product and licensed to Ethicon hereunder in
the Fields of Use in the Territory, Ethicon shall notify ArthroCare in
writing to that effect, including with said written notice evidence
establishing a prima facie case of infringement by one or more
Infringing Product(s) of one or more Valid Claim(s) by such third party.
For the purposes of Article 8, Substantial Commercial Scale shall mean
[***] If, prior to the expiration of [***] from the date of said
notice, ArthroCare obtains a discontinuance of such infringement or
brings suit against the third party infringer, and diligently prosecutes
such suit thereafter, then [*** ] Ethicon will cooperate with ArthroCare
in any such suit and shall have the right to consult with ArthroCare and
be represented by its own counsel at its own expense. ArthroCare and
Ethicon shall both have the right to arbitrate, under the provisions of
Article 14, any disagreement between the Parties under Article 8,
including, but not limited to, any disagreement over [***] From the
date one party notifies the other it wishes to commence an arbitration
proceeding or mediation under Article 14, until such time as the matter
has been finally settled, the running of any time period referred to in
Article 8 shall be suspended.
8.2 In the event that the Parties enter into arbitration
regarding [***] and in the event that Ethicon should prevail in any such
arbitration, ArthroCare [***] However, in the event that the arbitration
decision issues within the [***] set forth in Article 8.1 (as suspended
during the pendency of the arbitration), ArthroCare [***]
8.3 Notwithstanding anything to the contrary in the Agreement,
if in ArthroCare's reasonable judgement it is necessary [***] then
ArthroCare shall notify Ethicon and ArthroCare shall [***]
8.4 After the expiration of said [***] from the date of said
notice, if Ethicon and ArthroCare have agreed, or an arbitrator has
ruled pursuant to Article 14, that [***]
8.5 Notwithstanding any other provision in this Agreement,
ArthroCare shall not be required to [***]
ARTICLE 9 - WARRANTIES AND REPRESENTATIONS
9.1 ArthroCare expressly warrants and represents that
a. It owns all of the right, title and interest in and to
the ArthroCare Patents and Applications and/or is
empowered to grant the licenses and release granted
herein;
b. It has no outstanding encumbrances or agreements,
including any agreements with academic institutions,
universities, or other third parties, whether written,
oral or implied, which would be inconsistent with the
licenses and release granted herein;
c. Schedule A includes to the best of ArthroCare's
knowledge all of the patents and patent applications
filed as of the Effective Date that fall under the
definition of ArthroCare Patents and Applications; and
d. Schedule C includes to the best of ArthroCare's
knowledge [***]
9.2 ArthroCare shall indemnify and hold Ethicon and its
Affiliates, officers, directors, employees, and agents, as well as Gyrus
and its Affiliates, officers, directors, employees, and agents, harmless
from all liabilities, demands, damages, expenses (including reasonable
attorney fees) and losses arising out of or relating to:
a. The breach of any of the warranties and
representations set forth in Article 9.1 above; and
b. The possession, manufacture, use, sale or other
disposition by or on behalf of ArthroCare of any
ArthroCare product (including without limitation
Existing Products) whether based on breach of
warranty, negligence, product liability or otherwise,
and
c. ArthroCare's exercise of any right granted to
ArthroCare pursuant to this Agreement.
9.3 Ethicon expressly warrants and represents that
a. Ethicon is empowered to grant the immunities from suit
granted in Article 7.1, and is empowered to grant the
licenses described in Article 7.2.
b. Ethicon has no outstanding encumbrances or agreements,
including any agreements with academic institutions,
universities, or other third parties, whether written,
oral or implied, which would be inconsistent with the
licenses and immunities from suit granted herein;
c. Schedule B includes to the best of Ethicon's knowledge
all of the patents and patent applications in
existence as of the Effective Date that fall under the
definition of Ethicon Patents and Applications; and
d. [***]
9.4 Gyrus expressly warrants and represents that
a. Gyrus is empowered to grant the immunities from suit
granted in Article 7.1, and is empowered to grant the
licenses described in Article 7.2, to the extent that
such immunities and licenses relate to Ethicon Patents
and Applications owned by, or assigned to, Gyrus;
b. Gyrus has no outstanding encumbrances or agreements,
including any agreements with academic institutions,
universities, or other third parties, whether written,
oral or implied, which would be inconsistent with the
licenses and immunities from suit granted herein;
c. Schedule B includes to the best of Gyrus'knowledge
all of the patents and patent applications in
existence as of the Effective Date that fall under the
definition of Ethicon Patents and Applications; and
d. [***]
9.5 Ethicon shall indemnify and hold ArthroCare and its
Affiliates and its officers, directors, employees, and agents harmless
from all liabilities, demands, damages, expenses (including reasonable
attorney fees) and losses arising out of or relating to:
a. The breach by Ethicon of any of the warranties and
representations set forth in Article 9.3 above; and
b. The possession, manufacture, use, sale or other
disposition by or on behalf of Ethicon of any Licensed
Product whether based on breach of warranty,
negligence, product liability or otherwise, and
c. Ethicon's exercise of any right granted to Ethicon
pursuant to this Agreement.
9.6 Gyrus shall indemnify and hold ArthroCare and its Affiliates
and its officers, directors, employees, and agents harmless from all
liabilities, demands, damages, expenses (including reasonable attorney
fees) and losses arising out of or relating to:
a. The breach by Gyrus of any of the warranties and
representations set forth in Article 9.4 above; and
b. The possession, manufacture, use, sale or other
disposition by or on behalf of Gyrus of any Licensed
Product whether based on breach of warranty,
negligence, product liability or otherwise, and
c. Gyrus' exercise of any right granted to Gyrus pursuant
to this Agreement.
9.7 Notwithstanding anything to the contrary herein, the
indemnification provisions of this Article shall not extend to any
consequential damages that a Party may suffer as a result of a breach of
this Agreement.
9.8 Notwithstanding anything to the contrary herein, the parties
agree that a breach of Sections 9.1c. and d. and 9.3 c. and d. shall not
be deemed to be a material breach. Upon knowledge of any such breach by
one party, the non-breaching party shall notify the breaching party of
the breach. The breaching party shall have a period of ninety (90) days
from the date of receipt of the notice to correct the breach, at which
point the breach shall be deemed material. Should either party decide
to submit the matter to arbitration pursuant to Article 14 herein, then
the ninety-day period shall be tolled pending the outcome of the
arbitration.
ARTICLE 10 - DISCLAIMER OF CERTAIN WARRANTIES
10.1 Nothing in this Agreement is or shall be construed as:
a. A warranty or representation by ArthroCare as to the
validity or scope of any patent claim or patent under ArthroCare Patents
and Applications; or
b. A warranty or representation by Ethicon or Gyrus as to
the validity or scope of any patent claim or patent
under Ethicon Patents and Applications; or
c. A warranty or representation by ArthroCare that
anything made, used,
imported, sold, or offered for sale under the licenses
granted by ArthroCare to Ethicon or Gyrus hereunder is
or will be free from infringement of any patent
rights, foreign or domestic, or other intellectual
property right of any third party and/or not covered
by this Agreement; or
d. A warranty or representation by Ethicon or Gyrus that
anything made, used, imported, sold, or offered for sale under the
licenses or immunities from suit granted by Ethicon
and/or Gyrus to ArthroCare hereunder is or will be
free from infringement of any patent rights, foreign
or domestic, or other intellectual property right of
any third party and/or not covered by this Agreement;
or
e. Except as provided in Article 8 of this Agreement, an
obligation of ArthroCare to bring or prosecute actions
or suits against third parties for infringement of the
ArthroCare Patents and Applications; or
f. An obligation of Ethicon or Gyrus to bring or
prosecute actions or suits against third parties for infringement of the Ethicon
Patents and Applications; or
g. Granting, by implication, estoppel, or otherwise, any
licenses or rights to Ethicon under patents or other rights of ArthroCare
or third parties other than as expressly provided
herein, regardless of whether such patents or other
rights are dominant or subordinate to any ArthroCare
Patents and Applications; or
h. Granting, by implication, estoppel, or otherwise, any
licenses or rights to ArthroCare under patents or other rights of
Ethicon, Gyrus or third parties other than as
expressly provided herein, regardless of whether such
patents or other rights are dominant or subordinate to
any Ethicon Patents and Applications.
10.2 ARTHROCARE MAKES NO WARRANTIES WITH RESPECT TO THE
ARTHROCARE PATENTS AND APPLICATIONS, FOREIGN COUNTERPARTS, ANY NON-U.S.
PATENTS, OR THE LICENSED PRODUCTS, WHETHER EXPRESS OR IMPLIED, EITHER IN
FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, ARTHROCARE SPECIFICALLY DISCLAIMS ANY
IMPLIED WARRANTIES OF QUALITY, MERCHANTABILITY. FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT.
10.3 ETHICON AND GYRUS MAKE NO WARRANTIES WITH RESPECT TO THE
ETHICON PATENTS AND APPLICATIONS, FOREIGN COUNTERPARTS, ANY NON-U.S.
PATENTS, OR ANY PRODUCTS THAT MAY BE LICENSED THEREUNDER, WHETHER
EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ETHICON
AND GYRUS SPECIFICALLY DISCLAIM ANY IMPLIED WARRANTIES OF QUALITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
ARTICLE 11 - LIMITATION OF LIABILITY
11.1 NO PARTY WILL BE LIABLE TO ANY OTHER PARTY WITH RESPECT TO
ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (A) ANY
INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, (B) ANY LOST PROFITS OR
LOST BUSINESS OR (C) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY
OR SERVICES; EVEN IF THE REMEDIES PROVIDED FOR IN THIS AGREEMENT FAIL OF
THEIR ESSENTIAL PURPOSE AND EVEN IF EITHER PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OR PROBABILITY OF SUCH DAMAGES.
ARTICLE 12 - TERMINATION
12.1 The licenses granted under Article 4, and the payment
obligations under Article 5, shall remain in effect until [***]
12.2 Any licenses granted under Article 7 shall remain in effect
until [***] The immunity granted in Article 7.1 shall remain in effect
until [***]
12.3 Ethicon or ArthroCare [***] may terminate this Agreement
upon ninety (90) days prior written notice for any material breach or
default of the other Party of any material provision of this Agreement.
Such written notice shall be sent to all Parties. Subject to the
provisions of Article 14 below, such termination shall become effective
at the end of the ninety (90) day period unless during such period the
party in breach or default cures such breach or default, or in the event
of a material breach by Ethicon, [***] From the date one Party notifies
the other it wishes to commence an arbitration proceeding or a mediation
under Article 14, until such time as the matter has been finally settled
through mediation or by arbitration, the running of the time period
referred to herein, as to which a party must cure a breach, shall be
suspended as to the subject matter of the dispute. This Agreement will
remain in full force and effect during any ninety (90) day cure period
and/or during any such mediation or arbitration.
ARTICLE 13 - MATTERS SUBMITTED TO BINDING ARBITRATION
13.1 The following matters shall be submitted to binding
arbitration in accordance with Article 14.
a. Disputes which may arise under Articles 4, 5, or 6,
above, including but not limited to the following:
i. [***]
b. Disputes which may arise under Article 7, above,
including but not limited to the following:
i. [***]
c. [***]
d. Any other disputes that arise between the Parties
concerning or relating to the Agreement.
ARTICLE 14 - BINDING ARBITRATION
14.1 Any dispute, claim or controversy arising from or related in
any way to this Agreement or to the interpretation, application, breach,
termination or validity thereof, including any claim of inducement of
this Agreement by fraud or otherwise, will be submitted for resolution
to arbitration pursuant to the commercial arbitration rules then
pertaining to the CPR Institute for Dispute Resolution, or successor
("CPR"). In the event, however, that the rules of the CPR conflict
with the express provisions herein the provisions of this Article 14
control. If ArthroCare submits a claim or controversy to arbitration
pursuant to this Article the arbitration will be held in New Brunswick,
New Jersey. If Ethicon or Gyrus submit a claim or controversy to
arbitration pursuant to this Article the arbitration will be held in
Santa Xxxxx County, California. Any cross-claims, counterclaims or
other claims arising out of or related to this Agreement or the original
arbitration shall be arbitrated in the same location as the original
arbitration proceeding.
14.2 The panel of arbitrators shall consist of three arbitrators
chosen from the CPR
Panels of Distinguished Neutrals. Each arbitrator chosen from the CPR
Panels of Distinguished Neutrals under this Article shall be either a
lawyer who has specialized in business litigation with at least 15 years
experience with a law firm of over 25 lawyers or has served as a judge
of a court of general jurisdiction. Furthermore, if at least one of the
issues to be resolved by the arbitrators is described in Articles
13.1(a)(i), 13.1(b)(i), 13.1(b)(ii), or 13.l(c), then at least one of
the arbitrators shall, in addition to the qualifications listed above,
be an attorney with at least 10 years experience litigating or preparing
and prosecuting patent applications. In the event that the aggregate
damages sought by the claimant are stated to be less than [***] and the
aggregate damages sought by the counterclaimant are stated to be less
than [***] the Parties shall select a single arbitrator having the same
qualifications and experience specified above. The arbitrator(s) shall
be neutral, independent, disinterested, impartial, and shall abide by
the Canons of Ethics of the American Bar Association for neutral,
independent arbitrators.
14.3 The Parties agree to cooperate in good faith to set up the
logistics and procedures of the arbitration. In particular, the Parties
agree to cooperate: (a) to obtain selection of the arbitrator(s) within
45 days of initiation of the arbitration, (b) to meet with the
arbitrator(s) within 45 days of their selection, and (c) to agree at that
meeting or before upon procedures for discovery and as to the conduct of
the arbitration hearing. There shall be no ex parte communications with
an arbitrator either before or during the arbitration relating to the
dispute, the issues involved in the dispute, or the arbitrator's views
on any such issues.
14.4 The Parties further agree that the procedures for discovery
and the conduct of the arbitration hearing will result in the hearing
being concluded within no more than 9 months after selection of the
arbitrator(s). The Parties further agree that arbitrator(s) shall
render the judgment and award within 9 months of the conclusion of the
hearing(s), or of any post-hearing briefing, which must be completed by
both sides with 30 days after the conclusion of the hearing. The Parties
further agree that during discovery any expert witness(es) retained to
testify in the arbitration must submit an expert report which complies
with the provisions of Federal Rule of Civil Procedure 26(a)(2).
14.5 In the event that the Parties are unable to reach agreement
on the procedures for
discovery and the conduct of the arbitration hearing as set forth in
clause 14.3 -- 14.4 above, the CPR will select the arbitrator(s). In so
doing, the CPR will allow three peremptory challenges for each side and
appropriate strikes for reasons of conflict or other cause. The
arbitrator(s) shall then set a date for the hearing and commit to the
rendering of the award within the time periods specified in clause 14.4
above. The arbitrators shall also provide for discovery according to
the time limits set forth in clause 14.4. In so doing the arbitrators
shall recognize the understanding of The Parties that they contemplate
reasonable discovery, including document demands and depositions, but
that such discovery be limited so that The Parties may meet the time
limits of clause 14.4 without undue difficulty. Neither side may obtain
more than a total of [***] of deposition testimony from all witnesses,
including both fact and expert witnesses. Furthermore, neither side may
serve more than [***] individual requests for documents, including
subparts, or [***] individual requests for admission or interrogatories,
including subparts. Notwithstanding the above limits on deposition time
and written discovery, if the arbitration includes a large number of
patents, named inventors and/or products in dispute, either Party may
show good cause to expand the hours of deposition testimony allowed from
the witnesses, and the arbitrator(s) will have the discretion to grant
such request, so long as such grant of additional discovery is
consistent with the limitations and the spirit of this Agreement to have
substantially less discovery conducted than is conducted in typical
patent litigation, and notwithstanding the above, in no event shall such
additional discovery allow any increase in the time periods described in
Article 4.4. In the event multiple hearing days are required, they will
be scheduled consecutively to the greatest extent possible.
14.6 The arbitrator(s) shall render their award following the
substantive law of the state where the arbitration is conducted pursuant
to clause 14.1, as well as the law set forth in the Patent Code (35
U.S.C.1 et seq.), except that the interpretation and enforcement of
these arbitration provisions shall be governed by the Federal
Arbitration Act. The arbitrator(s) are not free to apply "amiable
compositeur," or to apply their own or another's view of "natural
justice and equity." The arbitrator(s) shall have the power to exclude
evidence on the grounds that the prejudicial effect of such evidence
exceeds its probative value, that the evidence is cumulative, or that
the evidence is irrelevant. The arbitrator(s) shall issue a written
opinion setting forth findings of fact, conclusions of law, and the
reasons therefor. A transcript of the evidence adduced at the hearing
shall be made and shall be made available to either Party on request at
the requesting Party's expense.
14.7 The Parties agree that the arbitration hearings, the award,
and the written opinion will be kept confidential. The arbitrator(s)
shall issue appropriate protective orders to safeguard The Parties'
confidential information.
14.8 Each Party to this Agreement hereby knowingly and
voluntarily waives its right to trial by jury of any dispute, claim or
controversy arising from or related in any way to this
Agreement or to the interpretation, application, breach,
termination or validity thereof, including any claim of inducement of
this Agreement by fraud or otherwise.
14.9 Each Party to this Agreement hereby knowingly and
voluntarily waives any claim to punitive or exemplary damages from
another Party as part of any dispute, claim or controversy arising from
or related in any way to this Agreement or to the interpretation,
application, breach, termination or validity thereof, including any
claim of inducement of this Agreement by fraud or otherwise. This
waiver includes any claim to increased damages premised on an allegation
of willful patent infringement. Each Party to this Agreement is hereby
precluded from requesting or receiving such damages in any arbitration
proceeding under this Article.
14.10 Each Party to this Agreement hereby knowingly and
voluntarily waives any right to seek or receive injunctive relief as
part of any dispute, claim or controversy arising from or related in any
way to this Agreement or to the interpretation, application, breach,
termination or validity thereof, including any claim of inducement of
this Agreement by fraud or otherwise. Each Party to this Agreement is
hereby precluded from requesting or receiving injunctive relief in any
arbitration proceeding under this Article.
14.11 The Parties agree that there is no right of appeal from the
final decision of the arbitrator(s). Each Party to this Agreement
acknowledges that the final decision of the arbitrator(s) shall be
binding upon The Parties, and hereby knowingly and voluntarily waives
any right to appeal the decision of the arbitrator(s) to the federal or
state courts. The decision of the arbitrator(s) may be vacated,
modified or corrected only upon the grounds specified in the Federal
Arbitration Act.
14.12 The United States District Court for the jurisdiction in
which the arbitration is held may enter judgment upon any award rendered
under this Article to ensure that the award is enforceable against The
Parties. The Parties consent to the jurisdiction of that United States
District Court for the enforcement of this Agreement and for the entry
of judgment on any award. In the event that such Court lacks
jurisdiction, then any court having jurisdiction of this matter may
enforce this Article and enter judgment upon any award rendered under
this Article.
14.13 The Parties agree that [***] The written opinion rendered
by the arbitrator(s) under clause 14.6 will include a determination as
to which Party (if any) is to be considered the "prevailing Party" for
the purposes of this Article. [***]
14.14 The arbitrator(s) shall be bound by the express terms of
this Agreement, and may not amend or modify such terms in any manner.
Any award rendered by the arbitrator(s) shall be consistent with the
terms of this Agreement, and such terms herein shall control the rights
and obligations of the parties.
14.15 Any dispute controversy or claim arising out of or related
to this agreement, or the interpretation, application, breach,
termination or validity thereof, including any claim of inducement by
fraud or otherwise, which claim would, but for this provision, be
submitted to arbitration shall, before submission to arbitration, first
be mediated through non-binding mediation in accordance with the Model
Procedures for the Mediation of Business Disputes promulgated by the CPR
Institute for Dispute Resolution, or successor ("CPR") then in effect,
except where those rules conflict with these provisions, in which case
these provisions control. The Parties shall agree upon the place of the
Mediation once the mediator is selected. The Mediation shall be
attended by a senior executive with authority to resolve the dispute
from each of the operating companies that are Parties.
14.16 The mediator shall be neutral, independent, disinterested
and shall abide by the Canons of Ethics of the American Bar Association
for neutral, independent arbitrators and will be selected from a
professional mediation firm such as ADR Associates or JAMS/ENDISPUTE or
CPR.
14.17 The Parties shall promptly confer in an effort to select a
mediator by mutual agreement. In the absence of such an agreement, the
mediator shall be selected from a list generated by CPR with each party
having the right to exercise challenges for cause and two peremptory
challenges within 72 hours of receiving the CPR list.
14.18 The mediator shall confer with the Parties to design
procedures to conclude the mediation within no more than 45 days after
initiation. Under no circumstances shall the commencement of
arbitration under Article 14.1, above, be delayed more than 45 days by the
mediation process specified herein absent contrary agreement.
14.19 Each Party agrees to toll all applicable statutes of
limitation during the mediation process and not to use the period or
pendancy of the mediation to disadvantage the other Party procedurally
or otherwise. No statements made by either Party during the mediation
may be used by the other Party during any subsequent arbitration or
other proceeding.
14.20 From the date one party notifies the other it wishes to
commence an arbitration proceeding or a mediation, until such time as
the matter has been finally settled through mediation or by arbitration
the running of the time period referred to in Article 12.3 above, as to
which a party must cure a breach shall be suspended as to the subject
matter of the dispute.
ARTICLE 15 - MISCELLANEOUS
15.1 Marketing Obligations. ArthroCare acknowledges that Ethicon
and Gyrus have no affirmative obligation to sell the Licensed Products,
and therefore shall not be obligated to use its best efforts or any
other efforts in marketing the Licensed Products. All business
decisions, including without limitation the design, manufacture, sale,
price and promotion of the Licensed Products, shall be within the sole
discretion of Ethicon and/or Gyrus.
15.2 Disputes as to Asserted Claims. Subject to the terms and
conditions of this Agreement, [***]
15.3 Confidentiality and Publicity. No Party shall disclose the
terms of this Agreement to an unaffiliated third party, except for
legal, financial, accounting or other similar advisors who agree to keep
the terms of this Agreement confidential, without the prior written
approval of the other party, or as required by law or regulation. No
Party shall use the fact of the agreement or any of its terms as a
competitive tool. Furthermore, except as required by law or regulation,
and except for information that has already been made public in the
press release attached in Schedule G or otherwise agreed to by the
parties, no party will originate any publicity, news release, or other
public announcement, written or oral, whether to the public press, to
stockholders, or otherwise, relating to this Agreement, to any amendment
hereto or to performance hereunder or the existence of an arrangement
between the parties without the prior written approval of the other
parties. To effectuate these provisions, within 15 days of the
Effective Date, ArthroCare will issue the press release attached hereto
as Schedule G, Ethicon and ArthroCare will generate an approved
statement containing the portions of this agreement that may be
disseminated to the public, and Ethicon and ArthroCare will also
distribute this approved statement to their respective sales forces.
Notwithstanding anything to the contrary herein, the Parties agree that
an unintentional breach of Section 15.3 shall not be deemed to be a
material breach so long as the breaching Party uses reasonable efforts
to remedy or mitigate any such breach within a reasonable time after
being notified of such breach. Furthermore, the Parties agree that
Gyrus shall be permitted to issue the press release attached hereto as
Schedule I.
15.4 Notices. All notices hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally, one day
after delivery to a nationally recognized overnight delivery service,
charges prepaid, three days after sent by registered or certified mail,
postage prepaid, or when receipt is confirmed if by, facsimile or other
telegraphic means:
In the case of ArthroCare Corporation:
ArthroCare Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to:
Xxxx X. Raffle, Esq.
ArthroCare Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
In the case of Ethicon:
Ethicon, Inc.
U.S. Xxxxx 00
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Vice-President, New Business Development
With a copy to:
Chief Patent Counsel
Xxxxxxx & Xxxxxxx
Xxx Xxxxxxx & Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxx Xxxxxx 00000
In the case of Gyrus:
Gyrus Medical Ltd.
Xxxxxxx Xxxx
Xx. Xxxxxxx, Xxxxxxx
XX0 XXX, Xxxxxx Xxxxxxx
Attn: Managing Director
Fax: 00-0000-000-000
With a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx & Vanderhye, P.C.
0000 Xxxxx Xxxxx Xxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Fax: (000) 000-0000
Such addresses may be altered by written notice given in accordance with
this Article 15.4.
15.5 Assignment. [***]
15.6 Force Majeure. Any delays in or failures of performance by
any Party under this Agreement shall not be considered a breach of this
Agreement if and to the extent caused by occurrences beyond the
reasonable control of the party affected, including but not limited to:
acts of God; acts, regulations or laws of any government; strikes or
other concerted acts of workers; fires; floats; explosions; riots; wars;
rebellions; and sabotage; and any time for performance hereunder shall
be extended by the actual time of delay caused by such occurrence.
15.7 Relationship of Parties. The Parties hereto are entering
into this Agreement as independent contractors, and nothing herein is
intended or shall be construed to create between the Parties a
relationship of principal and agent, partners, joint venturers or
employer and employee. No Party shall hold itself out to others or seek
to bind or commit the other Parties in any manner inconsistent with the
foregoing provisions of this Article.
15.8 [***]
15.9 Integration. This Agreement constitutes the entire
agreement and understanding between the Parties with respect to the
matters contained herein, and there are no prior oral or written
promises, representations, conditions, provisions or terms related
thereto other than those set forth in this Agreement. The Parties may
from time to time during the term of this Agreement modify any of its
provisions by mutual agreement in writing.
15.10 Other Disputes. (a) Issues or disputes pertaining to
patents, products or processes not specifically included within the
terms and provisions of this Agreement are outside the scope of this
Agreement. By way of example only and not limitation, issues concerning
[***]
(b) The Parties agree that in the case of any action or
proceeding brought in any court or tribunal in any
country concerning the patents, products, or processes
that [***]
15.11 Headings. The inclusion of headings in this Agreement is
for convenience only and shall not affect the construction or
interpretation hereof.
15.12 Construction. The Parties agree and acknowledge that this
Agreement is the product of both parties and shall not be construed
against either party.
15.13 Governing Law. Except as provided in Article 14 above, the
validity and interpretation of this Agreement and the legal relations of
the parties to it shall be governed by the internal laws of the State of
Delaware.
15.14 Patent Applications. The Parties will have access to
confidential information regarding the ArthroCare and Ethicon Patents
and Applications, such as the serial numbers of U.S. patent
applications. All Parties agree to maintain the confidentiality of this
information, and not to use this information against the other party in
any confidential patent office proceeding that is not open to the
public.
15.15 Execution of Agreement in Counterparts. This Agreement may
be executed in any number of counterparts, and execution by each of the
Parties of any one of such counterparts will constitute due execution of
this Agreement. Each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute
but one agreement.
This Agreement is signed as indicated below by duly authorized
representatives of
ArthroCare, Ethicon, and Gyrus, respectively.
ARTHROCARE CORPORATION
Date: _____________________ By: _____________________________
Xxxxxxx X. Xxxxx
President and CEO
ETHICON, INC.
MITEK SURGICAL PRODUCTS
GYNECARE
GYNECARE, INC.
Date: _____________________ By: _____________________________
Xxxxxx X. Xxxxxxxxx
Vice-President,
Growth Technologies &
New Business Development
GYRUS MEDICAL LTD.
Date: _____________________ By: _____________________________
Xxxx Xxxxx, M.D.
Managing Director
SCHEDULE A
[***]
SCHEDULE B
[***]
SCHEDULE C
[***]
SCHEDULE D
[***]
SCHEDULE E
[***]
SCHEDULE F
[Counsel listed on last page.]
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
ARTHROCARE CORP. No. C-98-00609 WHO
Plaintiff,
vs. STIPULATED NOTICE OF DISMISSAL
WITH
ETHICON, INC. et al. PREJUDICE
Defendants
DATE: June 29, 1999
TIME: 12:00pm
CTRM: 7
Xxx. Xxxxxxx X. Xxxxxx, Xx.
______________________________________
Pursuant to Federal Rule of Civil Procedure 41(A)(1), the Parties to the
above-captioned litigation agree to the dismissal with prejudice of the
litigation and all claims, counterclaims, and defenses therein.
Accordingly, the Parties hereby stipulate and agree that all claims,
counterclaims, and defenses therein the above-captioned litigation SHALL
BE, and HEREBY ARE, dismissed with prejudice, with all parties to bear
their own costs and attorney's fees.
DATED: June ___, 1999 Respectfully Submitted,
___________________________ ______________________________
XXXXXXX X. XXXXXX (Bar No. 104795) XXXXXX X. XXXX (State Bar No.
153203)
XXXXX XXXXXX (Bar No. 133712) XXXXX X. XXXXX (State Bar No. 16190
1)
XXXXXXXX XXXXXXX (Bar No. 174440) 33 New Xxxxxxxxxx Tower
XXXX, GOTSHAL & XXXXXX LLP Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxxxx Xxxxxx Xxx Xxxxxxxxx, XX 00000-
9781
0000 Xxxx Xxxx Xxxx, Xxxxx 000 (000) 000-0000
Xxxxx Xxxx, XX 00000-0000
(000) 000-0000
Attorneys for Plaintiff XXXXXX X. XXXXXX
ArthroCare Corporation XXXXX XXXXXXXX (State Bar No.
194029)
XXXXXXX X. XXXX
XXXXXXX, XXXXXXX, XXXXXX &
CIVILETTI LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Phone (000) 000-0000
Attorneys for Defendants
Ethicon, Inc., Mitek Surgical
Products,
and Gynecare, Inc.
SCHEDULE G
ARTHROCARE AND ETHICON TO SETTLE LITIGATION
ETHICON LICENSES ARTHROCARE'S PATENTS IN TWO FIELDS
SUNNYVALE, CA--JUNE 24, 1999-- ArthroCare Corporation (NASDAQ:ARTC)
today announced that ETHICON, Inc. and ArthroCare have agreed to
settle a patent infringement claim brought by ArthroCare in February
1998 against ETHICON and the MITEK and GYNECARE divisions. Under the
terms of the settlement, ETHICON will license ArthroCare's United
States patents in the arthroscopy and gynecology markets and
ArthroCare will dismiss the legal action.
Both companies will continue to be active in the marketplace.
ETHICON, Inc. will pay ArthroCare a license fee and ongoing royalties
on sales in the United States of certain arthroscopy and gynecology
products. ArthroCare anticipates these payments will have a positive
material impact on results for the quarter ending July 3, 1999. The
settlement agreement also establishes a procedure for resolution of
certain potential intellectual property disputes in these two markets
without litigation. Additional terms of the settlement agreement
were not disclosed.
ArthroCare has developed a broad technology platform for operating on
soft tissue. The technology is based on a patented method of tissue
removal, called Coblation(TM) technology, that is designed to improve
the effectiveness and safety of standard surgical methods. Coblation
technology uses radio frequency (RF) energy to remove tissue through
a significantly cooler process than is possible with traditional
electro- or laser-surgery. Coblation-assisted surgery has the
potential to improve operative precision and efficiency compared with
many standard surgical techniques and thereby reduce pain and speed
recovery.
Except for historical information, this press release includes forward-
looking statements that involve risks and uncertainties, including, but
not limited to, the value of intellectual property, the establishment of
brand identity, and risks as detailed from time to time in the company's
Securities and Exchange Commission filings, including ArthroCare's Form
10-K for the year ended January 3, 1999 and form 10-Q for the quarter
ended April 3, 1999. Actual results may differ materially from
management expectations.
ArthroCare Corporation is a medical device company redefining the
standard in soft tissue surgery by developing, manufacturing, and
marketing patented Coblation technology that allows surgeons to
operate with increased precision and accuracy, with minimal damage to
surrounding tissue. The company's systems are being used to perform
many types of closed joint surgery, and have been introduced for use
in cosmetic surgery and ear, nose and throat (ENT) surgery.
ArthroCare's long-term strategy includes applying its patented
platform technology to a broad range of other soft tissue surgical
markets including various cardiology applications and the fields of
urology, gynecology, and oral and general surgery. ArthroCare's web
site can be found at xxx.xxxxxxxxxx.xxx.
ETHICON, INC. is a Xxxxxxx & Xxxxxxx company marketing surgical
devices in the areas of wound management, women's health, and
surgical sports medicine. ETHICON's worldwide web address is
xxx.xxxxxxxxxx.xxx.
# # #
SCHEDULE H
[***]
SCHEDULE I
M E M O R A N D U M
TO: Xxxxx Xxxxxx
FROM: Xxxx Xxxxx
SUBJECT: Draft Press Release on Arthrocare Settlement
DATE: --- June 1999
Gyrus, the "PlasmaKinetic" endosurgical device company, announces the
settlement of the US litigation brought by Arthrocare in February 1998
against Ethicon Inc relating to their importation, sale and distribution
of Gyrus's VAPR(R) arthroscopic and VersaPoint(R) hysteroscopic systems in
the US market. The VAPR(R) and VersaPoint(R) systems are manufactured by
Gyrus and licensed to Ethicon Inc, a division of Xxxxxxx & Xxxxxxx.
Under the terms of the settlement, Ethicon has licensed Arthrocare's US
patents in the arthroscopic and hysteroscopic gynaecology markets and
Arthrocare has dismissed the legal action.
Both Ethicon and ArthroCare will continue to be active in developing the
arthroscopic market. Ethicon will pay Arthrocare a license fee and
ongoing royalties on sales in the United States of certain arthroscopic
and gynaecological products. The settlement agreement also establishes
a procedure for resolution of any future intellectual property disputes
in these two markets worldwide without resorting to litigation.
Additional terms of the settlement agreement were not disclosed.
In a separate agreement, Gyrus and Ethicon will share the costs of
settlement including ongoing royalties on a proportional basis,
comparable to their respective sharing of sales revenue. Gyrus will
make a one-off charge of approximately 1M against the costs related to
settling the litigation in the current financial year ending 30th June,
1999. Other aspects of the agreement include an extension of Gyrus's
manufacturing exclusivity for the US market. Gyrus and Ethicon are also
negotiating terms to support a more aggressive product development
program for both the VAPR(R) and VersaPoint(R) product lines.
In the first half of the current financial year, Gyrus was able to
report a 135% leap in product sales (4 million from 1.7 million),
along with a sharp drop in pre-tax losses (0.9 million from 1.9
million). The settlement of the US litigation has now removed what
could have been a significant risk to the future growth of the business
and has simultaneously provided a much stronger barrier to other
competitors seeking to enter the market. This has not been without its
costs, not least in deflecting the focus of senior management from
developing other aspects of the business. With resolution of this
issue, Gyrus can now confidently move forward in developing additional
markets and alliances.
Gyrus employ 190 people at their headquarters and manufacturing plant
near Cardiff, Wales. Their factory includes a 3,000sq. ft. Class 10,000
Clean Room where the single use disposables for use with PlasmaKinetic
systems are produced. Plans to develop an adjacent site which will
increase production capacity significantly from January 2000 have been
approved and the company is now moving into its next rapid scale up
phase.
Gyrus Group PLC has its UK headquarters at Gyrus Group PLC., Xxxxxxx
Xxxx, Xx Xxxxxxx, Xxxxxxx, Xxxxx XX0 0XX. Tel: (01222) 300100, fax:
(01222) 300101. You can also visit the company on the web at:
xxx.xxxxx.xx.xx
With Compliments,
Xxxx Xxxxx PR
Tel: (01628) 483040
Fax: (01628) 486796
E-Mail: xxxx@xxxxxxx.xxxxx.xx.xx
1
DC2/146182v7
FINAL
