Jury Tells Tyco Unit to Pay $43.5 Million

A federal jury has awarded an Orange County surgical equipment maker $43.5 million in damages from industry giant U.S. Surgical Corp. in a long-running patent infringement dispute involving a device used in minimally invasive surgery.

The jury found that U.S. Surgical, a division of Tyco International Ltd., “willfully” infringed a patent held by Applied Medical Resources Corp. of Rancho Santa Margarita, executives at the companies said Friday.

That finding gives U.S. District Judge Cormac J. Carney the option of trebling the damages. A hearing on that issue is scheduled for Sept. 20 in Carney’s Santa Ana court.

The case is the second of three related federal lawsuits that Applied Medical, a private firm with about $60 million in annual revenue, has filed against U.S. Surgical, a Norwalk, Conn.-based unit of Tyco. Tyco, based in Bermuda, had fiscal 2003 revenue of $36.8 billion.

The suits contend U.S. Surgical stole Applied Medical’s technology for seals used in trocars, the tubes inserted into patients during laparoscopic surgeries. By working through the tubes, surgeons need to make only small incisions. The trocar seals are crucial because the patients are pumped full of gas to give the doctors more room to work.

Applied Medical first sued U.S. Surgical in 1996 in federal court in Virginia. It won a jury award of more than $15 million in 1997, to which a judge added another $5 million after jurors found willful patent infringement. Since then, U.S. Surgical has modified its trocars twice, which it markets under the Versaport brand, triggering two more suits by Applied Medical.

U.S. Surgical President Alan Panzer said in a statement that the devices considered in this month’s trial have been replaced by a Versaport Plus model.

“Now that we have this lawsuit involving these discontinued products behind us, we look forward to continuing to serve our customers with our current line of Versaport Plus trocar products, which are not impacted by this lawsuit,” Panzer said. Tyco and U.S. Surgical executives didn’t return calls seeking additional comment.

Executives at Applied Medical noted that Versaport Plus, introduced after a court ordered U.S. Surgical to stop selling the earlier version, is the subject of the third patent infringement lawsuit, which is scheduled for trial before Carney in March.

“We’re delighted by the verdict, but we know this is not the end of the battle,” said Nabil Hilal, a senior vice president at Applied Medical.

Because appeals could delay payment by more than a year, Hilal declined to speculate what Applied Medical would do with its award, though he said the company always reinvested profit in research. “We’ll cross that bridge when we come to it,” he said.

The award is the second recent large patent judgment against a Tyco subsidiary. On July 14, U.S. District Judge Mariana Pfaelzer in Los Angeles upheld a jury award of $134.5 million against Tyco’s Nellcor unit for infringing two patents held by Irvine medical device maker Masimo Corp.

Final judgment in that case is to be entered next week, said Joseph Re of Knobbe, Martens, Olson & Bear, the attorney for both Masimo and Applied Medical.