Medical Device Link.

Originally Published MX November/December 2005

COVER STORY

ArthroCare's fundamental technology is surrounded by one of the strongest, broadest, and deepest intellectual property sets in the medtech industry, according to the company's president and CEO, Michael A. Baker. And that's not just big talk; ArthroCare has been putting its money where its mouth is for the past eight years.

Although Baker says his company is not litigious by nature, ArthroCare has not shied away from defending its patents against three of medtech's biggest players: Ethicon (Somerville, NJ), a Johnson & Johnson company; Stryker Corp. (Kalamazoo, MI); and Smith & Nephew (London). And not only has ArthroCare upheld its patents in each case, it has also turned each dispute on its head, entering into mutually beneficial licensing agreements with all three companies.

ArthroCare's technology, coblation, uses radio-frequency energy to remove tissue through a significantly cooler process than is possible with traditional electrocautery or laser surgery. The company's soft-tissue surgery systems consist of a controller unit and an assortment of single-use disposable devices that are specialized for specific types of surgery. According to ArthroCare, coblation technology can replace the multiple surgical tools traditionally used in soft-tissue surgery with one multipurpose surgical system. It is applicable across many soft-tissue surgical markets, including arthroscopic surgery; cosmetic surgery; ear, nose, and throat surgery; spinal surgery; neurosurgery; general surgery; and various cardiology applications.

Following is a rundown of ArthroCare's history of patent litigation and the agreements that have emerged because of it.

ArthroCare v. Ethicon/Johnson & Johnson

Litigation initiated: February 1998
Agreement reached: June 1999
Agreement terms: Ethicon agreed to license ArthroCare's U.S. patents in the arthroscopy and gynecology markets. Ethicon agreed to pay ArthroCare a license fee and ongoing royalties on U.S. sales of certain arthroscopy and gynecology products. The agreement also established a procedure for resolution of certain potential intellectual property disputes in these two markets without litigation. Under this procedure, the licenses granted in settlement were extended to Australia, Canada, and Japan.

ArthroCare v. Stryker Corp.

Litigation initiated: June 2000
Agreement reached: July 2000
Agreement terms: ArthroCare granted Stryker a worldwide, nonexclusive license covering bipolar devices in arthroscopy. Stryker agreed to pay ArthroCare an initial license fee and ongoing royalty payments on worldwide sales of its Serfas arthroscopy product set.

ArthroCare's Super TurboVac is used in sports medicine procedures. Photo courtesy ArthroCare. (click to enlarge)

ArthroCare v. Smith & Nephew

Litigation initiated: July 2001
Agreement reached: September 2005
Agreement terms: ArthroCare signed a worldwide product supply agreement with the endoscopy business of Smith & Nephew. Under the agreement, ArthroCare agreed to manufacture bipolar and monopolar arthroscopy products for worldwide sale by Smith & Nephew. ArthroCare receives royalty payments for all bipolar products Smith & Nephew sells in the United States and for bipolar shaver products manufactured and sold by Smith & Nephew worldwide. ArthroCare was also granted a license for the worldwide sale of Smith & Nephew spine products. ArthroCare received a one-time cash settlement payment at signing and will receive a series of related milestone payments over the first year.

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