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This article was originally published in The Gray Sheet

Executive Summary

VENTRITEX PATENT CROSS-LICENSING AGREEMENTS WITH CPI, TELECTRONICS for implantable defibrillators will result in Ventritex recognizing a charge of about $19 mil. for the fourth quarter ended June 30, the firm says in a July 27 press release announcing the agreements. The charge includes one-time payments to Lilly subsidiary Cardiac Pacemakers, Inc. and Telectronics, "as well as other related settlement expenses." In addition to the one-time payments to both firms, Ventritex will pay royalties to CPI on sales of products incorporating the licensed patents. Ventritex markets the Cadence third-generation implantable pacemaker- cardioverter-defibrillator, which was launched in the spring ("The Gray Sheet" May 10, p. 3). The Cadence is the Sunnyvale, California firm's first commercially marketed product. Frank Fischer, president and CEO, said the two recent agreements will provide "expanded design freedom for future products." Specific terms of the agreements were not disclosed. The licensing agreements resolve a pending patent infringement case between Ventritex and Telectronics and threatened litigation with CPI. Ventritex and CPI have been involved in patent-related discussions for the last several months; according to CPI, the licensing agreement "settled all outstanding patent issues." In May 1992, Ventritex entered into a cross-licensing agreement with Medtronic covering patents for devices used to treat tachyarrhythmias ("The Gray Sheet" Sept. 14, 1992, p. 4). That agreement, like the one with CPI, includes royalty payments. As a result of the recent licensing agreements, Intermedics is the only remaining implantable defibrillator firm with which Ventritex has pending patent infringement litigation. Earlier this month, a U.S. District Judge for the Northern District of California dismissed an action filed by Ventritex "seeking a declaration that seven of Intermedics' patents were invalid or not infringed by Ventritex' Cadence" device, according to Intermedics. A motion to file a supplemental complaint was denied. Intermedics filed an amended complaint against Ventritex alleging infringement of nine patents in May ("The Gray Sheet" May 10, p. 3). The case is pending in the U.S. District Court for the Southern District of Texas in Galveston, Texas.

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