The New Jersey Appellate Division concluded that a settlement agreement and concurrent covenant not to sue precluded a patent owner from asserting additional independent patent infringement claims. (Grayzel v. Boston Scientific Corp, A-0991-14T2 (App. Div. Jan. 11, 2016)) Dr. Joseph Grayzel invented a balloon catheter used prominently in cardiac surgery. Dr. Grayzel received a patent for his innovation (Patent No. 4,796,629), which he then successfully asserted against Boston Scientific Corp. In 2003, Dr. Grayzel and Boston Scientific settled their patent litigation, resulting in payment of royalties to Dr. Grayzel.
The settlement, however, was not the end, but merely the end of the beginning of the dispute between patent holder (Dr. Grayzel) and the infringer (Boston Scientific). Dr. Grayzel obtained a second patent for improvements to his balloon catheter in 2010 (Patent No. 7,662,163). Boston Scientific also developed a new product in the intervening years, which Dr. Grayzel asserted infringed on his latest patent. Absent additional facts, Dr. Grayzel would be well within his rights to assert a second patent infringement action against Boston Scientific. Either a new patent or a new product can lead to new patent infringement action unless there is an agreement otherwise providing.
But here there was an “agreement otherwise”. In the “covenant not to sue” between the patent holder and infringer, Dr. Grayzel gave up any right to sue “for infringement by any Cutting Balloon Product sold by” Boston Scientific. The agreement went on to define “Cutting Balloon Product” very broadly and did not limit it to products in existence at the time of the agreement. Nor was the agreement limited to infringement under the first patent. According to the Appellate Division, Dr. Grayzel signed an open ended covenant not to sue that precluded him from bringing any future patent infringement actions against Boston Scientific.
Because Dr. Grayzel contracted away his rights in the 2003 settlement, he was unable to assert his rights when a new infringement began. Absent his agreement, the patent infringement action could have proceeded. Boston Scientific saved the expense of a long patent infringement action as well as large potential damages by drafting a smart, forward-thinking settlement agreement.
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