Patent Litigation Status
Masimo has reached a settlement with Nellcor to conclude a long-running patent case in which Nellcor was found to have infringed several Masimo patents. The purpose of this letter is to briefly share some facts regarding this patent suit and the final settlement agreement.
Long after the industry had decided that it was not possible to make pulse oximetry technology reliable during patient motion, Masimo invented and, in 1996, brought read-through-motion pulse oximetry to the market. In late 1999, Masimo sued Nellcor for patent infringement when Nellcor released its N-395 pulse oximeter, which Nellcor claimed could read through patient motion. In March of 2004, a jury found that Nellcor infringed several Masimo patents. The District Court did not enter an injunction at that time, which allowed Nellcor to continue selling the infringing products during the appeal. In September 2005, the appellate court affirmed the infringement findings against Nellcor, and instructed the District Court to enter a permanent injunction against Nellcor’s pulse oximeters that were found to infringe.
On January 17, 2006, Masimo and Nellcor entered into a settlement agreement, where Nellcor, among other things, agreed to discontinue shipment of all pulse oximeters that were found to infringe Masimo’s patents and pay Masimo $265 Million for sales of the infringing products. These products include all of Nellcor’s 04/N395 (Oxismart XL) and 05/N595 (Oximax) stand-alone and handheld pulse oximeters as well as the corresponding boards used in select multi-parameter patient monitors.
With the discontinuance of the products found to infringe, Nellcor has announced a new product, known as the 06/N600, which was not the subject of the litigation. Nellcor did not include adaptive filters or parallel algorithms to measure saturation in this product, which remain significant contributors to the unparalleled performance for Masimo SET® and Masimo Rainbow™ SET oximeters. Although Masimo believed the 06/N600 design still infringed some of Masimo’s patents, after testing the 06/N600 oximeter provided to Masimo by Nellcor, Masimo agreed to provide a covenant not to sue Nellcor on the 06/N600 platform in exchange for an ongoing royalty. However, if Nellcor improves the performance of the 06/N600, the improved product may be subject to an infringement suit by Masimo.
Based on Masimo’s testing of the 06/N600 platform, we are even more confident that an objective, side-by-side comparison between the Nellcor N600 and Masimo oximeters will reveal the clinical superiority of Masimo’s oximeter performance. Masimo is therefore doubling its performance guarantee to $500,000 (for terms see Masimo’s website).
In closing, Nellcor has agreed to respect our patents, and the performance gap between Masimo and Nellcor pulse oximeters has increased. Moreover, when you consider this performance gap in combination with the advent of Masimo Rainbow SET Pulse CO-Oximetry™, the first and only technology to permit clinicians to measure COHb and MetHb noninvasively, why settle for anything less?