Medtronic Sticks It to Boston Scientific

Medtronic (NYSE: MDT) stuck it to Boston Scientific (NYSE: BSX) and Johnson & Johnson (NYSE: JNJ) during the most recent quarter, grabbing more than 20% of the U.S. stent market with the launch of its new drug-eluting stent, Endeavor. Now it's sticking it to Boston Scientific in the courtroom.

On Tuesday, a jury found that Boston Scientific's balloon catheters and stent delivery systems infringe on three of Medtronic's patents. The jury awarded $250 million in damages to Medtronic.

Boston Scientific isn't giving up yet. It's hoping to get the jury's decision overturned by the District Court, or by the U.S. Court of Appeals if the first tactic fails. As is almost always the case with patent disputes, I expect this lawsuit could drag on for years.

If Boston Scientific can't get the verdict thrown out, it'll have to either stop selling its products, which seems unlikely, or work out a royalty-bearing license with Medtronic. Boston Scientific should get used to paying royalties on its drug-eluting stents; in the deal that broke up Guidant, Boston Scientific agreed to pay royalties to Abbott Labs (NYSE: ABT) on its Promus stent, which is the same as Abbott's Xience V. That patent is expected to be approved by the FDA later in the quarter.

Boston Scientific has been on a roll of late. By cutting costs, it was able to grow adjusted income by 36% last quarter, even as revenue fell slightly. But paying out court-ordered damages and royalties on its products is not going to help the company "live below its means."