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Commitments and Contingencies
6 Months Ended
Sep. 30, 2021
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 16. Commitments and Contingencies

From time to time, the Company is involved in legal and administrative proceedings and claims of various types. In some actions, the claimants seek damages, as well as other relief, which, if granted, would require significant expenditures. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in liability and the amount of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

Maquet Matters

In December 2015, the Company received a letter from Maquet Cardiovascular LLC (“Maquet”), a subsidiary of Getinge AB, asserting that the Company’s Impella® devices infringe certain claims with guidewire, lumen, rotor, purge and sensor features, which were in two Maquet patents and one pending patent application (which has since issued as a third patent) in the U.S. and elsewhere, and attaching a draft litigation complaint.  The letter encouraged the Company to take a license from Maquet. In May 2016, the Company filed suit in U.S. District Court for the District of Massachusetts (“D. Mass.” or “the Court”) against Maquet, seeking a declaratory judgment that the Company’s Impella devices do not infringe Maquet’s cited patent rights.  

In August 2016, Maquet sent a letter to the Company identifying four new Maquet U.S. continuation patent filings with claims that Maquet alleges are infringed by the Company’s Impella devices. The four U.S. continuation applications have been issued as patents of Maquet but expired on September 1, 2020.

In September 2016, Maquet filed a response to the Company’s suit in D. Mass., including various counterclaims alleging that the Company’s Impella 2.5®, Impella CP®, Impella 5.0®, and Impella RP® heart pumps infringe certain claims of the three original issued U.S. patents (“2016 Action”). In July 2017, the Court granted a motion to add three of the four additional continuation patents to the 2016 Action.  In April 2018, the Court conducted a Markman hearing on claim interpretation. On September 7, 2018, the judge issued a Memorandum and Order on Claim Construction, where he interpreted the disputed claim terms in the case.  Maquet then filed a motion for reconsideration of the Court’s construction of one of the disputed claim terms. The motion was denied on May 22, 2019. As a result of the Court’s denial, only one of the six originally asserted patents is in dispute. The Company filed a motion for summary judgement (the “MSJ”) for the remaining patent on September 18, 2019 (non-infringement) and April 13, 2020 (invalidity). The parties argued the MSJ for non-infringement on November 19, 2019 and the MSJ for invalidity on August 20, 2020.  

On September 30, 2021, the Court granted the Company’s MSJ for non-infringement of the asserted claims in the remaining patent which expired on September 1, 2020.   On October 20, 2021, Maquet filed a motion for reconsideration of the Order in favor of the Company. The Company intends to file a response to Maquet’s motion in due time.  Because the Court has not yet issued a final judgement, the case is not yet appealable to the Federal Circuit.    

In November 2017, Maquet filed a second action in D. Mass (the “2017 Action”) alleging that the Company’s Impella 2.5®, Impella CP®, and Impella 5.0® heart pumps infringe certain claims of the fourth additional U.S. continuation patent mentioned above (the seventh patent overall). Discovery in the 2017 Action is ongoing.

In a series of letters during January and February 2019, Maquet informed the Company of seven new patent applications filed from the patents in the 2016 Action and 2017 Action with claims Maquet alleges would be infringed by the Impella® products if the new applications were to issue as patents. One of the newly issued patents has been added to the 2017 Action. A Markman hearing for the newly-added patent was held on November 18, 2019.  A Markman order has not been issued yet. The asserted patent in this case expired on September 1, 2020. Discovery remains ongoing.

In the 2016 Action and 2017 Action, Maquet seeks injunctive relief and monetary damages in the form of a reasonable royalty, with three times the amount for alleged willful infringement. In its responses to the Company’s counterclaims, Maquet admits that its current commercially available products do not embody the claims of the asserted patents.

The Company is unable to estimate the potential liability with respect to the legal matters noted above. There are numerous factors that make it difficult to meaningfully estimate possible loss or range of loss at this stage of the legal proceedings, including the significant number of legal and factual issues still to be resolved in the Maquet patent disputes.

Thoratec Matters

Thoratec Corporation (“Thoratec”), a subsidiary of Abbott Laboratories (“Abbott”), has challenged a number of Company-owned patents in Europe in connection with the launch of Thoratec’s HeartMate PHP™ medical device (“PHP”) in Europe and the Company has counterclaimed for infringement in the District Court, or the Court of 1st Instance, in Düsseldorf. The litigation was stayed pending the Federal Court of Justice, the Court of 3rd and Last Instance in Germany for patent infringement cases,  ruling on the validity and scope of the litigated patents. In September 2019, the Federal Court of Justice in Germany upheld the Company’s patents that are the subject of the patent infringement action for the sales and marketing of Thoratec’s PHP pump in Germany. Subsequently, the Court of 1st Instance in Düsseldorf lifted the stay, re-opened the litigation proceedings, and ruled in favor of the Company.  The Court of 1st Instance acknowledged that Thoratec’s PHP product infringes two of the Company’s patents related to the key features of Impella® intravascular pump and future expandable heart pump, known as Impella ECP®.  Abbott appealed and the oral hearing was held on August 26, 2021.  

On September 23, 2021, the Appellate Court (the “Court of 2nd Instance”) in Düsseldorf upheld the ruling by the Court of 1st Instance in both cases and did not allow an appeal to the Federal Court of Justice.  Thoratec has until the end of October 2021 to appeal the Court of 2nd Instance’s order denying appeal in both cases to the Federal Court of Justice.   If Thoratec forgoes the appeal or the case is not heard by Federal Court of Justice, then the verdict will be deemed final and enforceable. The judgement will remain provisionally enforceable until the final resolution, which means that the Company is able to seek a court ordered injunction preventing the sale and marketing by Thoratec of PHP, should Thoratec attempt to launch HeartMate PHP in Germany.

These actions relate solely to Thoratec’s ability to manufacture and sell its PHP product in Europe and have no impact on the Company's ability to manufacture or sell its Impella® line of medical devices.  The actions do not expose the Company to liability risk, except under local German law, which requires a losing party in a proceeding to pay a portion of the other party’s legal fees.

Securities Class Action Litigation

On or about August 6, 2019, the Company received a securities class action complaint filed on behalf of a single shareholder in the U.S. District Court for the Southern District of New York (“SDNY”), on behalf of himself and persons or entities that purchased or acquired the Company’s securities between January 31, 2019 through July 31, 2019. On October 7, 2019, a similar purported class action complaint was filed by a different shareholder on behalf of himself and persons or entities that purchased or acquired the Company’s securities between November 1, 2018 and July 31, 2019. Also, on October 7, 2019, four shareholders filed applications to be appointed lead plaintiff and for their counsel to be appointed lead counsel for the class. Two of those shareholders also filed motions to consolidate the two cases and two of the shareholders have withdrawn their applications to be lead plaintiff.

The complaints alleged that the Company violated Sections 10(b) and 20(a) of and Rule 10b-5 under the Exchange Act, in connection with allegedly misleading disclosures made by the Company regarding its financial condition and results of operations.

On June 29, 2020, SDNY issued an order consolidating the two cases and appointed Local 705 International Brotherhood of Teamsters Pension Fund as the lead plaintiff and Labaton Sucharow LLP as lead counsel.  On September 17, 2020, the lead plaintiff filed an amended complaint in which it proposed a new class period of May 3, 2018 to July 31, 2019. As prescribed by a scheduling order, the Company filed a motion to dismiss on November 16, 2020. On September 21, 2021, SDNY granted the Company’s motion, dismissed the amended complaint, and gave the lead plaintiff leave to move to amend the complaint by October 12, 2021. On October 12, 2021, the Company and the lead plaintiff entered into a stipulation to voluntarily dismiss the securities class action and SDNY ordered dismissal of the case with prejudice on the same day. Under the terms of the stipulation, the lead plaintiff has agreed not to move for leave to amend the complaint and not to appeal the dismissal of the action.  

Shareholder Derivative Litigation

On November 6 and 7, 2019, two shareholders filed derivative actions in SDNY that were subsequently consolidated.  On November 8, 2019, another shareholder filed a derivative action in Massachusetts Suffolk County Superior Court.  On January 7, 2020, another shareholder derivative action was filed in the U.S. District Court for the District of Delaware.  The complaints in these actions rely on many of the same allegations as in the securities class actions, and assert that, between November 1, 2018 and July 31, 2019, the directors of the Company made or allowed to be made misleading public statements regarding the Company’s growth, ultimately harming the Company.  

The Company has agreed with the plaintiffs in all three actions to stay the cases pending resolution of a motion to dismiss in the securities class actions. As a result of the stay, the Delaware action has been administratively closed.

Litigation Demand

On March 3, 2020, a shareholder sent a letter to the Board of Directors asserting that the directors of the Company made or allowed to be made misleading public statements regarding the Company’s growth. The letter relies on many of the same allegations as the securities class actions and derivative actions, and demands that the Board (i) undertake an independent investigation of the directors, (ii) bring suit against the directors on behalf of the Company, and (iii) take a number of additional affirmative actions to redress the purported wrongs. On March 30, 2020, the Company, after discussions with the Board of Directors, sent a written response to the shareholder’s counsel which they responded to on June 1, 2020.  The Company then sent a further response to the shareholder’s counsel on June 15, 2020, affirming the decision to defer consideration of the litigation demand pending further developments in the securities class action suit. Following the filing of the amended complaint in the securities class action, described above, the same shareholder renewed their demand on September 29, 2020.  The Company responded on October 9, 2020 and once again affirmed that it will defer consideration of the demand pending further substantive developments in the securities class action suit.

On November 5, 2020, a second shareholder sent a letter to the Board of Directors that made essentially the same demands as the September 29, 2020 letter from the first shareholder.  The Company responded on November 23, 2020, noting that it will defer consideration of the demand pending further substantive developments in the securities class action suit.  

The Company is unable to estimate the potential liability with respect to the various legal matters noted above. There are numerous factors that make it difficult to estimate reasonably possible loss or range of loss at this stage of the legal proceedings, including the significant number of legal and factual issues still to be resolved in the shareholder derivative litigations.