Liability in EU Market Promises to Grow

Device makers doing business in the U.S. don’t always care for the current state of tort law, but at least they know what to expect. The legal environment in other markets is undergoing some changes that promise to up the ante where financial liability is concerned.

The European Parliament recently voted on the overhaul of device regulations for the European Union, bringing to a close an effort of several years’ duration. As has been previously described at this blog, the notified bodies have their own recent issues with liability in the EU nations, but one of the less conspicuous features of the new Medical Device Regulations is that device makers will have to ensure they can make compensation to all patients who have been harmed by defective medical devices.

The version of the new regulatory framework adopted by the EP includes a requirement that device makers develop “a robust financial mechanism” that will compensate patients who “receive defective products.” There are several factors that go into the calculation of that “robust” mechanism, including the class of the device and the associated risk, but the legislation also points to the size of the manufacturer as a factor. The legislation further stipulates that device makers put themselves in a position to “rapidly and effectively” compensate patients, even when the company has gone out of business.

It requires no reading of tea leaves to realize this provision was sparked at least in part by the silicone gel breast implant scandal, which gained momentum in 2009 when implant rupture rates began to spike. The manufacturer, Poly Implant Prothèse, went bankrupt the following year. The metal-on-metal hip implant problem might also have figured into this provision.

The summary for this legislation is not specific about the nature of this financial mechanism, so it would appear that liability policies will serve in the stead of cash reserves. Whether a manufacturer opts to self-insure or cover this requirement by other means, one thing companies cannot do is leave themselves open to a raft of lawsuits without some sort of plan in place to deal with any claims.

Company beats shareholder suit despite CIA

Minnesota-based Cardiovascular Systems, Inc., persuaded a federal judge to toss out a class-action shareholder lawsuit based on alleged illegal sales tactics, but the suit may be refiled. District Court judge Donovan Frank dismissed the suit (Shoemaker v. Cardiovascular Systems) due to the absence of information specific enough to support the allegations, but Frank left the door open to a reopening of the suit. Cardiovascular had already settled a qui tam lawsuit with the federal government in the amount of $8 million, but the company is also working under a five-year corporate integrity agreement with the Office of Inspector General at the Department of Health and Human Services, which went into effect in June 2016.

PTO to revisit controversial AIA program

Holders of patents who have grown fatigued with the inter partes review process at the U.S. Patent and Trademark Office may be relieved to know the PTO is undertaking a retrospective review of this and other procedures handled by the agency’s Patent Trial and Appeals Board (PTAB). The inter partes review, one of several functions added to the PTO’s to-do list via the America Invents Act (AIA) of 2012, has been widely blasted as doing little to slow down the stream of cases landing at the Court of Appeals for the Federal Circuit, but also for allowing parties with no direct interest in a patent to damage or destroy the patent.

Hedge fund billionaire Kyle Bass has not been uniformly successful with the inter partes process, losing a challenge to the patent for Shire’s Lialda (mesalimine) late in 2016, but Bass has managed to invalidate a number of important patents via the process. PTO director Michelle Lee has instructed PTO staffers to review issues such as multiple petitions, motions to amend, and claims construction. The PTO announcement did not identify a date by which the review would be complete, however.

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