Dispute between HeartWare and Ventracor heats up

The legal battle between artificial heart firms HeartWare (ASX:HTW) and Ventracor (ASX:VCR) has intensified, with HeartWare filing a strong rebuttal to patent infringement action commenced against it by Ventracor and the University of Technology, Sydney.

Late last year, VentrAssist, a subsidiary of Ventracor, issued a lawsuit alleging that HeartWare's HVAD device infringed on the patents underlying Ventracor's ventricular assist device. Both devices are designed to aid the heart's ventricles in pumping blood around the body.

In a defence filed in the US District Court for the Southern District of Florida this week, HeartWare "emphatically denied" patent infringement. In documentation issued to the court, HeartWare said the patents infringement asserted against it by Ventracor and UTS were invalid and unenforceable on the grounds of "inequitable conduct", because it alleged Ventracor had failed to disclose known, relevant prior art in the US that had been disclosed in Europe.

In addition to denying the infringement, HeartWare has filed six counterclaims against Ventracor, including counterclaims seeking damages and costs based on unfair competition and violation of US antitrust laws. HeartWare is seeking a decision in that the relevant patents are invalid, not infringed and unenforceable.

"In taking this infringement action against HeartWare, Ventracor has exposed its patent portfolio to the legal process. In responding to Ventracor's claims HeartWare has taken advantage of this situation. Despite this we will continue to seek alternative resolution to this dispute," said HeartWare CEO Stuart McConchie.

In reply, Ventracor CEO Colin Sutton said: "HeartWare's claims are unsubstantiated and untested and Ventracor will respond to those claims as part of the normal court process,"

Neither Sutton nor McConchie would rule out settlement discussions. "Ventracor is open to entering into negotiations -- under the appropriate conditions. We are not just interested in delay tactics. We would like it resolved, and quickly so," Sutton said.

In February, HeartWare filed a motion to dismiss under safe-harbour exemption in section 271(e)(1) of the US Patents Act. In April US District Court Magistrate Judge Seltzer found that the case could not be summarily dismissed and recommended that Ventracor be permitted a period of time to conduct discovery. The discovery is continuing.

Sutton was critical of HeartWare's latest move. "They [...] are trying a different approach. In our view it is an equally flawed approach. We already see errors in the assertion and remain convinced in our minds that our patents are valid," he said.

Both companies were quick to assert that the legal case would not get in the way of normal business.

"This can continue in the background and will not change the timeframe of HeartWare's key milestones," said McConchie.

"Running two clinical trials takes Ventracor's first attention, and this is a sideshow," said Sutton.

HeartWare completes final HVAD implant in GLP study

Meanwhile, surgeons at the Texas Heart Institute have performed a sixth successful pre-clinical implantation of a HeartWare (ASX:HTW) ventricular assist device (HVAD) under good laboratory practice (GLP) conditions. HeartWare expects this to be the final implant in the study which will form the basis of its technical submission to regulatory bodies and ethical committees, prior to commencing human trials in Australia, the EU and US. The company commenced its first GLP trials in sheep at the Texas Heart Institute in April.

Last week, a further two HVAD GLP studies reached the 90 days required by the pre-clinical protocol, bringing the total to four. In all cases, analysis of the device along with pathology tested conducted at the Texas Heart Institute indicated that the pumps performed very well.

"We now have over 12 months of cumulative experience with implants done under GLP conditions," said Howard Leibman, director, corporate development at HeartWare. "All of the devices performed exceptionally well and we remain on track to commence human clinical trials which will involve up to seven centres in parallel, including two in Australia and five in Europe."

HeartWare's first left ventricular assist device, is expected to commence human clinical trials in early 2006, with first sales planned for 2007.