ADAC patent suit turns tables on nuclear competitor Elscint

March 2, 1994

Underlying technology bought from PhilipsThe patent infringement legal dispute between nuclear medicinevendors ADAC Laboratories and Elscint took an unusual turn lastmonth. ADAC acquired patents from Philips Medical Systems relatingto gamma

Underlying technology bought from Philips

The patent infringement legal dispute between nuclear medicinevendors ADAC Laboratories and Elscint took an unusual turn lastmonth. ADAC acquired patents from Philips Medical Systems relatingto gamma camera technology and then filed a countersuit againstElscint for allegedly violating those patents.

Elscint, of Haifa, Israel, initiated the litigation last yearwhen it launched a patent infringement case against ADAC in U.S.District Court in Maryland (SCAN 9/8/93). Elscint filed the suitonly months after receiving $7.75 million for settling a similaraction against Sopha Medical Systems (SCAN 7/28/93).

Elscint has charged ADAC with violating its patents in nuclearmedicine and fluoroscopy technology. The patents involved in thenuclear medicine claims cover basic technology used in gamma camerasthat transform gamma rays into useful electrical information.The fluoroscopy claims were deferred by agreement of both parties,according to ADAC chairman and CEO Stanley D. Czerwinski.

Elscint asked for a preliminary injunction to prevent ADACfrom manufacturing nuclear medicine equipment covered by the patentspending the outcome of a trial, which has been scheduled for October.The injunction would probably cover a major part of ADAC's nuclearmedicine line, Czerwinski said.

The first week of hearings on the injunction was completedlast month, and the second week was scheduled to begin March 1.The preliminary injunction phase of the dispute will probablybe completed this month.

ADAC unleashed a surprise weapon in the dispute last month.On Feb. 10, the Milpitas, CA, vendor announced that it had acquiredPhilips' nuclear medicine patent portfolio, which consists of13 U.S. patents and 56 foreign patents and patent applications.The next day, ADAC announced it had filed a patent infringementclaim against Elscint in U.S. District Court in San Jose, CA,charging Elscint with violating the Philips patents. ADAC filedthe lawsuit in direct response to the Elscint litigation, accordingto Czerwinski.

"We at ADAC believe in competition in the marketplacerather than in the courts and so have a policy of not assertingpatents against our competitors," Czerwinski said. "However,in this case Elscint has already filed an action against us. Wehad no choice but to respond in kind, and believe that we willprevail both in our defense against their claims and in our claimsagainst them."

The patents were acquired to give ADAC patent protection inthe future and not for the purpose of suing Elscint, Czerwinskisaid. Philips exited the nuclear medicine market three years ago.At that time, the Dutch vendor licensed its nuclear technologyto both ADAC and Digital Design of France (SCAN 10/9/91).

Originally Philips' main U.S. distributor for nuclear medicineequipment, ADAC was later transferred service responsibility forPhilips' installed base of nuclear medicine cameras (SCAN 5/6/92).The U.S. vendor marketed the ARC 3000 gamma camera, acquired fromPhilips, until that product was discontinued.

ADAC's countersuit has set up a situation that would invitean out-of-court settlement of the litigation. Such a developmentis possible, Czerwinski said. Because of its patent position,however, ADAC is likely to secure better settlement terms thanthose won by Sopha.