[Federal Register: March 9, 1995 (Volume 60, Number 46)]
[Notices]
[Page 12948-12955]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09mr95-55]
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FEDERAL TRADE COMMISSION
[File No. 951 0002]
Boston Scientific Corporation; Proposed Consent Agreement With
Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
permit, among other things, Boston Scientific Corporation, a
Massachusetts-based manufacturer and marketer of catheters, to proceed
with the proposed acquisitions of Cardiovascular Imaging Systems, Inc.,
and SCIMED Life Systems, Inc., but would require the respondent to
grant a non-exclusive license to a specified package of patents and
technology related to the manufacture, production and sale of
intravascular ultrasound (IVUS) imaging catheters to the Hewlett-
Packard Company or another Commission-approved licensee. When the
consent becomes final, the license would have to be granted within ten
days to Hewlett-Packard or within six months to another licensee. In
addition, the consent agreement would require the respondent to obtain
Commission approval, for ten years, before acquiring an interest
greater than one percent in a company engaged in researching,
developing or manufacturing IVUS catheters for sale in the United
States.
DATES: Comments must be received on or before April 10, 1995.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
Howard Morse or Robert Tovsky, FTS/S-3627, Washington, D.C. 20580.
(202) 326-2949 or 326-2634.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given
that the following consent agreement containing a consent order to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, has been placed on the public record for a
period of thirty (30) days. Public comment is invited. Such comments or
views will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
Agreement Containing Consent Order
The Federal Trade Commission (``Commission''), having initiated an
investigation of the proposed acquisitions by Boston Scientific
Corporation of Cardiovascular Imaging Systems, Inc. and SCIMED Life
Systems, Inc., and it now appearing that Boston Scientific Corporation,
hereinafter sometimes referred to as ``proposed respondent,'' is
willing to enter into an agreement containing an order to license or
divest certain assets, and to cease and desist from making certain
acquisitions, and providing for other relief:
It Is Hereby Agreed by and between proposed respondent, by its duly
authorized officers and attorney, and counsel for the Commission that:
1. Proposed respondent Boston Scientific Corporation is a
corporation organized, existing and doing business under and by virtue
of the laws of the State of Delaware with its office and principal
place of business located at 1 Boston Scientific Place, Natick,
Massachusetts, 01760-1537.
2. Proposed respondent admits all the jurisdictional facts set
forth in the draft of complaint.
3. Proposed respondent waives:
a. Any further procedural steps;
b. The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
c. All rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement;
and
d. Any claim under the Equal Access to Justice Act.
4. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of thirty (30) days and information in respect thereto
publicly released. The Commission thereafter may either withdraw its
acceptance of this agreement and so notify the proposed respondent, in
which event it will take such action as it may consider appropriate, or
issue and serve its complaint (in such form as the circumstances may
require) and decision, in disposition of the proceeding.
5. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondent that the law has been
violated as alleged in the draft of complaint, or that the facts as
alleged in the draft complaint, other than jurisdictional facts, are
true.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to the proposed
respondent, (1) issue its complaint corresponding in form and substance
with the draft of complaint and its decision containing the following
order to license, divest and cease and desist in disposition of the
proceeding and (2) make information public with respect thereto. When
so entered, the order to license, divest and cease and desist shall
have the same force and effect and may be altered, modified or set
aside in the same manner and within the same time provided by statute
for other orders. The order shall become final upon service. Delivery
by the United States Postal Service of the complaint and decision
containing the agreed-to order to proposed respondent's address as
stated in this agreement shall constitute [[Page 12949]] service.
Proposed respondent waives any right it may have to any other manner of
service. The complaint may be used in construing the terms of the
order, and no agreement, understanding, representation, or
interpretation not contained in the order or the agreement may be used
to vary or contradict the terms of the order.
7. Proposed respondent has read the proposed complaint and order
contemplated hereby. Proposed respondent understands that once the
order has been issued, it will be required to file one or more
compliance reports showing that is has fully complied with the order.
Proposed respondent further understands that it may be liable for civil
penalties in the amount provided by law for each violation of the order
after it becomes final.
Order
I
It Is Ordered that, as used in this Order, the following
definitions shall apply:
A. ``Respondent'' or ``Boston Scientific'' means Boston Scientific
Corporation, its predecessors, successors, assigns, subsidiaries,
divisions, and groups and affiliates controlled by Boston Scientific,
their successors and assigns, and the directors, officers, employees,
agents, and representatives of each.
B. ``CVIS'' means Cardiovascular Imaging Systems, Inc.
C. ``SCIMED'' means SCIMED Life Systems, Inc.
D. ``Commission'' means the Federal Trade Commission.
E. ``CVIS Acquisition'' means the acquisition by Respondent of CVIS
voting securities that is the subject of an Agreement and Plan of
Merger and Reorganization entered into on or about August 31, 1994.
F. ``SCIMED Acquisition'' means the acquisition of SCIMED voting
securities that is the subject of an Agreement and Plan of Merger
entered into on or about November 8, 1994.
G. ``IVUS Catheters'' means intravascular ultrasound catheters,
intracardiac ultrasound catheters, removable imaging cores used in
intravascular or intracardiac ultrasound imaging, and intravascular
imaging guidewires.
H. ``IVUS Technology Portfolio'' means:
1. all rights of Boston Scientific, CVIS and SCIMED under United
States and foreign patents and patent applications filed in any country
relating to IVUS Catheters, including rights under patents issued in
the future in any country based upon patent applications filed, or
inventor's certificates and invention disclosures made, on or before
the License Date, and rights under all substitutions, continuations,
continuations-in-part, divisions, renewals, reissues and extensions
based on said patents and patent applications, including but not
limited to the right to manufacture, use, sell, or offer for sale for
any purpose or application any product suitable for use as an IVUS
Catheter;
2. all trade secrets, technology and know-how of CVIS and SCIMED
relating to IVUS Catheters, including but not limited to, books and
records, the results of research and development efforts, filings with
the United States Food and Drug Administration, scientific and clinical
reports, designs, manuals, drawings, and design, material and equipment
specifications and any know-how used by CVIS or SCIMED in conjunction
with the research and development, manufacturing or marketing of IVUS
Catheters;
3. a copy of the IVUS Catheter customer lists of Boston Scientific
and CVIS.
I. ``SCIMED IVUS Technology'' means all assets of SCIMED relating
to IVUS Catheters, including but not limited to:
1. United States and foreign patents and patent applications filed
in any country relating to IVUS Catheters;
2. all trade secrets, technology, and know-how of SCIMED relating
to IVUS Catheters, including but not limited to, books and records, the
results of research and development efforts, filings with the United
States Food and Drug Administration, scientific and clinical reports,
designs, manuals, drawings, and design, material and equipment
specifications and any know-how used by SCIMED in conjunction with the
research and development, manufacturing or marketing of IVUS Catheters;
and
3. all IVUS Catheter prototypes.
J. ``License Date'' means the date on which the IVUS Technology
Portfolio is licensed following Commission approval pursuant to
Paragraph II or Paragraph V of this Order.
K. ``Licensee'' means the person to whom the IVUS Technology
Portfolio is licensed pursuant to Paragraph II or Paragraph V of this
Order.
L. ``IVUS Consoles'' means instruments used to deploy IVUS
Catheters and to convert into display images signals transmitted by
IVUS Catheters.
II
It Is Further Ordered that:
A. Within six (6) months of the date this Order becomes final,
Respondent shall, absolutely and in good faith, grant pursuant to
Paragraph II.B of this Order, at no minimum price and with no
continuing royalties, a perpetual, non-exclusive license of the IVUS
Technology Portfolio, together with the right to grant exclusive sub-
licenses to any part of such IVUS Technology Portfolio, the right to
grant exclusive sub-licenses to manufacture or sell any product
pursuant to such IVUS Technology Portfolio, and the right to have IVUS
Catheters manufactured and sold on its behalf by any person.
B. Respondent shall license the IVUS Technology Portfolio.
1. to Hewlett-Packard Company, within ten days after the date this
Order becomes final, pursuant to, and in accordance with, the February
21, 1995 agreement between Respondent and Hewlett-Packard Company,
which agreement is in Confidential Appendix II; or
2. to a person that receives the prior approval of the Commission
and only in a manner that receives the prior approval of the
Commission.
The purpose of the license is to create an independent competitor in
the development, production and sale of IVUS Catheters and to remedy
the lessening of competition resulting from the CVIS Acquisition and
the SCIMED Acquisition as alleged in the Commission's Complaint.
C. For a period of three (3) years after the date this Order
becomes final, upon reasonable notice and reasonable request from the
Licensee, Boston Scientific shall provide to the Licensee information,
technical assistance and advice sufficient to effect the transfer to
the Licensee of the IVUS Technology Portfolio, and to enable the
Licensee to obtain all necessary United States Food and Drug
Administration approvals or certifications obtained by CVIS or Boston
Scientific with respect to, and to enable the Licensee to manufacture,
all IVUS Catheters manufactured by CVIS at any time during the period
commencing twelve (12) months prior to the date this Order becomes
final and extending through the License Date. Upon reasonable notice
and reasonable request from the Licensee, Boston Scientific shall also
provide to the Licensee consultation with knowledgeable employees of
Boston Scientific and training at the Licensee's facility for a period
of time, not to exceed two (2) years, sufficient to satisfy the
Licensee's management that its personnel are adequately trained in the
design and manufacture of IVUS [[Page 12950]] Catheters. Respondent may
require reimbursement from the Licensee for all its direct out-of-
pocket expenses incurred in providing the services required by this
Paragraph II.C of this Order.
D. Respondent shall not restrict any person employed by CVIS or
SCIMED prior to the date this Order becomes final from accepting
employment with the Licensee or, following employment of any such
person by the Licensee, communicating to the Licensee any intellectual
property included in the IVUS Technology Portfolio.
E. Pending the licensing of the IVUS Technology Portfolio,
Respondent shall take such actions as are necessary to maintain the
viability and marketability of the IVUS Technology Portfolio and to
prevent the destruction, removal, wasting, deterioration, or impairment
of the IVUS Technology Portfolio.
F. Respondent shall comply with all terms of the Agreement to Hold
Separate, attached to this Order and made a part hereof as Appendix I.
The Agreement to Hold Separate shall continue in effect until such time
as specified in the Agreement to Hold Separate.
III
It Is Further Ordered that Respondent shall supply to the Licensee,
for such period as the Licensee may request, up to three (3) years, on
reasonable commercial terms and provisions, at Boston Scientific's cost
or at such lower price as Boston Scientific and the Licensee may
otherwise agree, for distribution and sale by the Licensee, such
quantities and types of IVUS Catheters as may be requested by the
Licensee, upon reasonable notice, from among the various types
manufactured and sold by Boston Scientific during the period of such
supply arrangement.
IV
It Is Further Ordered that, for a period of five (5) years from the
date this Order becomes final, Respondent shall not offer, renew,
extend or enter into any exclusive contract or agreement, or enforce
directly or indirectly any exclusivity provision thereof, with any
manufacturer of IVUS Consoles, relating to the development, manufacture
or distribution of such units or relating to compatibility between the
IVUS Consoles produced by such manufacturer and IVUS Catheters produced
by any person.
V
It Is Further Ordered that:
A. If Boston Scientific has not licensed the IVUS Technology
Portfolio as required by Paragraph II of this Order, the Commission may
appoint a trustee to license the IVUS Technology Portfolio and to
divest CVIS together with the SCIMED IVUS Technology. In the event that
the Commission or the Attorney General brings an action pursuant to
5(l) of the Federal Trade Commission Act, 15 U.S.C. 45(l), or any other
statute enforced by the Commission, Boston Scientific shall consent to
the appointment of a trustee in such action. Neither the appointment of
a trustee nor a decision not to appoint a trustee under this Paragraph
shall preclude the Commission or the Attorney General from seeking
civil penalties or any other relief available to it, including a court-
appointed trustee, pursuant to Sec. 5(l) of the Federal Trade
Commission Act, or any other statute enforced by the Commission, for
any failure by the Respondent to comply with this Order.
B. If a trustee is appointed by the commission or a court pursuant
to Paragraph V of this Order, Respondent shall consent to the following
terms and conditions regarding the trustee's powers, duties, authority,
and responsibilities:
1. The Commission shall select the trustee, subject to the consent
of Respondent, which consent shall not be unreasonably withheld. The
trustee shall be a person with experience and expertise in
acquisitions, divestitures, and licensing. If Respondent has not
opposed, in writing, including the reasons for opposing, the selection
of any proposed trustee within ten (10) days after notice by the staff
of the Commission to Respondent of the identity of any proposed
trustee, Respondent shall be deemed to have consented to the selection
of the proposed trustee.
2. Subject to the prior approval of the Commission, the trustee
shall have the exclusive power and authority to license the IVUS
Technology Portfolio and to divest CVIS together with the SCIMED IVUS
Technology.
3. Within ten (10) days after appointment of the trustee,
Respondent shall execute a trust agreement that, subject to the prior
approval of the Commission and, in the case of a court-appointed
trustee, of the court, transfers to the trustee all rights and powers
necessary to permit the trustee to effect the licensing or divestiture
required by this Order.
4. The trustee shall have--
a. six (6) months from the date the Commission approves the trust
agreement described in Paragraph V.B.3. to accomplish the licensing of
the IVUS Technology Portfolio, which license shall be subject to the
prior approval of the Commission. If, however, at the end of this six
(6)-month period, the trustee has submitted a licensing candidate or
believes that licensing can be achieved within a reasonable time, the
licensing period may be extended by the Commission, or, in the case of
a court-appointed trustee, by the court; and
b. if the trustee has not licensed the IVUS Technology Portfolio
within the six (6)-month period described in Paragraph V.B.4.a., above,
the trustee shall have an additional twelve (12) months to accomplish
the divestiture of CVIS together with the SCIMED IVUS Technology, which
divestiture shall be subject to the prior approval of the Commission.
If, however, at the end of this twelve (12)-month period, the trustee
has submitted a divestiture candidate or believes that divestiture can
be achieved within a reasonable time, the divestiture period may be
extended by the Commission, or, in the case of a court-appointed
trustee, by the court; provided, however, the Commission may extend
this period only two (2) times.
5. The trustee shall have full and complete access to the
personnel, books, records and facilities related to the IVUS Technology
Portfolio, CVIS and the SCIMED IVUS Technology and to any other
relevant information, as the trustee may request. Respondent shall
develop such financial or other information as the trustee may request
and shall cooperate with the trustee. Respondent shall take no action
to interfere with or impede the trustee's accomplishment of the
licensing or divestiture. Any delays in divestiture caused by
Respondent shall extend the time for divestiture under this Paragraph
in an amount equal to the delay, as determined by the Commission or,
for a court-appointed trustee, by the court.
6. The trustee shall use his or her best efforts to negotiate the
most favorable price and terms available in each contract that is
submitted to the Commission, subject to Respondent's absolute and
unconditional obligation to license or divest at no minimum price. The
licensing or divestiture shall be made in the manner and to a Licensee
or acquirer approved by the Commission; provided, however, if the
trustee receives bona fide offers from more than one entity, and if the
Commission determines to approve more than one such entity, the trustee
shall license or divest, as applicable, to the entity selected by
Respondent from among those approved by the Commission. [[Page 12951]]
7. The trustee shall serve, without bond or other security, at the
cost and expense of Respondent, on such reasonable and customary terms
and conditions as the Commission or a court may set. The trustee shall
have the authority to employ, at the cost and expense of Respondent,
such consultants, accountants, attorneys, investment bankers, business
brokers, appraisers, and other representatives and assistants as are
necessary to carry out the trustee's duties and responsibilities. The
trustee shall account for all monies derived from the licensing or
divestiture and all expenses incurred. After approval by the Commission
and, in the case of a court-appointed trustee, by the court, of the
account of the trustee, including fees for his or her services, all
remaining monies shall be paid at the direction of the Respondent, and
the trustee's power shall be terminated. The trustee's compensation
shall be based at least in significant part on a commission arrangement
contingent on the trustee's licensing the IVUS Technology Portfolio, or
divesting CVIS and the SCIMED IVUS Technology.
8. Respondent shall indemnify the trustee and hold the trustee
harmless against any losses, claims, damages, liabilities, or expenses
arising out of, or in connection with, the performance of the trustee's
duties, including all reasonable fees of counsel and other expenses
incurred in connection with the preparation for, or defense of any
claim, whether or not resulting in any liability, except to the extent
that such liabilities, losses, damages, claims, or expenses result from
misfeasance, gross negligence, willful or wanton acts, or bad faith by
the trustee.
9. If the trustee ceases to act or fails to act diligently, a
substitute trustee shall be appointed in the same manner as provided in
Paragraph V.A. of this Order.
10. The Commission or, in the case of a court-appointed trustee,
the court, may on its own initiative or at the request of the trustee
issue such additional orders or directions as may be necessary or
appropriate to accomplish the licensing or divestiture required by this
Order.
11. The trustee shall have no obligation or authority to operate or
maintain the IVUS Technology Portfolio, CVIS or the SCIMED IVUS
Technology.
12. The trustee shall report in writing to Respondent and the
Commission every sixty (60) days concerning the trustee's efforts to
accomplish the licensing or divestiture.
VI
It Is Further Ordered that, for a period of ten (10) years from the
date this Order becomes final, Respondent shall not, without the prior
approval of the Commission, directly or indirectly, through
subsidiaries, partnerships, or otherwise:
A. Acquire more than one (1) percent of the stock, share capital,
equity, or other interest in any concern, corporate or non-corporate,
engaged in at the time of such acquisition, or within the two years
preceding such acquisition engaged in the research, development, or
manufacture of IVUS Catheters for sale in the United States;
B. Acquire any assets used for or previously used for (and still
suitable for use for) the manufacture of IVUS Catheters for sale in the
United States; or
C. Acquire exclusive rights to any patent or other technology
relating to the manufacture or sale of IVUS Catheters in the United
States
Provided, however, that this Paragraph VI shall not apply to the
acquisition of products or services in the ordinary course of business.
VII
It Is Further Ordered that:
A. Within sixty (60) days after the date this Order becomes final
and every sixty (60) days thereafter until Respondent has fully
complied with the provisions of Paragraphs II and V of this Order,
Respondent shall submit to the Commission a verified written report
setting forth in detail the manner and form in which it intends to
comply, is complying, and has complied with this Order. Respondent
shall include in its compliance reports, among other things that are
required from time to time, a full description of the efforts being
made to comply with Paragraph II of the Order, including a description
of all substantive contacts or negotiations for the licensing and the
identity of all parties contacted. Respondent shall include in its
compliance reports copies of all written communications to and from
such parties, all internal memoranda, and all reports and
recommendations concerning licensing.
B. One (1) year from the date this Order becomes final, annually
for the next nine (9) years on the anniversary of the date this Order
becomes final, and at other times as the Commission may require,
Respondent shall file a verified written report with the Commission
setting forth in detail the manner and form in which it has complied
and is complying with this Order.
VIII
It Is Further Ordered that Respondent shall notify the Commission
at least thirty (30) days prior to any proposed change in the corporate
structure of Respondent such as dissolution, assignment, sale resulting
in the emergence of a successor corporation, or the creation or
dissolution of subsidiaries or any other change in the corporation that
may affect compliance obligations arising out of this Order.
IX
It Is Further Ordered that Respondent, for the purpose of
determining or securing compliance with this Order, and subject to any
legally recognized privilege, upon written request and on five day's
notice to Respondent, shall permit any duly authorized
representative(s) of the Commission:
A. Access, during office hours and in the presence of counsel, to
inspect and copy all books, ledgers, accounts, correspondence,
memoranda and other records and documents in the possession or under
the control of Respondent relating to any matters contained in this
Order; and
B. Without restraint or interference from Respondent, to interview
Respondent's officers, directors, or employees, who may have counsel
present, regarding such matters.
X
It Is Further Ordered that this order shall terminate twenty (20)
years from the date this order becomes final.
Appendix I
Agreement To Hold Separate
[Docket No. C- , File No. 951-0002]
Agreement To Hold Separate
This Agreement to Hold Separate (the ``Hold Separate'') is by and
among the Boston Scientific Corporation (``Boston Scientific''), a
corporation organized, existing, and doing business under and by virtue
of the laws of Delaware, with its principal office and place of
business at 1 Boston Scientific Place, Natick, Massachusetts, 01760-
1537, and the Federal Trade Commission (the ``Commission''), an
independent agency of the United States Government, established under
the Federal Trade Commission Act of 1914, 15 U.S.C. Sec. 41, et seq.
(collectively, the ``Parties'').
Premises
Whereas, on August 31, 1994, Boston Scientific entered into an
agreement with Cardiovascular Imaging Systems, Inc. (``CVIS'')
providing for the acquisition (hereinafter the ``CVIS
[[Page 12952]] Acquisition'') of the voting securities of CVIS; and
Whereas, CVIS, with its principal office and place of business at
595 North Pastoria Avenue, Sunnyvale, California 94086, manufactures
and sells intravascular ultrasound catheters and high frequency imaging
units for use with such catheters; and
Whereas, on November 8, 1994, Boston Scientific entered into an
agreement with SCIMED Life Systems, Inc. (``SCIMED'') providing for the
acquisition (hereinafter the ``SCIMED Acquisition'') of the voting
securities of SCIMED; and
Whereas, SCIMED, with its principal office and place of business at
One SCIMED Place, Maple Grove, Minnesota 55311-1566, is conducting
research and development with respect to IVUS Catheters; and
Whereas, if the Commission accepts the Agreement Containing Consent
Order (``Consent Order''), the Commission will place it on the public
record for a period of at least thirty (30) days and may subsequently
withdraw such acceptance pursuant to the provisions of Sec. 2.34 of the
Commission's Rules; and
Whereas, the Commission is concerned that if an understanding is
not reached, preserving the status quo ante of CVIS, during the period
prior to the final acceptance and issuance of the Consent Order by the
Commission (after the 30-day public comment period), divestiture
resulting from any proceeding challenging the legality of the CVIS
Acquisition might not be possible, or might be less than an effective
remedy; and
Whereas, the Commission is concerned that if the CVIS Acquisition
is consummated, it will be necessary to preserve the Commission's
ability to require the divestiture of CVIS and the Commission's right
to seek a viable competitor to Boston Scientific; and
Whereas, the Commission has filed suit in the United States
District Court for the District of Columbia (Civil Action No. 1:95
CV00198) seeking a preliminary injunction with respect to the CVIS
Acquisition pending an administrative trial, and the Commission has
authorized its staff to seek a preliminary injunction with respect to
the SCIMED Acquisition pending an administrative trial; and
Whereas, the purpose of the Hold Separate is to:
(i) Preserve CVIS as a viable and competitive business, independent
of Boston Scientific, and engaged in the research and development,
manufacture and sale of IVUS Catheters and IVUS Consoles, pending final
acceptance or withdrawal of acceptance of the Consent Order by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules;
(ii) Preserve CVIS as a viable and competitive business,
independent of Boston Scientific, and engaged in the research and
development, manufacture and sale of IVUS Catheters and IVUS Consoles,
pending licensing of the IVUS Technology Portfolio pursuant to
Paragraph II of the Consent Order or pending licensing of the IVUS
Technology Portfolio or divestiture of CVIS and the SCIMED IVUS
Technology pursuant to Paragraph V of the Consent Order; and
(iii) Remedy any anticompetitive effects of the CVIS Acquisition;
and
Whereas, Boston Scientific's entering into this Hold Separate shall
in no way be construed as an admission by Boston Scientific that the
CVIS Acquisition or the SCIMED Acquisition is illegal or would have any
anticompetitive effects; and
Whereas, Boston Scientific understands that no act or transaction
contemplated by this Hold Separate shall be deemed immune or exempt
from the provisions of the antitrust laws or the Federal Trade
Commission Act by reason of anything contained in this Hold Separate.
Now, Therefore, the Parties agree, and in consideration of the
Commission's agreement that, unless it determines to reject the Consent
Order, it will not seek further relief from Boston Scientific with
respect to the CVIS Acquisition or the SCIMED Acquisition, except that
the Commission may exercise any and all rights to enforce this Hold
Separate and the Consent Order, once it becomes final, and in the event
that the required licensing is not accomplished, to appoint a trustee
to seek divestiture of CVIS and the SCIMED IVUS Technology, pursuant to
the Consent Order, as follows:
1. Boston Scientific agrees to execute and be bound by the attached
Consent Order.
2. If the Commission accepts the Consent Order for public comment,
Boston Scientific and the Commission will move to stay the action for
preliminary injunction pending in United States District Court with
respect to the CVIS Acquisition until such time as the Commission
withdraws such acceptance pursuant to the provisions of Sec. 2.34 of
the Commission's Rules or finally accepts and issues the Consent Order;
and, in the event the Commission finally accepts the Consent Order, the
Commission will move to dismiss the preliminary injunction action.
3. The terms ``IVUS Catheters,'' ``IVUS Consoles,'' ``IVUS
Technology Portfolio,'' and ``SCIMED IVUS Technology'' have the same
definitions as in the Consent Order;
4. Boston Scientific agrees that from the date this Hold Separate
is accepted until the earliest of the dates listed in subparagraphs
4.a, 4.b, 4.c or 4.d, it will comply with the provisions of paragraph 5
of this Hold Separate:
a. May 26, 1995, if the Commission has not made the Consent Order
final or withdrawn its acceptance of the Consent Order by that date;
b. three (3) business days after the Commission withdraws its
acceptance of the Consent Order pursuant to the provisions of Sec. 2.34
of the Commission's Rules;
c. the date the licensing required under Paragraph II or V of the
Consent Order is completed.
d. the date the divestiture required under Paragraph V of the
Consent Corder is completed.
5. Boston Scientific shall hold CVIS as it is constituted on the
date the CVIS Acquisition is consummated, separate and apart on the
following terms and conditions:
a. CVIS, as defined in Paragraph I.B. of the Consent Order, shall
be held separate and apart and shall be operated independently of
Boston Scientific (meaning here and hereinafter, Boston Scientific
excluding CVIS and excluding all personnel connected with CVIS as of
the date this Hold Separate is signed) except to the extent that Boston
Scientific must exercise direction and control over CVIS to assure
compliance with this Hold Separate or with the Consent Order.
b. Boston Scientific shall not exercise direction or control over,
or influence directly or indirectly, CVIS, the New Board (as defined in
subparagraph 5.d), or any of its operations or businesses; provided,
however, that Boston Scientific may exercise only such direction and
control over CVIS as is necessary to assure compliance with this Hold
Separate or with the Consent Order and provided further that Boston
Scientific may (a) direct CVIS to consent that patent litigation
between Boston Scientific and CVIS be stayed; (b) direct CVIS to
consent to acceptance of SCIMED's position in the arbitration
proceeding pending between CVIS and SCIMED; and (c) direct that Boston
Scientific and CVIS enter into a non-exclusive, royalty-free cross-
license of all their IVUS Catheter patents, provided however no such
cross-license shall limit rights conferred to CVIS except to the extent
it imposes identical limits on rights conferred to Boston
[[Page 12953]] Scientific, and provided further that no such cross-
license shall exclude any Boston Scientific patents relating to IVUS
Catheters; and following execution of such cross-license, direct that
the patent litigation between Boston Scientific and CVIS be dismissed.
c. Boston Scientific shall maintain the marketability, viability
and competitiveness of CVIS, and shall not take such action that will
cause or permit the destruction, removal, wasting, deterioration or
impairment of CVIS, except in the ordinary course of business and
except for ordinary wear and tear, and shall not sell, transfer,
encumber (other than in the normal course of business), or otherwise
impair the marketability, viability or competitiveness of CVIS.
d. Boston Scientific shall elect a three-person Board of Directors
for CVIS (the ``New Board''). The New Board shall consist of two
persons knowledgeable about IVUS Catheters, one of whom shall be named
Chairman of the New Board, and who shall remain independent of Boston
Scientific and competent to assure the continued viability and
competitiveness of CVIS, and one New Board Member who is also an
officer, agent or employee of Boston Scientific (the Boston Scientific
New Board Member''). Except for the Boston Scientific New Board Member,
Boston Scientific shall not permit any director, officer, employee or
agent of Boston Scientific also to be a director, officer, employee or
agent of CVIS. Each Board member shall enter into a confidentiality
agreement agreeing to be bound by the terms and conditions of this Hold
Separate.
e. Except as required by law and except to the extent that
necessary information is exchanged in the course of evaluating and
consummating the CVIS Acquisition, defending investigations or
litigation, obtaining legal advice, or complying with this Hold
Separate or the Consent Order, Boston Scientific shall not receive or
have access to, or the use of, any material confidential information of
CVIS or the activities of the New Board, not in the public domain.
Boston Scientific may receive on a regular basis from CVIS aggregate
financial information necessary and essential to allow Boston
Scientific to file financial reports, tax returns and personnel
reports. Boston Scientific and CVIS may also exchange confidential
information, subject to appropriate confidentiality agreements,
pursuant to agreements between CVIS and Boston Scientific for joint
research or contract manufacture, on arms-length commercial terms, to
the extent such agreements would be permissible between competitors
under the antitrust laws. Any such information that is obtained
pursuant to this subparagraph shall only be used for the purposes set
out in this subparagraph. (``Material confidential information,'' as
used in this Hold Separate, means competitively sensitive or
proprietary information not independently known to Boston Scientific
from sources other than CVIS or the New Board, as applicable, and
includes but is not limited to customer lists, customers, price lists,
prices, individual transactions, marketing methods, patents,
technologies, processes, or other trade secrets).
f. Except as permitted by this Hold Separate, the New Board member
appointed by Boston Scientific (``Boston Scientific New Board Member'')
who is also an officer, agent, or employee of Boston Scientific shall
not receive any CVIS material confidential information and shall not
disclose any such information obtained through his or her involvement
with CVIS to Boston Scientific or use it to obtain any advantage for
Boston Scientific. The Boston Scientific New Board Member shall
participate in matters that come before the New Board only for the
limited purpose of considering any capital investment of over one
million dollars ($1,000,000), approving any proposed budget and
operating plans, authorizing dividends and repayment of loans
consistent with the provisions hereof, reviewing any material
transactions described in paragraph 5.g, and carrying out Boston
Scientific's responsibilities under Hold Separate and the Consent
Order. Except as permitted by the Hold Separate, the Boston Scientific
New Board Member shall not participate in any other matter.
g. All material transactions, out of the ordinary course of
business and not precluded by paragraph 5 hereof, shall be subject to a
majority vote of the New Board (as defined in paragraph 5.d hereof).
h. Boston Scientific shall not change the composition of the New
Board unless the Chairman of the New Board consents, or unless it is
necessary to do so in order to assure compliance with this Hold
Separate or with the Consent Order. The Chairman of the New Board shall
have the power to remove members of the New Board for cause and to
require Boston Scientific to appoint replacement members of the New
Board. Boston Scientific shall not change the composition of the
management of CVIS except that the New Board shall have the power to
remove management employees for any legal reason. If the Chairman
ceases to act or fails to act diligently, a substitute Chairman shall
be appointed in the same manner as provided in paragraph 5.d. Boston
Scientific shall circulate to the management employees of CVIS and
appropriately display a notice of the Hold Separate and the Consent
Agreement at a conspicuous place at all CVIS offices and facilities.
i. All earnings and profits of CVIS shall be retained separately by
CVIS. If necessary, Boston Scientific shall provide CVIS with
sufficient working capital to operate at current rates of operation,
upon commercially reasonable terms.
j. Should the Federal Trade Commission seek in any proceeding to
compel Boston Scientific to divest itself of CVIS or SCIMED or to
compel Boston Scientific to divest any assets or businesses of CVIS and
SCIMED that it may hold, or to seek any other injunctive or equitable
relief, Boston Scientific shall not raise any objection based upon the
expiration of the applicable Hart-Scott-Rodino Antitrust Improvements
Act waiting period or the fact that the Commission has permitted the
CVIS Acquisition or the SCIMED Acquisition. Boston Scientific also
waives all rights to contest the validity of this Hold Separate.
6. For the purpose of determining or securing compliance with this
Hold Separate, subject to any legally recognized privilege, and upon
written request and five day's notice to Boston Scientific, Boston
Scientific shall permit any duly authorized representative(s) of the
Commission:
a. Access during the office hours of Boston Scientific and in the
presence of counsel to inspect and copy all books, ledgers, accounts,
correspondence, memoranda, and other records and documents in the
possession or under the control of Boston Scientific or CVIS relating
to compliance with this Hold Separate;
b. Without restraint or interference from Boston Scientific, to
interview Boston Scientific's or CVIS' officers, directors or
employees, who may have counsel present, regarding any such matters.
7. This agreement shall not be binding until approved by the
Commission.
Analysis To Aid Public Comment on the Provisionally Accepted
Consent Order
The Federal Trade Commission (``the Commission'') has accepted, for
public comment, from Boston Scientific Corporation (``Boston
Scientific''), an agreement containing a consent order. This agreement
has been placed on the public record for thirty days for
[[Page 12954]] reception of comments from interested persons.
Comments received during this period will become part of the public
record. After thirty days, the Commission will again review the
agreement and the comments received and will decide whether it should
withdraw from the agreement or make final the agreement's order.
The Commission's investigation of this matter concerns the proposed
acquisitions by Boston Scientific of Cardiovascular Imaging Systems,
Inc. (``CVIS'') and SCIMED Life Systems, Inc. (``SCIMED''). The
Commission's proposed complaint alleges that Boston Scientific and CVIS
each develop, produce and market intravascular ultrasound (``IVUS'')
catheters for use throughout the world. It also alleges that SCIMED has
been working on the development of these products, has manufactured and
tested prototypes, and is a likely entrant into the IVUS catheter
market. IVUS catheters are used in the diagnosis and treatment of
artery disease.
The agreement containing a consent order would, if finally accepted
by the Commission, settle charges that the acquisitions may
substantially lessen competition in the production and sale of IVUS
catheters in the United States. The Commission has reason to believe
that the acquisitions would have anticompetitive effects and would
violate Section 7 of the Clayton Act and Section 5 of the Federal Trade
Commission Act, unless an effective remedy eliminates such
anticompetitive effects.
The Commission has filed suit in the United States District Court
for the District of Columbia to enjoin Boston Scientific's proposed
acquisition of CVIS. That action is stayed by Commission acceptance of
the proposed order for public comment, and would be dismissed in the
event that the Commission makes final the order.
The Commission's proposed complaint in this matter alleges that
Boston Scientific's proposed acquisition of CVIS would eliminate
ongoing competition, result in substantially increased concentration,
and allow Boston Scientific to exercise market power. It further
alleges that Boston Scientific's proposed acquisition of SCIMED would
eliminate ongoing competition between Boston Scientific and SCIMED in
IVUS catheter research and development, and would eliminate SCIMED as a
potential entrant into the IVUS catheter market. The effect of these
acquisitions, the complaint alleges, is likely to be higher prices for
IVUS catheters and diminished product innovation.
The order accepted for public comment contains provisions that
would require Boston Scientific to license to Hewlett-Packard Company
or to another person that receives the prior approval of the Commission
a broad package of patents and technology relating to IVUS catheters.
This package would include rights to Boston Scientific's IVUS catheter
patents, as well as the patents and technology that Boston Scientific
proposes to acquire from both CVIS and SCIMED.
The order also would require Boston Scientific to provide, on
request by the licensee, certain technical assistance sufficient to
facilitate the licensee's use of the licensed technology and patents to
enter the IVUS catheter market. For IVUS catheters of the type
currently offered by CVIS, this requirement includes assistance for a
period of three years in manufacturing and obtaining regulatory
approvals. It also requires Boston Scientific to allow the licensee,
for a period of two years, to consult with Boston Scientific employees
for training in the design and manufacture of IVUS catheters. The order
would also require Boston Scientific to permit CVIS' and SCIMED's
current employees to take employment with the licensee. In order to
further facilitate entry into IVUS catheters, the order would prohibit
Boston Scientific from entering into exclusive contracts with
manufacturers of IVUS consoles that would exclude a new IVUS catheter
producer from the market.
The order would further provide for an interim supply agreement
between Boston Scientific and the licensee, to extend for a period of
three years, which covers the time that such a licensee could be
expected to require to enter the IVUS catheter market with commercial
products that have obtained regulatory approval.
Under the terms of the order, Boston Scientific must, if it does
not license Hewlett-Packard, grant a license to a Commission approved
licensee within six months of the date the order becomes final. If
Boston Scientific fails to do so, the Commission may appoint a trustee
to license the IVUS patents and technology, and, if necessary, to
divest CVIS together with SCIMED's IVUS technology and patents.
A hold separate agreement made a part of the consent requires
Boston Scientific, until it accomplishes the licensing required by the
order, or until the trustee accomplishes the licensing or divestiture
required by the order, or until May 26, 1995 if the order is not made
final by that date, to hold separate and preserve all of the assets and
businesses acquired from CVIS.
For a period of ten years from its effective date, the order would
also prohibit Boston Scientific from acquiring, without prior
Commission approval, more than one percent of the stock of, or any
other interest in, any company engaged in the research, development, or
manufacture for sale of IVUS catheters in the United States, assets
used or previously used for the manufacture of IVUS catheters for sale
in the United States, or exclusive rights to patents or other
technology used for the manufacture or sale of IVUS catheters in the
United States.
The purpose of this analysis is to invite public comment concerning
the consent order and any other aspect of the acquisition. This
analysis is not intended to constitute an official interpretation of
the agreement and order or to modify their terms in any way.
Donald S. Clark,
Secretary.
Statement of Commissioner Mary L. Azcuenaga, Concurring in Part and
Dissenting in Part, in Boston Scientific Corporation, File 951-0002
Today the Commission decides to publish for comment a proposed
consent order to settle concerns arising from the proposed acquisitions
by Boston Scientific of CVIS and SciMed. Although I have reason to
believe that the proposed acquisitions would be unlawful and the
proposed consent agreement appears likely to provide an appropriate
remedy for the violations, two provisions of the proposed settlement
are troubling: one is the negotiated agreement to curtail the public
comment period; the second is the fixed date for the expiration of the
hold separate agreement.
Although Boston Scientific may be able to show good reason why the
public comment period under Section 2.34 of the Commission's Rules of
Practice, 16 C.F.R. Sec. 2.34, should be curtailed from the usual 60
days, it has made no attempt to do so. Instead, without any proffered
justification, Boston Scientific and the staff have negotiated a 30-day
public comment period. It should go without saying that the
requirements of the Commission's Rules of Practice should not be a
matter for negotiation.\1\ The Commission's [[Page 12955]] acceptance
of the negotiated term creates an unfortunate precedent. Future
respondents are likely to seek comparable concessions, increasing both
the public and private costs of law enforcement negotiations. To the
extent that the order reduces the length of the period for public
comment and no good cause for that departure from the Commission's
rules having been shown, I dissent.
\1\The rules have the force and effect of law and should not be
taken lightly. Departing from the rules without justification leads
to inequality of treatment and leaves the Commission open to charges
of arbitrary and capricious decisionmaking.
The duration of the public comment period is not a trivial
matter. Cf. the Tunney Act, 15 U.S.C. Sec. 16, which requires a 60-
day public comment period for Department of Justice antitrust
consent orders. The Tunney Act also provides that the 60-day public
comment period ``shall not be shortened except by order of the
district court upon a showing that (1) extraordinary circumstances
require such shortening and (2) such shortening is not adverse to
the public interest.'' 15 U.S.C. Sec. 16(d).
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Nor should the commission condone fixing a date certain for
termination of the hold-separate agreement.\2\ This means that to
preserve its options, the Commission must decide the matter by a date
certain, which trivializes the decisionmaking process. The Commission
can expedite matters and has done so when appropriate,\3\ as consistent
with a careful review of the merits. A willingness to act expeditiously
is quite different from acquiescing in advance to a ``drop dead date''
that may leave the Commission unable fully to consider issues and
conditions as they may then exist or as they may be revealed during the
public comment period.\4\
\2\A hold separate agreement preserves a viable and competitive
business, independent of the acquirer, in part to ensure the
Commission's ability to require a divestiture. When the hold
separate agreement expires, the parties are free to consummate their
transaction.
\3\Expedited treatment for one respondent means moving that
matter to the front of the queue. The Commission ordinarily has
required a showing that such treatment is warranted.
\4\The Commission and the public interest would be disserved to
the extent that useful comments from the public are abbreviated or
perhaps not even submitted because of the shortened public comment
period.
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[FR Doc. 95-5790 Filed 3-8-95; 8:45 am]
BILLING CODE 6750-01-M