Tyco Unit to Appeal Award to Masimo

A unit of Tyco International said Tuesday that it would appeal a federal court jury’s verdict that it engaged in anti-competitive behavior and must pay $420 million to Irvine-based medical device maker Masimo Corp.

In a case filed in U.S. District Court in Los Angeles, the jury Monday found that Pleasanton, Calif.-based Nellcor unlawfully excluded its rivals from the market for pulse oximeters, which monitor oxygen levels in blood. The jury awarded $140 million to Masimo, which was tripled under U.S. antitrust laws.

In a statement, Nellcor said its practices “have always been in full compliance with federal and state antitrust laws.”

“We are confident that we will ultimately prevail when the legal process is completed,” Nellcor President David Sell said. A spokesman for Bermuda-based Tyco declined to comment.

A lawyer for Masimo called the jury’s verdict “gratifying” and said the company intended to vigorously pursue its case.

The decision “sends a message about the importance of protecting free and open competition,” said Marc Seltzer, a lawyer for Masimo.

The verdict comes amid a series of suits over the last few years by smaller medical device manufacturers that claim larger competitors have used their market clout to unfairly shut them out, said Mark Leahey, who heads the Medical Device Manufacturers Assn.

In its lawsuit, Masimo alleged that Nellcor, which according to published reports controls at least 70% of the pulse oximetry market, conducted a number of anti-competitive acts to exclude its smaller rival from the market.

In one tactic, customers -- which include hospitals and medical device distributors -- would lose discounts on other Nellcor and Tyco products unless they also bought Nellcor’s pulse oximeters, according to the lawsuit. The devices cost about $2,000 apiece.

Robert Betz, who heads the Health Industry Group Purchasing Assn., said such sales tactics were common and legal in many industries. These “are justified business practices,” Betz said, “as they produce real cost savings for healthcare providers.”

Nellcor also contended in court that antitrust laws were designed to protect consumers, not competitors, and said its sales practices benefited hospitals by lowering prices.

The antitrust suit is the latest in a long-running feud between Masimo and Nellcor. Nellcor was ordered to pay Masimo $164 million last year for infringing a patent on the oximeters, a decision Nellcor is appealing.