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UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA

ARTHREX, INC., Plaintiff, v. PARCUS MEDICAL, LLC, Defendant. ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS Defendant Parcus Medical, LLC (Parcus), for its Answer, Affirmative Defenses and Counterclaims, answers the numbered paragraphs of the Plaintiffs Complaint and further states as follows: INTRODUCTION 1. Parcus admits that the Complaint purports to allege an action for patent Civil Action No. 2:11-CV-694-FtM-295PC

infringement arising under the Patent Laws of the United States, Title 35 of the United States Code. Parcus otherwise denies any and all remaining allegations of Paragraph 1. PARTIES 2. Parcus is without knowledge or information sufficient to form a belief as to the

truth of the allegations of Paragraph 2, and therefore denies said allegations. 3. Parcus admits that it is a Wisconsin limited liability company with its principal Parcus

place of business at 839 South Neenah Avenue, Sturgeon Bay, Wisconsin 54235. otherwise denies any and all remaining allegations of Paragraph 3.

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JURISDICTION AND VENUE 4. Parcus admits that the Complaint purports to allege an action for patent

infringement arising under the Patent Laws of the United States, Title 35 of the United States Code. Parcus further admits that plaintiff purports to bring an action for patent infringement over which this court would have subject matter jurisdiction pursuant to 35 U.S.C. 1331 and 1338(a). Parcus otherwise denies any and all remaining allegations of Paragraph 4. 5. Parcus does not contest that Parcus is subject to this Courts exercise of in

personam jurisdiction over it for the purposes of this action only. Parcus otherwise denies any and all remaining allegations of Paragraph 5. 6. Parcus denies that venue is appropriate in this judicial district pursuant to 28

U.S.C. 1391. Parcus does not reside in this judicial district, nor did any substantial part of the events or omissions giving rise to the claim described by Arthrex occur in this District. Venue properly lies, if anywhere, in the judicial district where Parcus resides. ARTHREXS PATENTS 7. Parcus admits that, on its face, U.S. Patent No. 5,993,451 (the 451 patent) is

entitled Cannulated Suture Anchor Drill Guide, but denies that the 451 patent was duly and/or lawfully issued. Parcus otherwise denies any and all remaining allegations of Paragraph 7. 8. Parcus admits that the face of 451 patent lists Stephen S. Burkhart as an inventor.

Parcus otherwise denies any and all remaining allegations of Paragraph 8. 9. Parcus is without knowledge or information sufficient to form a belief as to the

truth of the allegations of Paragraph 9, and therefore denies said allegations. 10. Paragraph 10 states a legal conclusion, thus no response is necessary. To the

extent any response is required, Parcus denies the allegations of Paragraph 10.

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11.

Parcus admits that, on its face, U.S. Patent No. 6,641,597 (the 597 patent) is

entitled Interference Fit Knotless Suture Anchor Fixation, but denies that the 597 patent was duly and/or lawfully issued. Parcus otherwise denies any and all remaining allegations of Paragraph 11. 12. Parcus admits that the face of 597 patent lists Stephen S. Burkhart, R. Donald

Grafton and Peter J. Dreyfuss as inventors. Parcus otherwise denies any and all remaining allegations of Paragraph 12. 13. Parcus is without knowledge or information sufficient to form a belief as to the

truth of the allegations of Paragraph 13, and therefore denies said allegations. 14. Paragraph 14 states a legal conclusion, thus no response is necessary. To the

extent any response is required, Parcus denies the allegations of Paragraph 14. PLAINTIFFS COUNT I (Alleged Infringement of the 451 Patent) 15. Parcus incorporates by reference its responses to each of the foregoing paragraphs

as if fully stated herein. 16. Paragraph 16 states a legal conclusion, thus no response is necessary. To the

extent any response is required, Parcus denies the allegations of Paragraph 16. 17. 18. 19. 20. Parcus denies the allegations of Paragraph 17. Parcus denies the allegations of Paragraph 18. Parcus denies the allegations of Paragraph 19. Parcus denies the allegations of Paragraph 20.

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PLAINTIFFS COUNT II (Alleged Infringement of the 597 Patent) 21. Parcus incorporates by reference is responses to each of the foregoing paragraphs

as if fully stated herein. 22. Paragraph 22 states a legal conclusion, thus no response is necessary. To the

extent any response is required, Parcus denies the allegations of Paragraph 22. 23. 24. 25. 26. Parcus denies the allegations of Paragraph 23. Parcus denies the allegations of Paragraph 24. Parcus denies the allegations of Paragraph 25. Parcus denies the allegations of Paragraph 26. JURY DEMAND 27. Parcus does not object to a trial by jury on all issues and claims so triable. PRAYER FOR RELIEF 28. Complaint. AFFIRMATIVE DEFENSES FIRST AFFIRMATIVE DEFENSE Parcus has not infringed, is not infringing, has not induced and/or contributed to the infringement, and will not infringe, induce or contribute to the infringement, literally or under the Doctrine of Equivalents, of any valid and enforceable claim of the 451 or 597 patents. SECOND AFFIRMATIVE DEFENSE Upon information and belief, the claims of the 451 and 597 patents are invalid for failure to comply with one or more of the requirements of the patent laws of the United States, including, without limitation, 35 U.S.C. 101, 102, 103 and/or 112. Parcus denies that Arthrex is entitled to any of the relief prayed for in its

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THIRD AFFIRMATIVE DEFENSE Plaintiffs claims fail to state a claim upon which relief can be granted. FOURTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred by the doctrine of unclean hands. FIFTH AFFIRMATIVE DEFENSE Upon information and belief, the 451 and 597 patents are unenforceable by Arthrex. SIXTH AFFIRMATIVE DEFENSE Plaintiffs claims for patent infringement are barred by lack of standing. SEVENTH AFFIRMATIVE DEFENSE Plaintiffs claims for patent infringement are barred by the doctrine of patent misuse. EIGHTH AFFIRMATIVE DEFENSE Plaintiff is barred from obtaining any relief for alleged infringement committed more than six years prior to the filing of the complaint pursuant to 35 U.S.C. 286. NINTH AFFIRMATIVE DEFENSE Upon information and belief, Plaintiff is barred from obtaining any relief prior to giving actual notice of infringement to Parcus as a result of Plaintiffs, its predecessors in-interest, and/or licensees having failed to comply with the marking and/or notice requirements of 35 U.S.C. 287. TENTH AFFIRMATIVE DEFENSE Venue in this District is improper under 28 U.S.C. 1391. ELEVENTH AFFIRMATIVE DEFENSE Venue is improper under 28 U.S.C. 1404.

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TWELFTH AFFIRMATIVE DEFENSE Venue is improper under 28 U.S.C. 1400(b). THIRTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims for patent infringement are barred in whole or in part by laches. FOURTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims for patent infringement are barred by the doctrine of waiver and/or abandonment. FIFTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred by the doctrine of estoppel. SIXTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred by Plaintiffs inequitable conduct. SEVENTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred by the rule against claim splitting, which prohibits filing duplicative complaints, prosecuting by piecemeal, and by the doctrine of claim preclusion, and must therefore be dismissed. ADDITIONAL AFFIRMATIVE DEFENSES Parcus reserves the right to assert additional affirmative defenses and/or counterclaims after further investigation. PARCUS MEDICALS COUNTERCLAIMS 1. Parcus brings counterclaims: (a) under the patent laws of the United States, 35

U.S.C. 1 et seq., and the Declaratory Judgment Act, 28 U.S.C. 2201 et seq., to obtain a declaratory judgment that each and every claim of the 451 and 597 patents are invalid and/or not infringed; (b) for unfair and illegal anti-competitive practices by Arthrex, of which this

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litigation is a part, in violation of Fla. Stat. 501.204, which declares unlawful unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce. THE PARTIES 2. Counterclaim-Plaintiff Parcus, Inc., is a Wisconsin limited liability company with

its principal place of business at 839 South Neenah Avenue, Sturgeon Bay, Wisconsin 54235. 3. On information and belief, Counterclaim-Defendant Arthrex, Inc. is a Delaware

corporation having its principal place of business at 1370 Creekside Boulevard, Naples, Florida 34108. JURISDICTION AND VENUE 4. There is an actual controversy between Parcus and Arthrex regarding invalidity

and noninfringement of the 451 and 597 patents 617 because Arthrex has asserted that Parcus infringes the 451 and 597 patents. 5. The invalidity and noninfringement claims of this Counterclaim arise under the

patent laws of the United States, 35 U.S.C. 1 et seq., and the Declaratory Judgment Act, 28 U.S.C. 2201 et seq. This Court has subject matter jurisdiction over this counterclaim pursuant to at least 28 U.S.C. 1331, 1338(a), and 2201(a). 6. This Court also has original jurisdiction over the claims stated herein pursuant to

28 U.S.C. 1331 and 18 U.S.C. 1964(a), and Court may exercise supplemental jurisdiction over the state law claims stated herein pursuant to 28 U.S.C. 1367. 7. If venue is proper over the action brought by the plaintiff, then venue over these

counterclaims is also proper in this District pursuant to at least 28 U.S.C. 1391, because the

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defendants reside in this district and a substantial part of the events giving rise to the claims occurred in this district, and pursuant to 28 U.S.C. 1400. COUNTERCLAIM COUNT I DECLARATORY JUDGMENT OF NONINFRINGEMENT OF THE 451 PATENT 8. Counterclaim-Plaintiff repeats and incorporates herein by reference the

allegations contained in each of the foregoing paragraphs. 9. Counterclaim-Plaintiff has not infringed, is not infringing, has not induced and/or

contributed to the infringement, and will not infringe, induce or contribute to the infringement, literally or under the Doctrine of Equivalents, of any valid and enforceable claim of the 451 patent by making, using, selling offering for sale and/or importing into the United States suture anchor instrumentation for use during arthroscopic surgeries, including but not limited to Parcus V-Mouth Drill Guide (Part No. 10330) and 8-Point Drill Guide (Part No. 10446) instrumentation. COUNTERCLAIM COUNT II DECLARATORY JUDGMENT OF INVALIDITY OF THE 451 PATENT 10. Counterclaim-Plaintiff repeats and incorporates herein by reference the

allegations contained in each of the foregoing paragraphs. 11. Each and every claim of the 451 patent is invalid for failure to comply with one

or more of the requirements of the patent laws of the United States, including, without limitation, 35 U.S.C. 101, 102, 103 and/or 112. COUNTERCLAIM COUNT III DECLARATORY JUDGMENT OF NONINFRINGEMENT OF THE 597 PATENT

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12.

Counterclaim-Plaintiff repeats and incorporates herein by reference the

allegations contained in each of the foregoing paragraphs. 13. Counterclaim-Plaintiff has not infringed, is not infringing, has not induced and/or

contributed to the infringement, and will not infringe, induce or contribute to the infringement, literally or under the Doctrine of Equivalents, of any valid and enforceable claim of the 597 patent by making, using, selling offering for sale and/or importing into the United States suture anchors for use during arthroscopic surgery, including but not limited to Parcus Series 3 Suture Anchors (Part Nos. 10323T and 10313) and Parcus V-LoX Hybrid Suture Anchors (Part No. 10354T). COUNTERCLAIM COUNT IV DECLARATORY JUDGMENT OF INVALIDITY OF THE 597 PATENT 14. Counterclaim-Plaintiff repeats and incorporates herein by reference the

allegations contained in each of the foregoing paragraphs. 15. Each and every claim of the 597 patent is invalid for failure to comply with one

or more of the requirements of the patent laws of the United States, including, without limitation, 35 U.S.C. 101, 102, 103 and/or 112. COUNTERCLAIM COUNT V UNLAWFUL ANTI-COMPETITIVE PRACTICES 16. Parcus Medical repeats and incorporate herein by reference the allegations

contained in each of the foregoing paragraphs. 17. The instant patent infringement suit by Arthrex is but a single anti-competitive act

in a concerted series of acts designed and intended to eliminate competition against Arthrex generally, and to eliminate Parcus Medical as a competitor in particular.

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18.

The unlawful anti-competitive practices of which Parcus Medical complains

include, but are not limited to: a. Sham Litigation: Arthrex initiated, prosecuted and continues to prosecute sham trade secret litigation in this Court, styled as Arthrex Inc. and Arthrex Manufacturing Inc. vs. Parcus Medical LLC, Case No. 10- CIV-151- FtM-36-DNF (the Trade Secret Case). b. Litigation as a Weapon of Economic Destruction: Arthrex initiated the Trade Secret Case and the instant Patent Case with the express stated intent to impose unsustainable and ruinous legal fees on a fledgling competitor less than 1/1000th Arthrexs size. c. Trade Disparagement: Arthrex, in concert with its sales agents, has undertaken a campaign of disseminating false and disparaging statements to surgeons, Ambulatory Surgical Centers, hospital administrators and other potential Parcus customers across the country, including false statements that Parcus misappropriated Arthrex trade secrets; that Parcus products are cheap knock-offs of Arthrex products; that Parcuss founders are unethical; that Parcus is a Ponzi Scheme; that surgeons investments in Parcus are (contrary to fact) below-market options; that surgeons investments in Parcus constitute (contrary to fact) illegal kickbacks; and many other malicious falsehoods. d. Violation of the Federal Anti-Kickback Statute, 42 U.S.C. 1320A 7B. Arthrex markets and sells what it calls its C3 Program, pursuant to which Arthrex gives surgeons seeking to establish and/or equip Ambulatory Surgery Centers (ASCs) expensive operating room capital equipment worth hundreds of thousands of dollars for free in return for exclusive dealing contracts tying the surgeons and ASCs to purchase Arthrex products exclusively for a term of years. These free equipment packages constitute remuneration (including any kickback, bribe, or rebate) in facial violation of 42 U.S.C. 1320A7B(2). e. Threats, Intimidation and Extortion. Arthrex, and in particular its billionaire CEO, Reinhold Schmieding, routinely employ threats, intimidation and extortion as anti-competitive business tactics. Indeed, Schmieding authored, and Arthrex disseminates, a competitive mission statement that reads:

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f. Illegal enforcement of perpetual non-competes. Reinhold Schmiedings self-avowed mission is to force his former colleagues, by whatever means necessary, never to compete with Arthrex: Schmieding has threatened that he will settle for nothing less than total cessation of developing products that compete with Arthrex whether or not those products infringe any Arthrex patent, or embody any Arthrex trade secrets even though these former colleagues left Arthrex nine (9) to twelve (12) years ago. ANTI-COMPETITIVE PRACTICES: LITIGATION AS AN ECONOMIC WEAPON 19. A myriad of high-level internal Arthrex communications, which cannot be

detailed here because they remain for the time being subject to a Confidentiality Agreement and Protective Order in the Trade Secret Case, demonstrate that Arthrex prosecuted the Trade Secret Case and is prosecuting this Patent Case as part of a campaign to destroy Parcus, a tiny nascent competitor, financially. Some of the evidence has, however, become public. 20. The equities of this case can only be fairly understood against the backdrop of

Arthrexs overwhelming financial superiority and self-professed ability to flex its muscles in the marketplace. The comparison between Parcus and Arthrex makes the disparity clear: Parcus 2008 Sales 2009 Sales 2010 Sales 21. $ 225,651 $ 677,439 $1,407,052 Arthrex $680,000,000 $800,000,000 $930,000,000

Arthrex topped $1 Billion in sales in 2011 and is projecting $1.2 Billion in 2012.

It has the financial wherewithal to sustain expensive litigation as a business strategy. Parcus cannot, and Arthrex knows it. 22. Shortly after the Trade Secret Case was filed, on May 13, 2010, an Arthrex

officer, sales manager, product manager or other high-level Arthrex executive, whom Arthrex

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has as yet failed to identify, posted the following message on an online industry message board which can be found at http://www.cafepharma.com/boards/showthread.php?p=3566958:
#10 05-13-2010, 05:52 PM Anonymous Re: Parcus Medical Parcus is made up of past Arthrex employees and people who sold their businesses to Arthrex. Probably not a good idea to step on the toes of the people who bought your company and made you rich. Anyhow, Parcus raised a few million in start up capital. That could be drained very easily if this turns into a long term legal battle with an international orthopedic giant like Arthrex. Probably won't make new funds easy to obtain until this is settled. Parcus might think they have a "niche" offering lower priced produces and increased profits to surgery centers, but they offer nothing truly superior or unique and if they run out of cash, the stock options they are offered you to switch over might not be worth anything AND your Arthrex rep might not be running over every time you need something anymore...think before you switch. Is it worth the small margin that you might be gaining? Posts: n/a

23.

This post states Arthrexs strategy unmistakably: Arthrex believed that Parcuss

comparatively meager capital could be drained very easily. Arthrex knew that its prosecution of the Trade Secret Case (and the instant Patent Case) won't make new funds easy to obtain. In the false belief that Parcus like Arthrex offered its surgeon customers and distributors stock options a practice in which Arthrex has engaged extensively, but Parcus not at all Arthrex threatened Parcuss investors and customers: if they [Parcus] run out of cash, the stock options they offered you to switch over might not be worth anything, intending to chill investors and customers alike and thereby to cripple Parcus. Finally, Arthrex threatened retribution: if they [Parcus] run out of cash your Arthrex rep might not be running over every time you need something anymore. Arthrexs intent is clear: to chill investment in Parcus, to chill sales, to drain Parcuss capital, and thereby either to force Parcus to capitulation or be put out of business. Intimidate and Eradicate is the competitive mission statement.

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24.

Other statements that reveal Arthrexs strategy have become public, such as this

statement by an Arthrex Regional Sales Manager disseminated to the industry (PM004016):

25.

Arthrex CEO Reinhold Schmieding himself arranged to deliver an overt threat to

a Parcus founder through that founders wifes brother: I suggest you advise Mr. Donnermeyer that he either pursues other business interests or retire graciously and gratefully. We will not rest should he continue to pursue his current endeavors at Parcus. (PM004000). Schmieding targeted his demand that Donnermeyer retire gratefully at a long-former colleague whose noncompete had expired five (5) years earlier. Schmieding had no right whatsoever to demand of a person whose non-compete period has long expired that he pursue other business interests or retire i.e., that he refrain from competition in perpetuity. As Justice Learned Hand wrote so eloquently, time creates no prescriptive right in other men's labor. If an employer expects so much, he must secure it by contract. Harley & Lund Corp. v. Murray Rubber Co., 31 F.2d 932, 934 (2d Cir. 1929). Upon the expiration of the contract term, the former employee is free to compete. The use of intimidation to stifle a persons lawful right to compete in the industry in which he has labored for decades is an unlawful and unconscionable unfair business practice. 26. Most recently, Schmieding misused a conference call that had been set up to

discuss potential settlement to make fresh threats intended to intimidate Parcus and eliminate it as a competitor.1 Schmieding demanded that Parcus cease developing any products competitive with Arthrex, irrespective of whether or not the future products might infringe any Arthrex

Statements made in the course of settlement discussions are inadmissible if offered to prove liability or amount of damages in the underlying cause, but Federal Rule of Evidence 408 does not protect such statements if they constitute an independent violation, such as retaliation, interference, intimidation or unfair competition and are thus offered for another purpose. Carney v. American University, 151 F.3d 1090, 109596 (D.C. Cir. 1998).

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patent, or embody any Arthrex trade secret. The demand was to cease competing against Arthrex period. This demand was made to two other former colleagues of Schmiedings, whose non-competes had expired at the latest in 2000 and 2005, respectively, i.e., years before Parcus was even formed. Schmieding threatened: if you compete with me you will have continued litigation for years to come. In light of the gross disparity between Arthrexs $1.2 Billion dollars in sales and Parcus Medicals little more than $2 Million dollars in sales, the threat was clearly to inflict ruinous and never-ending legal costs if Parcus did not cease competing with Arthrex in any way. Communicating a threat to a person with the intent that:

the other person engage in (or refrain from) conduct against his will is the very definition of intimidation; to engage in such intimidation by the use of interstate wires may form the basis for liability under RICO.2 27. Numerous more specific examples of threats, intimidation and extortionate

conduct could be and will be added when Parcus obtains relief from Arthrexs designation of the damning documents as Attorneys Eyes Only under a Confidentiality Agreement that was intended to protect bona fide trade secrets, not to conceal unethical and unlawful anticompetitive conduct. ANTI-COMPETITIVE PRACTICES: TRADE DISPARAGEMENT 28. Shortly after commencing the Trade Secret Case, Arthrex widely disseminated

statements to the press asserting or implying that two specific Parcus founders, Mark Brunsvold and Dennis Donnermeyer, had misappropriated Arthrex trade secrets. In the context of such Arthrex statements as that Arthrex is committed to developing innovative products and that in order to continue that innovation, Arthrex will continuously and vigorously protect its
2

See, e.g., Raybestos Products Co. v. Younger, 54 F.3d 1234, 1241-43 (7th Cir. 1995).

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proprietary and confidential information, Arthrexs statements were clearly intended to convey recent misappropriation of innovations to imply the kind of fact pattern normally seen in a trade secrets case: i.e., where an employee leaves an employer, takes confidential designs or codes with him, and proceeds to use current research and development information to compete unfairly against the former employer. 29. In this case, by contrast, Brunsvold had last been employed by Arthrex in May Parcus was not formed until April 2007, did not

2003 and Donnermeyer in June 2003.

commence operations until January 2008, and did not market a new product until March 2009 nearly six (6) years after the two had departed Arthrex. Neither Brunsvold nor Donnermeyer has been or could credibly be accused of having wrongfully taken any secret documents with them when they left Arthrex; nor have any such documents ever been identified by any Arthrex witness. Nor has Arthrex ever identified any bona fide trade secrets to support its claims. 30. Arthrex had no good faith basis for its allegations of misappropriation in the

Trade Secret Case, and in this Patent Case, Arthrex proceeds on an entirely different and inconsistent theory. Both cases are motivated by oppressive and anti-competitive strategies. Both cases have been used as the pretext upon which to spread malicious falsehoods in the industry as part of a concerted strategy to undermine a competitor so small one would think a self-proclaimed international orthopedic giant like Arthrex would have more important things to do than to intimidate and exterminate it. 31. Arthrex, in concert with its sales agents, has undertaken a campaign of

disseminating false and disparaging statements to surgeons, ambulatory surgical centers, hospital administrators and other potential Parcus customers across the country, including such false statements as that Parcus willfully misappropriated Arthrexs proprietary trade secrets, with

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the clear implication that Parcus had misappropriated recent innovations; that Parcus products are cheap knock-offs of Arthrex products, when in fact Parcus products have received FDA approval and are neither cheap nor knock-offs, but are simply priced more competitively than Arthrexs products; that Parcuss founders are unethical; that Parcus is a Ponzi Scheme; that surgeons investments in Parcus are (contrary to fact) stock options and therefore violations of the surgeons professional ethics, whereas in truth it is Arthrex, not Parcus, that has issued millions of dollars worth of stock options to numerous surgeons who promote and purchase Arthrex products, and Parcus has issued none; that surgeons investments in Parcus constitute (contrary to fact and law) illegal kickbacks, whereas in fact it is Arthrex that engages widely in illegal kickbacks (see infra); and many other malicious falsehoods, all of which were calculated to induce surgeons and other potential customers not to deal with Parcus, thereby interfering with Parcuss ability to gain legitimate entry into the market, to prevent Parcus from competing with Arthrex on price, and to prevent Schmiedings former colleagues from making a living in their chosen profession while Schmieding himself multiplies his billions. 32. Other internal Arthrex documents which cannot presently be quoted demonstrate

that false and defamatory statements concerning Parcus, its founders and its products were disseminated and encouraged by persons at the highest level of Arthrex management, precisely in order to interfere with Parcus prospective advantageous relations, to intimidate and exterminate Parcus. ANTI-COMPETITIVE PRACTICES: VIOLATION OF THE FEDERAL ANTI-KICKBACK STATUTE, 42 U.S.C. 1320A7B 33. Arthrex markets what it calls its C3 Program, pursuant to which Arthrex gives

surgeons seeking to establish, equip, update or expand Ambulatory Surgery Centers (ASCs) expensive operating room (OR) capital equipment for free, in return for exclusive dealing

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contracts tying the surgeons and ASCs to purchase exclusively, for a term of years, the thousands of consumable products that are Arthrexs bread-and-butter products such as the implantable interference screws and anchors at issue in the Trade Secret Case and the instant case. The capital equipment used in ASC ORs can cost hundreds of thousands of dollars: as reported in industry press3, it's easy to spend upwards of $100,000 on a new tower or several times that if you're outfitting more than one OR. Arthrex and its Distributors will combine to cover all or substantially all of the cost of one, two or three such towers: for example, as reported in an HBS Consulting Report entitled Alternative Financial Solutions for Medical Technology Acquisition4: Arthrex C3 (Comprehensive Cost Containment) new capital equipment program for arthroscopic outpatient facilities. Through the C3 program, Arthrex and its distributors cover the majority of the costs of capital equipment while the customer signs an agreement for the use of consumables over a period of time. 34. Extensive documentation (which cannot at present be detailed here because it has

been designated Attorneys Eyes Only by Arthrex) demonstrates unequivocally that Arthrex gives this expensive equipment at no charge or at discounts approaching 100% to surgeons and their ASCs, in order to induce them to enter into exclusive dealing contracts. 35. The Federal Anti-Kickback Statute, 42 U.S.C. 1320A7B, provides in part: (2) Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to any person to induce such person (B) to purchase, order, or arrange for or recommend purchasing or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both. 36.
3 4

Arthrexs widespread practice of giving free capital equipment packages to

OutpatientSurgery.net > February 2006 > Thinking of Buying...Video Towers This report can be found at http://www.hbs-consulting.com/german/HBSStrategyReviews/AlternitiveFinancing.pdf

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surgeons to induce them to purchase or arrange for purchasing or ordering Arthrex consumable products for a period of years clearly constitutes remuneration (including any kickback, bribe, or rebate) in facial violation of 42 U.S.C. 1320A7B(2). 37. Arthrexs unlawful practices constitute unfair methods of competition,

unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce within the meaning of Fla. Stat. 501.204, which declares such practices unlawful. 38. Arthrexs tactics of threatening and intimidating a small start-up competitor with

expensive litigation having no good faith basis is a predatory misuse of its size and financial advantage for anti-competitive and unconscionable purposes, constituting unlawful methods of competition, unconscionable acts or practices, and/or deceptive acts or practices in the conduct of commerce, all within the meaning of Fla. Stat. 501.204.. 39. 40. Arthrexs unfair practices have damaged Parcus in an amount to be proven at trial. Arthrexs violations of Fla. Stat. 501.204 were knowing, willful, intentional,

and undertaken with malice. 42. Parcus is entitled to its actual damages, multiple, punitive and/or exemplary

damages, together with its attorneys fees and costs. COUNTERCLAIM-PLAINTIFFS PRAYER FOR RELIEF WHEREFORE, Counterclaim Plaintiff Parcus Medical LLC requests the following relief: A. B. Judgment dismissing with prejudice Arthrexs claims against Parcus; A Declaration that Parcus has not infringed and is not infringing any valid

and enforceable claim of the 451 patent, either directly or indirectly;

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C.

A Declaration that Parcus has not infringed and is not infringing any valid

and enforceable claim of the 597 patent, either directly or indirectly; D. E. F. A Declaration that each and every claim of the 451 patent is invalid; A Declaration that each and every claim of the 597 patent is invalid; Denying Arthrexs request for damages, costs, attorneys fees, interest

and/or injunctive relief; G. A Declaration that this case is exceptional under 35 U.S.C. 285 and

awarding Parcus its expenses, costs and attorneys fees; H. I. J. K. Money damages in amounts to be determined at trial; Multiple, punitive and/or exemplary damages; Its attorneys fees and costs; Such other and/or further relief as the Court may deem just and proper. DEMAND FOR JURY TRIAL Counterclaim-Plaintiff demands a jury trial on all issues triable of right by jury. Respectfully submitted, PARCUS MEDICAL LLC By its attorneys: /s/ Simeon D. Brier Simeon D. Brier, Florida Bar No. 525782 EDWARDS WILDMAN PALMER LLP 525 Okeechobee Blvd., Suite 1600 West Palm Beach, FL 33401 Telephone: (561) 833-7700 Facsimile: (561) 655-8719 sbrier@edwardswildman.com and Alan M. Spiro, BBO # 475650 (pending Admission Pro Hac Vice)

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Case 2:11-cv-00694-JES-SPC Document 13

Filed 02/06/12 Page 20 of 20 PageID 80

aspiro@edwardswildman.com Adam Samansky, BBO # 661123 (pending Admission Pro Hac Vice) asamansky@edwardswildman.com 111 Huntington Avenue Boston, MA 02199 Telephone: (617) 239-0100 Dated: February 6, 2012 CERTIFICATE OF SERVICE I hereby certify that on February 6, 2012, the foregoing Answer, Affirmative Defenses and Counterclaims was electronically filed with the Clerk of the Court using CM/ECF and was also served upon all counsel of record identified on the below Service List through CM/ECF. /s/ Simeon D. Brier Simeon D. Brier SERVICE LIST Andrew H. Reiss, Esq. Cheffy Passidomo, PA 821 Fifth Avenue South, Suite 201 Naples, FL 34102-6621 Telephone: 239.261.9300 Facsimile: 239.643.3558 ahreiss@napleslaw.com Anthony P. Cho, Esq. acho@cgolaw.com Todd W. Barrett, Esq. tbarrett@cgolaw.com Carlson, Gaskey & Olds, P.C. 400 W. Maple Road, Suite 350 Birmingham, MI 48009 Telephone: 248.988.8360 Facsimile: 248.988.8363

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