[Federal Register Volume 60, Number 46 (Thursday, March 9, 1995)]
[Notices]
[Pages 12948-12955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5790]



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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