Wright Medical Technology, Inc., et al.; Proposed Consent Agreement with Analysis to Aid Public Comment

[[Page 460]]

FEDERAL TRADE COMMISSION

[[File No. 951 0015]

Wright Medical Technology, Inc., et al.; 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

require, among other things, a Tennessee-based research and development

corporation to transfer to the Mayo Foundation, the licensor of the

implant technology to Orthomet, Inc., a complete copy of all assets

relating to Orthomet's business of researching and developing

orthopaedic implants for use in human hands, and would also require

Wright Medical Technology to obtain Commission approval before

acquiring any interest in any firm that has received, or has applied

for, Food and Drug Administration approval to market orthopaedic hand

implants in the United States.

dates: Comments must be received on or before March 6, 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: Richard Dagen or Benjamin Tahyar, FTC/

S-2627, Washington, D.C. 20580. (202) 326-2628 or 326-2889.

supplementary information: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 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 sixty (60) 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 Section 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order

In the Matter of Wright Medical Technology, Inc., a corporation,

Kidd, Kamm Equity Partners, L.P., a limited partnership, Kidd, Kamm

Investments, L.P., a limited partnership, and Kidd, Kamm

Investments, Inc., a corporation.

The Federal Trade Commission (``Commission''), having initiated an

investigation of the acquisition of all the outstanding shares of

common and convertible preferred stock of Orthomet, Inc. (``Orthomet'')

by Wright Medical Technology, Inc. (``WMTI''), a subsidiary of Kidd,

Kamm Equity Partners, Inc. (``KKEP''), KKEP's general partner, Kidd,

Kamm Investments, L.P. (``KKI''), and KKI's general partner, Kidd, Kamm

Investments, Inc. (``KKI, Inc.''), and it now appearing that WMTI,

KKEP, KKI, and KKI, Inc., hereinafter sometimes referred to as

``Proposed Respondents,'' are willing to enter into an Agreement

Containing Consent Order (``Agreement'') to (i) divest and license

certain assets, (ii) cease and desist from certain acts, and (iii)

provide for certain other relief:

It is hereby agreed by and between Proposed Respondents, by their

duly authorized officers and their attorneys, and counsel for the

Commission that:

1. Proposed Respondent WMTI is a corporation organized, existing,

and doing business under and by virtue of the laws of the State of

Delaware, with its principal place of business located at 5677 Airline

Road, Arlington, Tennessee 38002.

2. Proposed Respondent KKEP is a limited partnership organized,

existing, and doing business under and by virtue of the laws of the

State of Delaware, with its principal place of business located at

Three Pickwick Plaza, Greenwich, Connecticut 06830.

3. Proposed Respondent KKI is a corporation organized, existing,

and doing business under and by virtue of the laws of the State of

Delaware, with its principal place of business located c/o Kidd, Kamm &

Company, 9454 Wilshire Boulevard, Suite 920, Beverly Hills, California

90212.

4. Proposed Respondent KKI, Inc. is a corporation organized,

existing, and doing business under and by virtue of the laws of the

State of Delaware, with its principal place of business located at

Kidd, Kamm & Company, 9454 Wilshire Boulevard, Suite 920, Beverly

Hills, California 90212.

5. Proposed Respondents admit all the jurisdictional facts set

forth in the draft of complaint.

6. Proposed Respondents waive:

(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 pursuant to this Agreement; and

(d) any claims under the Equal Access to Justice Act.

7. 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 sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this Agreement and so notify the Proposed Respondents, 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.

8. This Agreement is for settlement purposes only and does not

constitute an admission by the Proposed Respondents 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.

9. 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 Section 2.34 of the

Commission's Rules, the Commission may, without further notice to

Proposed Respondents, (1) issue its complaint corresponding in form and

substance with the draft of complaint and its decision containing the

following Order to divest and license and to cease and desist in

disposition of the proceeding, and (2) make information public with

respect thereto. When so entered, the Order 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 Respondents' addresses as stated in this

Agreement shall constitute service. Proposed Respondents waive any

right they 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.

10. Proposed Respondents have read the proposed complaint and Order

contemplated hereby. Proposed Respondents understand that once the

[[Page 461]] Order has been issued, they will be required to file one

or more compliance reports showing they have fully complied with the

Order. Proposed Respondents further understand that they 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. ``WMTI'' means Wright Medical Technology, Inc., its

subsidiaries, divisions, groups and affiliates controlled by WMTI, and

their respective directors, officers, employees, agents and

representatives, and their respective successors and assigns.

B. ``KKEP'' means Kidd, Kamm Equity Partners, L.P., its

subsidiaries (including WMTI), divisions, groups and affiliates

controlled by KKEP, and their respective general partners, directors,

officers, employees, agents and representatives, and their respective

successors and assigns.

C. ``KKI'' means Kidd, Kamm Investments, L.P., its divisions,

groups and affiliates controlled by KKI, and their respective general

partners, directors, officers, employees, agents and representatives,

and their respective successors and assigns.

D. ``KKI, Inc.'' means Kidd, Kamm Investments, Inc., its

subsidiaries, divisions, groups and affiliates controlled by KKI, Inc.,

and their respective directors, officers, employees, agents and

representatives, and their respective successors and assigns.

E. ``Orthomet'' means Orthomet, Inc., a corporation organized,

existing, and doing business under and by virtue of the laws of the

State of Minnesota, with its principal place of business located at

6301 Cecilia Circle, Minneapolis, Minnesota 55439.

F. ``Respondents'' mean WMTI, KKEP, KKI, and KKI, Inc.

G. ``Commission'' means the Federal Trade Commission.

H. ``Acquisition'' means the acquisition by WMTI of outstanding

shares of stock of Orthomet pursuant to a cash tender offer commenced

on October 17, 1994.

I. ``Mayo'' means the Mayo Foundation for Medical Education and

Research, a Minnesota Charitable Corporation, with its principal place

of business located at 200 First Street SW, Rochester, Minnesota 55439.

J. ``Mayo PIP Orthopaedic Finger Implant Design'' means the Mayo

proximal interphalangeal prosthesis design together with modifications,

enhancements, and improvements, whether or not patentable, that is the

subject of a technology license contract between Mayo and Orthomet

dated as of December 24, 1992.

K. ``Mayo MCP Orthopaedic Finger Implant Design'' means the

metacarpophalangeal prosthesis design developed as a cooperative effort

between Mayo and Orthomet, together with modifications, enhancements,

and improvements, whether or not patentable, that is the subject of a

technology license contract between Mayo and Orthomet dated as of May

1, 1993.

L. ``Mayo CMC Orthopaedic Finger Implant Design'' means the

carpometacarpal prosthesis design developed as a cooperative effort

between Mayo and Orthomet, together with modifications, enhancements,

and improvements, whether or not patentable, that is the subject of a

technology license contract between Mayo and Orthomet dated as of May

1, 1993.

M. ``Licensed Inventions'' means (1) the Mayo PIP Orthopaedic

Finger Implant Design, (2) the Mayo MCP Orthopaedic Finger Implant

Design, and (3) the Mayo CMC Orthopaedic Finger Implant Design.

N. ``Technology License Contracts'' means the contracts between

Mayo and Orthomet (1) relating to the Mayo PIP Orthopaedic Finger

Implant Design and any amendments thereto, (2) relating to the Mayo MCP

Orthopaedic Finger Implant Design and any amendments thereto, and (3)

relating to the Mayo CMC Orthopaedic Finger Implant Design and any

amendments thereto.

O. ``Orthopaedic Finger Implants'' means orthopaedic implants

designed for use in the proximal interphalangeal joint, the

metacarpophalangeal joint, and the carpometacarpal joint of the human

hand.

P. ``Orthomet/Mayo Orthopaedic Finger Implant Business'' means

Orthomet''s or WMTI's business of researching and developing

Orthopaedic Finger Implants for eventual commercialization based upon

the Licensed Inventions.

Q. ``Orthomet/Mayo Orthopaedic Finger Implant Research Assets''

means all tangible and intangible assets constituting or otherwise

relating to the Orthomet/Mayo Orthopaedic Finger Implant Business,

including but not limited to:

1. All books, records, CAD files and other documents;

2. All data, materials, and information relating to the Orthomet/

Mayo Orthopaedic Finger Implant Business, including, but not limited

to, FDA approvals for Orthopaedic Finger Implants, list of clinicians,

clinical testing, surgical techniques and protocols, surgical

instrumentation design development, and biomechanical materials;

3. All intellectual property, including, but not limited to,

patents and patent applications, formulas, processes, technology, know-

how, trade secrets, manufacturing information, specifications, plans,

drawings, designs and data, product prototypes, and other tangible

embodiments of know-how, including, but not limited to, the technology

and know-how required to manufacture commercially acceptable products;

and

4. All products testing and laboratory research data and samples,

including, but not limited to, bench testing, wear testing, and

materials testing.

R. ``Orthopaedic Finger Implant Licensee'' means the party or

parties, other than Respondents, to whom Mayo licenses the Licensed

Inventions.

S. ``FDA'' means the United States Food and Drug Administration.

T. ``510(k) Application'' means an application made to the FDA

pursuant to 21 U.S.C. Sec. 350(k), or successor provisions.

U. ``IDE Application'' means an application made to the FDA

pursuant to 21 C.F.R. Sec. 812.20, or successor provisions, for an

investigational device exemption.

II.

It is further ordered That: A. Within five (5) days after the date

this Order becomes final, Respondents shall:

1. Transfer to Mayo a full and complete copy of the Orthomet/Mayo

Orthopaedic Finger Implant Research Assets;

2. Grant Mayo a license to such assets, where applicable, with full

right of sublicense thereunder, in perpetuity; and

3. Make any and all such arrangements and transfers as are

necessary to enable Mayo to license an Orthopaedic Finger Implant

Licensee.

B. Upon reasonable notice and request from the Orthopaedic Finger

Implant Licensee, Respondents shall provide reasonable assistance to

the Orthopaedic Finger Implant Licensee regarding the Orthomet/Mayo

Orthopaedic Finger Implant Research Assets transferred pursuant to

Paragraph II.A of this Order. Such assistance shall include

consultation with knowledgeable employees of Respondents as the

Orthopaedic Finger Implant Licensee's facilities or at such other place

as is [[Page 462]] mutually satisfactory to Respondents and the

Orthopaedic Finger Implant Licensee for a period of time sufficient to

satisfy the Orthopaedic Finger Implant Licensee's management. However,

Respondents shall not be required to continue providing such assistance

for more than six (6) months. Respondents may require reimbursement

from the Orthopaedic Finger Implant Licensee for all the actual hourly

cost of pay and benefits for Respondents' personnel providing the

assistance and, if travel is required, the travel cost and per diem

subsistence incurred by Respondents in providing the assistance to the

Orthopaedic Finger Implant Licensee.

C. Pending the transfer (and licensing, where applicable) of

Orthomet/Mayo Orthopaedic Finger Implant Research Assets, Respondents

shall take such actions as are necessary to maintain the viability and

marketability of Orthomet/Mayo Orthopaedic Finger Implant Research

Assets and to prevent the destruction, removal, wasting, deterioration,

or impairment of Orthomet/Mayo Orthopaedic Finger Implant Research

Assets except for ordinary wear and tear.

III.

It is further ordered That: A. If Respondents do not, within six

(6) months of the date this Order becomes final, obtain the

Commission's approval for an Orthopaedic Finger Implant Licensee

pursuant to the procedures set forth in Sec. 2.41(f) of the

Commission's Rules of Practice, 16 C.F.R. Sec. 2.41(f), Respondents

shall:

1. Take whatever steps are necessary to effect the immediate

termination of the Technology License Contracts within five (5) days

after the end of the six (6)-month period;

2. After the termination of the Technology Licensee Contracts,

refrain from entering into any agreement of any sort with Mayo relating

to the Licensed Inventions or to the Orthomet/Mayo Orthopaedic Finger

Implant Research Assets; and

3. Within ten (10) days of the termination of the Technology

License Contracts ordered in this Paragraph, divest to Mayo absolutely

and in good faith the Orthomet/Mayo Orthopaedic Finger Implant Research

Assets and grant Mayo, where applicable, a license to such assets with

full right of sublicense thereunder, in perpetuity. Respondents shall

retain no interest or rights in the Orthomet/Mayo Orthopaedic Finger

Implant Research Assets. Mayo shall have the exclusive power and

authority to grant a license relating to the Licensed Inventions.

The purpose of licensing an Orthopaedic Finger Implant Licensee

other than Respondents is to ensure the continuation of the Orthomet/

Mayo Orthopaedic Finger Implant Research Assets as an ongoing research

project for Orthopaedic Finger Implants to be approved by the FDA for

sale in the United States and to remedy the lessening of competition

resulting from the Acquisition as alleged in the Commission's

complaint.

B. Upon reasonable notice and request from the Orthopaedic Finger

Implant Licensee, Respondents shall provide reasonable assistance to

the Orthopaedic Finger Implant Licensee regarding the Orthomet/Mayo

Orthopaedic Finger Implant Research Assets divested pursuant to

Paragraph III.A of this Order. Such assistance shall include

consultation with knowledgeable employees of Respondents at the

Orthopaedic Finger Implant Licensee's facilities or at such other place

as is mutually satisfactory to Respondents and the Orthopaedic Finger

Implant Licensee for a period of time sufficient to satisfy the

Orthopaedic Finger Implant Licensee's management. However, Respondents

shall not be required to continue providing such assistance for more

than six (6) months. Respondents may require reimbursement from the

Orthopaedic Finger Implant Licensee for all the actual hourly cost of

pay and benefits for Respondents' personnel providing the assistance,

and, if travel is required, the travel cost and per diem subsistence

incurred by Respondents in providing the assistance to the Orthopaedic

Finger Implant Licensee.

IV.

It is further ordered That Respondents shall not without the prior

approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise:

A. For a period of ten (10) years from the date this Order becomes

final, acquire more than 1% of the stock, share capital, equity, or

other interest in any concern, corporate or non-corporate, that (1) has

filed a 510(k) Application or IDE Application relating to Orthopaedic

Finger Implants or, within two (2) years prior to any such proposed

acquisition, has announced publicly its intention to submit either of

such applications, or (2) has received FDA approval relating to

Orthopaedic Finger Implants.

B. For a period of ten (10) years from the date this Order becomes

final, acquire any assets (including, but not limited to, any

technology, know-how, and other intellectual property) that relate to

Orthopaedic Finger Implants (1) for which a 510(k) Application or IDE

Application has been filed or for which the intention to file such

applications has been publicly announced within two (2) years prior to

any such proposed acquisition, or (2) for which FDA approval has been

received. The foregoing prohibition shall not apply to (i) the

acquisition of materials, supplies, inventory, testing equipment or

manufacturing equipment in the ordinary course of business, or (ii) the

acquisition of product evaluations and product testing and laboratory

research data (relating to Orthopaedic Finger Implants owned by

Respondents), including, but not limited to, bench testing, wear

testing and materials testing, from outside laboratories, outside

testing facilities or other third parties, in the ordinary course of

Respondents' business.

C. For a period of ten (10) years from the date the Technology

License Contracts are terminated pursuant to Paragraph III.A of this

Order, enter into any agreement with Mayo relating to Orthopaedic

Finger Implants.

V.

It is further ordered That,

A. Within sixty (60) days after the date this Order becomes final

and every sixty (60) days thereafter until Respondents have fully

complied with the provisions of Paragraphs II and III of this Order,

Respondents shall submit to the Commission a verified written report

setting forth in detail the manner and form in which they intend to

comply, are complying, and have complied with Paragraphs II and III of

this Order. Respondents shall include in their compliance reports,

among other things that are required from time to time, a full

description of the efforts being made to comply with these Paragraphs

of this Order, including a description of all substantive contacts or

negotiations undertaken by Respondents, and assistance offered by

Respondents to Mayo for accomplishing the provision (and licensing,

where applicable) of Orthomet/Mayo Orthopaedic Finger Implant Research

Assets required by this Order, including the identity of all parties

contacted by Respondents. Respondents shall include in their compliance

reports copies of all written communications to and from such parties,

all internal memoranda, and all reports and recommendations concerning

the requirements of Paragraphs II and III of this Order.

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 [[Page 463]] at other times the Commission may

require, Respondents shall file with the Commission verified written

reports setting forth in detail the manner and form in which they have

complied and are complying with Paragraph IV of this Order.

VI.

It is further Ordered That, for the purpose of determining or

securing compliance with this Order, Respondents shall permit any duly

authorized representatives 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 Respondents, relating to any matters contained in this

consent order; and

B. Upon five (5) days' notice to Respondents, and without restraint

or interference from Respondents, to interview officers of employees of

Respondents.

VII.

It is further Ordered That Respondents shall notify the Commission

at least thirty (30) days prior to any proposed change in Respondents

such as dissolution, assignment, sale resulting in the emergence of a

successor, or the creation or dissolution of subsidiaries or any other

change that may affect compliance obligations arising out of the Order.

VIII.

It is further ordered That, notwithstanding any other provision of

this Order, this Order shall terminate twenty (20) years from the date

this Order becomes final.

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted

provisionally an agreement containing a proposed Consent Order from

Wright Medical Technology, Inc. (``Wright''), a subsidiary of Kidd,

Kamm Equity Partners, L.P. (``KKEP''), a limited partnership, KKEP's

general partner, Kidd, Kamm Investments, LP (``KKI''), and KKI's

general partner, Kidd, Kamm Investments, Inc. (collectively, the

``Respondents''), under which Respondents would transfer and license

certain assets relating to orthopaedic finger implants as well as cease

and desist from certain acts.

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested people.

Comments received during this period will become part of the public

record. After sixty (60) 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 proposed

Order.

On October 17, 1994, Respondents commenced a cash tender offer to

acquire substantially all of the outstanding shares of common and

convertible preferred stock issued by Orthomet, Inc. (``Orthomet'').

The proposed complaint alleges that the proposed acquisition, if

consummated, would constitute a violation of Section 7 of the Clayton

Act, as amended, 15 U.S.C. Sec. 45 in the market for the sale of

orthopaedic implants used or intended for use in the human hand

approved by the United States Food and Drug Administration (``FDA'')

and in the market for the research and development of such orthopaedic

implants.

For the past several years, Orthomet has been the exclusive

licensee of the Mayo Foundation for Medical Education and Research

(``Mayo Foundation'') relating to certain orthopaedic joint implants

used or intended for use in the human hand originally designed by

orthopaedic surgeons working at the Mayo Foundation. During that period

Orthomet worked alongside the Mayo Foundation to develop and refine the

Mayo Foundation's original design with a goal towards eventual

commercialization. As a result of the proposed acquisition, the

exclusive license agreements between Orthomet and the Mayo Foundation

relating to the orthopaedic implants, which have since been made non-

exclusive, would be assigned to Wright.

The proposed Consent Order provides that within five (5) days of

the Order becoming final, Respondents shall transfer to the Mayo

Foundation a complete copy of all assets relating to Orthomet's

business of researching and developing orthopaedic implants used or

intended for use in the human hand and, where applicable, grant to the

Mayo Foundation a license to such assets with full rights of sublicense

in perpetuity. The proposed Consent Order is intended to free the Mayo

Foundation to find another non-exclusive licensee, in addition to

Wright, to develop for eventual commercialization orthopaedic implants

used or intended for use in the human hand.

In the event that the Mayo Foundation has not found another non-

exclusive licensee acceptable to the Commission within six (6) months

of the date the proposed Consent Order becomes final, Respondents shall

take whatever steps are necessary to terminate the license agreements

between the Mayo Foundation and Wright relating to orthopaedic implants

used or intended for use in the human hand and divest to the Mayo

Foundation all assets relating to Orthomet's business of researching

the developing orthopaedic implants used or intended for use in the

human hand. The Mayo foundation shall then be free to license, whether

exclusively or non-exclusively, any firm other than Respondents to

develop for eventual commercialization orthopaedic implants used or

intended for use in the human hand.

Under the provisions of the Order, Respondents are also required to

provide to the Commission a report of their compliance with the

transfer and divestiture provisions of the Order within sixty (60) days

following the date this Order becomes final, and every sixty (60) days

thereafter until Respondents have either transferred or completely

divested all assets relating to Orthomet's business of researching and

developing orthopaedic implants used or intended for use in the human

hand. The proposed Order will also require Respondents to cease and

desist for ten (10) years from acquiring, without Federal Trade

Commission approval, any interest in any firm that either has received

FDA approval to market orthopaedic implants used or intended for use in

the human hand in the United States or has filed a 510(k) or

investigational device exemption (``IDE'') application for approval

from the FDA or has publicly announced its intention to do so. The

proposed Order also requires the Respondents, for ten years, to seek

Federal Trade Commission approval before acquiring any assets relating

to market orthopaedic implants used or intended for use in the human

hand for which a 510(k) or IDE application has been filed or for which

the intention to file such applications has been publicly announced, or

for which FDA approval has been received. Finally, in the event that

Respondents are required to terminate their license agreements with the

Mayo Foundation, the proposed Order will also prohibit Respondents for

ten (10) years from entering into any agreement with the Mayo

Foundation relating to orthopaedic implants used or intended for use in

the human hand, without Federal Trade Commission approval. One year

from the date the Order becomes final and annually thereafter for nine

(9) years, Respondents will be required to provide [[Page 464]] to the

Commission a report of their compliance with the cease and desist

provisions of the proposed Order.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 95-96 Filed 1-3-95; 8:45 am]

BILLING CODE 6750-01-M