Medical Device Co. Receives $20M For Former Director's Failure to Offer

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By Michael Greene

July 2 — A subsidiary of the Spectranetics Corporation was awarded $20.034 million in damages after a federal judge concluded that a former director had usurped corporate opportunity by developing a competing medical device.

U.S. District Court for the Northern District of California Judge Yvonne Gonzalez Rogers found that AngioScore's co-founder Eitan Konstantino breached his fiduciary duties by not providing the company an opportunity to acquire the rights of “Chocolate,” a speciality angioplasty balloon catheter.

She also found that corporate defendants TriReme Medical Inc., a company Konstantino founded and for which he served as chief executive officer, and Quattro Vascular PTE Ltd. aided and abetted the breach for their role in launching the product. And she held QT Vascular Ltd. liable as their successor in interest.

Innovation vs. Duty of Loyalty

Citing Delaware law, the court found that the corporate opportunity doctrine applies to a director who is also an inventor.

“The fact of inventorship does not absolve a director of his fiduciary obligations with respect to inventions he may develop that compete with the corporation he serves. To hold otherwise would work an absurdity,” Rogers wrote.

However, Rogers also refused to adopt a rule that obligates directors to outright give purchasing opportunities to the corporations they serve.

“Critically, holding that directors who are also innovators must relinquish to the corporations they serve technologies falling within that corporation’s line of business, in which the corporation has an interest or expectancy, or which aligns with its business purpose and objectives, would serve to undermine innovation,” she opined.

Balancing the competing policy interests of fostering innovation and a director's duty of loyalty, Rogers found that the Konstantino's duty demanded that he at least offer AngioScore the opportunity to acquire the rights to Chocolate.

He breached his fiduciary duties by not providing this opportunity, the court held, noting that he actively hid his transgression from other board members. The court held the defendants liable for AngioScore's past and future lost profits.

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