Johnson & Johnson (NYSE:JNJ) might get billions as payback in the trial it’s in against Boston Scientific Corporation (NYSE:BSX), over device maker Guidant. Johnson & Johnson (NYSE:JNJ) initially came second to Boston Scientific (NYSE:BSX) in bidding for Guidant. The case will be heard by a New York federal court judge, on the grounds whether Boston Scientific (NYSE:BSX) has breached a contract with Johnson & Johnson (NYSE:JNJ) or not. The case will have no jury.

Johnson & Johnson (NYSE:JNJ) is demanding $5 billion in damages and interest from Boston Scientific (NYSE:BSX). Boston Scientific (NYSE:BSX) has a strong market reputation with a market capitalization, as of Tuesday of 17.8 billion. Moving against Boston Scientific (NYSE:BSX) could prove costly for Johnson & Johnson (NYSE:JNJ).

The trial will be a two part trial that will go on till December. Both parties have brought in well-known lawyers to handle the case which signifies how much important it is to both companies. It’s a matter of reputation for both the companies, more so for Boston Scientific (NYSE:BSX) because there are 5 billion on the line and neither of these companies is willing to back down or settle it out of court.

The background of the case is that Johnson & Johnson (NYSE:JNJ) entered a deal with Guidant back in 2004 to make cardiovascular devices. The price was set at a whopping 21.5 billion and to cater to antitrust concerns, Johnson & Johnson (NYSE:JNJ) and Guidant agreed upon the fact that the former would sell a portion of Guidant’s business to Abbot Laboratories. The deal also had a clause which prohibited the company from dealing with other companies.

Boston Scientific (NYSE:BSX) made a 25 billion offer to Guidant and also agreed to pay assets to Abbot Laboratories. When Johnson & Johnson (NYSE:JNJ) came to know that Guidant was dealing with another company, it sued Guidant and Abbot back in 2006 for breach of contract. Boston Scientific (NYSE:BSX) later on bought Guidant for 27 billion and paid 705 million termination fees to Johnson & Johnson (NYSE:JNJ).

Boston Scientific (NYSE:BSX) also pressed that Guidant didn’t knowingly breach the contract but Johnson & Johnson (NYSE:JNJ) since then has not backed down from the fiasco. It is adamant on taking Boston Scientific (NYSE:BSX) to the court and shakes the money out of them, the money which they could have made with Guidant back in 2004.

Analysts claim that there is a lot to lose for both the companies although Boston Scientific (NYSE:BSX) has gotten itself in a spot where it will have to pay Johnson & Johnson (NYSE:JNJ) one way or another. As for Johnson & Johnson (NYSE:JNJ), this obsession with Boston Scientific (NYSE:BSX) might prove to be costly for them because of all the proceedings and what not. And should the case get overturned or if Johnson & Johnson (NYSE:JNJ) is tangled into some legal matter, there is a chance that it might lose money too.

Johnson & Johnson (NYSE:JNJ) still has a healthy case, after all it’s a genuine breach of contract.

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