Jury Sides With Medtronic in Patent Infringement Case

A federal jury has awarded Medtronic Inc. $101.2 million in damages after concluding that rival NuVasive Inc. violated three of its spinal implant patents.

The jury, however, held Medtronic liable for $660,000 in damages to NuVasive for infringing one of its patents. The San Diego, Calif.-based company claimed another Medtronic unit, dubbed Medtronic Sofamor Danek USA, infringed its patent for a nerve monitoring system for lateral spinal surgery, according to court filings. Medtronic though, still denies the charge.

Markets for spinal implants have been shrinking over the last few years as hospitals attempt to lower healthcare costs by encouraging fewer product launches and demanding more reasonable product and equipment prices. Medtronic gradually has been adding new technology to its product lineup through deals and internal research, increasing its exposure to emerging markets and cutting costs in response.

After a two-week trial, a jury on Sept. 21 ruled that NuVasive’s CoRoent XL implants, MaXcess II and II retractors and both Helix and Helix mini anterior cervical plates infringed on Medtronic patents. “We are pleased by the jury’s verdict,” Doug King, senior vice president and president of Medtronic Spinal, said in a statement. “The decision confirms our leadership in spinal implant technology, and we remain committed to vigorously defending our intellectual property.”

The verdict is the 14th largest jury award in the United States so far this year, and the fourth-largest for a patent infringement claim, according to data compiled by Bloomberg News. The largest patent jury verdict in 2011 totaled $482 million in a lawsuit over stents against a Johnson & Johnson unit.

Medtronic’s final damages award, however, may approach that total. After the verdict was announced, an attorney for the Minneapolis, Minn.-based firm told Bloomberg News that the jury’s award “only reflects damages through June 2010. Medtronic will file a motion for an accounting from NuVasive to bring the damages up to date.” Once that is done, Medtronic could end up netting as much as $375.2 million for lost profits and royalties.

In computing damages, the eight-member jury decided upon patent royalty rates of 3 percent, 6 percent and 10 percent in awarding “lost profits damages (with royalty remainder)” for the three Medtronic patents, and a 5.5 percent “patent royalty rate” for the NuVasive patent, according to the verdict form.

NuVasive’s attorneys vehemently denied the patent infringement accusations both in court and after the verdict, telling Bloomberg News that the technology at issue was developed by the company independently and was first released to the market in 2003. At that time, Medtronic did not possess such technology, NuVasive lawyer Frank Scherkenback told jurors. NuVasive’s technology and devices “changed the face of spinal surgery,” he added, claiming the firm’s products became so successful that they quickly became the target for much larger companies such as Medtronic. “We didn’t copy. NuVasive copied nothing. They [Medtronic] wanted in on this product,” Scherkenback said.

While NuVasive has experienced top-line growth over the last few quarters, executives have acknowledged that a turbulent market for its spinal devices is making future earnings forecasts more difficult. After the jury announced its award, shares fell $1.21 or 5.7 percent; overall, shares have declined 17 percent this year.

“Maybe it’s time for NuVasive to consider selling itself,” Suraj Kalia, an analyst at Rodman & Renshaw LLC in New York, N.Y., said in a Sept. 21 note. “The luster from the spine surgery space is coming off.”