Bloomberg News

Medtronic Wins $101 Million in Patent Case Against NuVasive

September 21, 2011

(Updates with analyst’s comment in eighth paragraph.)

Sept. 21 (Bloomberg) -- Medtronic Inc. won a $101.2 million jury award in a patent-infringement trial against NuVasive Inc. over claims related to medical devices used in spinal surgery. NuVasive dropped as much as 8.4 percent in Nasdaq trading.

The federal jury in San Diego yesterday also held Medtronic liable for $660,000 in damages to NuVasive for infringing one of its patents.

In a two-week trial, Warsaw Orthopedic Inc., a unit of Minneapolis-based Medtronic, accused San Diego-based NuVasive of infringing three patents for implants capable of being inserted trans-laterally between adjacent vertebrae, a plate and screw system used to stabilize vertebrae in the cervical spine and a tissue retractor, according to court filings.

“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 U.S. so far in 2011 and the fourth-largest for a patent-infringement claim, according to data compiled by Bloomberg News. The largest patent jury verdict in 2011 was for $482 million in a lawsuit over stents against a Johnson & Johnson unit.

“We will aggressively challenge this verdict,” NuVasive Chairman Alex Lukianov said in a statement distributed by Marketwire.

Shares Fall

NuVasive dropped $1.21, or 5.7 percent, at 11:59 a.m. New York time in Nasdaq Stock Market trading, after falling as much as $1.78. The shares declined 17 percent this year before today.

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

Kalia rates the shares “outperform.”

Medtronic hasn’t filed a request for a court injunction blocking the use of products found to have infringed its patents.

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.

Damages Motion

Alexander MacKinnon, a lawyer for Medtronic, said in an interview after the verdict that “the jury award only reflects damages through June 2010 and Medtronic will file a motion for an accounting from NuVasive to bring the damages up to date.”      Another Medtronic attorney, Luke Dauchot, told jurors in his closing argument that they could award as much as $375.2 million for lost profits and royalties.

NuVasive alleged that another Medtronic unit, Medtronic Sofamor Danek USA, infringed its patent for a nerve monitoring system for lateral spinal surgery, according to court filings.

A NuVasive financial expert testified during the trial that NuVasive could be awarded as much as $752,000 over the company’s infringement claim against Medtronic.

NuVasive lawyer Frank Scherkenbach told jurors that NuVasive didn’t infringe the Medtronic patents. He said NuVasive’s technology at issue is the product of independent development, was first put on the market in 2003 and soon “changed the face of spinal surgery.” He said that Medtronic possessed no such technology in 2003.

‘Copied Nothing’

    “We didn’t copy,” he said. “NuVasive copied nothing.”

He said that NuVasive’s devices became so successful that the small company that originated in an orthopedic surgeon’s garage became a target for the much larger Medtronic. “They wanted in on this product,” he said.

Dauchot said that Medtronic stands by its claim that it didn’t infringe the NuVasive patent.

“Although we respect the jury’s finding of infringement on NuVasive’s patent we differ and are considering our options in that regard,” he said.

U.S. District Judge Michael M. Anello presided over the trial.

The case is Medtronic Sofamor Danek USA v. NuVasive Inc., 3:08-cv-1512, U.S. District Court, Southern District of California (San Diego).

--With assistance from Margaret Fisk in Detroit and Andrea Tan in Singapore. Editors: Peter Blumberg, Mary Romano

To contact the reporter on this story: Bill Callahan in San Diego at callahan@san.rr.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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