Medtronic is seeking compensatory damages from profits lost to the firm and an order to halt the company's alleged infringement. This won't be the first time the companies have held opposite ends of the courtroom. Legal issues between the two date back to 2008 when Medtronic filed an even larger intellectual property (IP) lawsuit involving nine additional instances of patent infringement. Rulings on the majority of those counts are still in progress. The most recent lawsuit only adds further complexity to what is likely going to be a long and arduous courtroom battle. Medtronic is poised to reap a large reward in this lawsuit should the trial's outcome reflect the partial outcome of the IP Lawsuit of 2008.
The most recent lawsuit references two different Nuvasive products, the CoRoent XL and the Osteocel Plus Bone Graft. The CoRoent XL is a family of spinal implants used to replace weakened or damaged intervertebral discs. These discs act as the spine's shock absorber allowing forces to be distributed evenly during the body's movements. Medtronic alleges that the product line infringed on their patent that depicted an implant design that could additionally restore the spine's curvature in the neck and lower back regions. The other product in question is the Osteocel Plus Bone Graft, used in guiding natural bone growth after spinal fusion procedures. Medtronic alleges that the Nuvasive product violated its patent for implants with markers that can be both prominently displayed on x-ray scans and subsequently absorbed by the body.
This lawsuit came as a surprise given the expansiveness of the initial lawsuit filed in 2008. At that time, Medtronic had filed nine counts of patent infringement against a variety of Nuvasive spinal surgery products, including their MaXcess Retractor System and Helix ACP Cervical Plates. In addition, the company was granted two patent reexaminations by the US Patent Office for Nuvasive patents relating to a retraction system used in visualization during spinal surgery. The tactic was used to question the validity of Nuvasive's intellectual property to potentially invalidate them and thus eliminate Nuvasive's claim for suing them. Nuvasive denied these claims and promptly countersued, claiming Medtronic infringed three of their patents, two of which were the under aforementioned reexamination.
Since the number of patents was so large, the court decided to break the proceedings into phases that would each examine a smaller number of patents. Patents that were under reexamination were not included in the proceedings. The first trial phase included three disputed claims by Medtronic and one disputed claim from Nuvasive. Each claim had a favorable outcome for the company that filed. In 2011, Medtronic won all three cases entitling it to $101 million in lost profits and royalties. Nuvasive was awarded $660,000. While Medtronic was well compensated post-trial, they were not however able to earn their desired injunction and have Nuvasive halt production of the disputed products. However, royalties are to be paid for lost and future profits at denoted rates. Phase II is set to begin January 2013.
The first phase of the 2008 IP lawsuit has likely produced the largest award for Medtronic in the series. The majority of their $101 million award was composed of the 10% royalty rate associated with the patent infringement involving a spinal implant. The company only received a 2% royalty rate for the patent infringement on an anterior cervical plating system and a 3% royalty rate for the patent infringement on instruments and methods for minimally invasive tissue retraction and surgery. Of the remaining six patents, five detail anterior cervical plating systems and one details improved methods and instrumentation used in spinal fusion surgery. If the jury rules in Medtronic's favor for these remaining claims, it's likely similar royalty rates will be issued leaving the company with 2-3% royalty rates. However, the company may seek to reap large amounts from the additional lawsuits filed this year. One such claim references a spinal implant patent which received the largest royalty payment in the 2008 trial.
Medtronic has monetarily benefitted from the patent legislation thus far, and that result was probably the catalyst for pursuing further lawsuits. Nuvasive on the other hand has not fared so well. The $101m payment to Medtronic was close to 20% of their revenue generated for 2011. However, the circumstances could have been more dire if the ruling had approved Medtronic's injunction requests involving Nuvasive's spinal surgery products and biologics. These two product areas comprise almost all of the company's 2011 revenue.
As for the rest of the firms in the spinal surgery marketplace, the recent string of IP lawsuits has likely sent a wave of concern and opportunity. Medtronic received a substantial sum in the first phase of the 2008 trial. At the time of the verdict, this was the fourth-largest patent infringement claim in history. Marketplace competitors, such as DePuy Spine, Zimmer and Integra, may see this result as an opportunity to take similar legislative action against other competitors to reap comparable sums. At the same time, these competitors may begin to reexamine their legal coffers to ensure ample funds are available should these types of lawsuits befall them. GlobalData estimates that the global spinal fusion market will to grow to a value of $7.8 billion by 2018.
The most recent lawsuit references two different Nuvasive products, the CoRoent XL and the Osteocel Plus Bone Graft. The CoRoent XL is a family of spinal implants used to replace weakened or damaged intervertebral discs. These discs act as the spine's shock absorber allowing forces to be distributed evenly during the body's movements. Medtronic alleges that the product line infringed on their patent that depicted an implant design that could additionally restore the spine's curvature in the neck and lower back regions. The other product in question is the Osteocel Plus Bone Graft, used in guiding natural bone growth after spinal fusion procedures. Medtronic alleges that the Nuvasive product violated its patent for implants with markers that can be both prominently displayed on x-ray scans and subsequently absorbed by the body.
This lawsuit came as a surprise given the expansiveness of the initial lawsuit filed in 2008. At that time, Medtronic had filed nine counts of patent infringement against a variety of Nuvasive spinal surgery products, including their MaXcess Retractor System and Helix ACP Cervical Plates. In addition, the company was granted two patent reexaminations by the US Patent Office for Nuvasive patents relating to a retraction system used in visualization during spinal surgery. The tactic was used to question the validity of Nuvasive's intellectual property to potentially invalidate them and thus eliminate Nuvasive's claim for suing them. Nuvasive denied these claims and promptly countersued, claiming Medtronic infringed three of their patents, two of which were the under aforementioned reexamination.
Since the number of patents was so large, the court decided to break the proceedings into phases that would each examine a smaller number of patents. Patents that were under reexamination were not included in the proceedings. The first trial phase included three disputed claims by Medtronic and one disputed claim from Nuvasive. Each claim had a favorable outcome for the company that filed. In 2011, Medtronic won all three cases entitling it to $101 million in lost profits and royalties. Nuvasive was awarded $660,000. While Medtronic was well compensated post-trial, they were not however able to earn their desired injunction and have Nuvasive halt production of the disputed products. However, royalties are to be paid for lost and future profits at denoted rates. Phase II is set to begin January 2013.
The first phase of the 2008 IP lawsuit has likely produced the largest award for Medtronic in the series. The majority of their $101 million award was composed of the 10% royalty rate associated with the patent infringement involving a spinal implant. The company only received a 2% royalty rate for the patent infringement on an anterior cervical plating system and a 3% royalty rate for the patent infringement on instruments and methods for minimally invasive tissue retraction and surgery. Of the remaining six patents, five detail anterior cervical plating systems and one details improved methods and instrumentation used in spinal fusion surgery. If the jury rules in Medtronic's favor for these remaining claims, it's likely similar royalty rates will be issued leaving the company with 2-3% royalty rates. However, the company may seek to reap large amounts from the additional lawsuits filed this year. One such claim references a spinal implant patent which received the largest royalty payment in the 2008 trial.
Medtronic has monetarily benefitted from the patent legislation thus far, and that result was probably the catalyst for pursuing further lawsuits. Nuvasive on the other hand has not fared so well. The $101m payment to Medtronic was close to 20% of their revenue generated for 2011. However, the circumstances could have been more dire if the ruling had approved Medtronic's injunction requests involving Nuvasive's spinal surgery products and biologics. These two product areas comprise almost all of the company's 2011 revenue.
As for the rest of the firms in the spinal surgery marketplace, the recent string of IP lawsuits has likely sent a wave of concern and opportunity. Medtronic received a substantial sum in the first phase of the 2008 trial. At the time of the verdict, this was the fourth-largest patent infringement claim in history. Marketplace competitors, such as DePuy Spine, Zimmer and Integra, may see this result as an opportunity to take similar legislative action against other competitors to reap comparable sums. At the same time, these competitors may begin to reexamine their legal coffers to ensure ample funds are available should these types of lawsuits befall them. GlobalData estimates that the global spinal fusion market will to grow to a value of $7.8 billion by 2018.
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