Medtronic (NYSE:MDT) prevailed in an antitrust lawsuit filed over a bone mill made by Lenox MacLaren Surgical, with a federal judge ruling that Lenox misrepresented the size of the bone mill market and failed to adequately market its own device.
Lenox MacLaren Surgical first inked a distribution deal with Medtronic in 2000 for the bone mill, hoping the pact would provide the scale to put the devices in every orthopedic surgical suite in the world, according to court documents.
The deal allegedly came to naught after Medtronic only bought the 500 mills the contract called for, using a loaner program to create a thriving demand even as it worked to develop its own mill to usurp the Lenox MacLaren device, according to a lawsuit Lenox MacLaren filed last fall.
Bone mills are used to grind bone samples taken from patients into uniform pieces, which are then packed into a bone void or fracture during spinal fusion procedures to help the damaged vertebrae heal. Louisville, Colo.-based Lenox MacLaren’s hand-cranked device was an advance because it created uniform pieces, no matter how fast it was cranked, leaving the individual bone cells intact, according to court documents.
Lenox accused Medtronic of luring Lenox into the distribution deal to create a market for bone mills, planning to supplant her device via a false recall and replace it with its own Midas Rex mill. That case was settled in arbitration, with Lenox prevailing on a single claim: "intentional interference with prospective business relations by the issuance of a voluntary recall of the Lenox product in October 2006, to clear it out of the marketplace and replace it with the Midas Rex," according to court documents.
Lenox sued again after the discovery process in the first lawsuit revealed collusion among other Medtronic subsidiaries not named in the original suit, according to the U.S. Court of Appeals for the 10th Circuit. Medtronic argued that the arbitration clause in the contract with Lenox should be enforced. Judge Richard Matsch of the U.S. District Court for Colorado disagreed, denying the motion, and a three-judge 10th Circuit panel upheld that decision.
Matsch ruled June 21 that Lenox failed to prove that Medtronic unlawfully sought to exclude its mill from the market and that Lenox never sought to compete with its larger brethren, according to court documents.
"While there is no doubt that there are obstacles to new entrants, the argument that Medtronic could exclude competitors is defeated by the fact that Stryker (NYSE:SYK) entered the market in 2008 and captured a larger share than Medtronic, based on revenues, as early as 2011. In contrast, during the same time period, Lenox made little or no competitive efforts. Lenox did not actively market or promote its bone mill, other than maintaining a website. It relied on word-of-mouth to sell its products. Lenox did not seek another distributor or to obtain any other assistance in attempting to compete with Medtronic after the one-year period of exclusivity in the License Agreement expired or after the agreement ended in April, 2005," Matsch wrote. "In sum, the plaintiff’s submissions do not establish genuine issues of material fact as to relevant market, the defendants’ monopoly power, or antitrust injury. The plaintiff’s claims of monopolization and attempted monopolization fail because they are premised on an overly narrow definition of the relevant product market and inaccurate portrayal of the competitive landscape. With respect to antitrust injury, the plaintiff’s evidence, viewed in a light most favorable to it, shows injury only to itself."