A federal appeals court yesterday overturned the lost profits awarded to Medtronic (NYSE:MDT) in its long-running patent infringement war with spine implant rival NuVasive Inc. (NSDQ:NUVA).
The U.S. Court of Appeals for the Federal Circuit decided that a lower court erred in 2011 when it awarded Medtronic $101.2 million in the case, ordering a new trial to determine the correct amount of damages.
Although the court upheld the infringement judgment against NuVasive (and another, $660,000 finding that Medtronic infringed 1 of its patents), the 3-judge appeals panel ruled that Medtronic subsidiary Warsaw Orthopedic is not entitled to lost profits and ongoing royalties.
"Our rejection of Warsaw’s claims for lost profits does not mean that Warsaw is precluded from any recovery. Warsaw is entitled to a reasonable royalty sufficient to compensate it for the value of what was taken from it – the value of the patented technology," Judge Timothy Dyk wrote for the Federal Circuit panel.
“Neither party argues it is possible to parse out and compute a reasonable royalty based on the jury verdict," Dyk wrote. "Although the jury verdict did state a reasonable royalty rate, it is not entirely clear the period for which that reasonable royalty was determined or whether the jury impermissibly relied on evidence not probative of the value of the patented technology."
“We are pleased with today’s legal ruling,” NuVasive chairman & CEO Alex Lukianov said in prepared remarks. “This provides greater clarity on the process moving forward and affirms our view that Medtronic had been awarded an excessive amount of damages. By limiting the damages to only a reasonable royalty, we believe our overall exposure in this phase of the litigation has been reduced from the current amount we have accrued. We look forward to the upcoming retrial.”
The case dates back to 2008, when a group of Medtronic subsidiaries sued NuVasive, accusing the San Diego-based company of infringing 9 patents relating to spinal implants. NuVasive in turn accused Medtronic of trespassing on 3 of its patents.
The jury issued a split verdict in the case in September 2011, awarding $101.2 million to Medtronic and $660,000 to its smaller rival. In June 2013 a federal judge boosted the royalty rate NuVasive was to pay Medtronic by 3.5%.
The companies settled their dispute over another patent in May 2013, with NuVasive agreeing to pony up $7.5 million and a 3% royalty.
