Medtronic Inc. (NYSE:MDT) lost a bid to quash an antitrust lawsuit accusing it of using unfair business practices to drive bone mill maker Lenox MacLaren Surgical out of business.
A federal judge in Colorado denied the Fridley, Minn.-based medical device maker’s motion to force the issue into arbitration, ruling against Medtronic move to enforce an arbitration provision in the license agreement between it and Lenox MacLaren — which expired in 2001.
Medtronic is "unable to point to any provision of the License Agreement that they could enforce against Lenox, wrote Judge Richard Matsch of the U.S. District Court for Colorado. “To permit the defendants to shield themselves from trial by invoking the arbitration provision in the License Agreement would deny the plaintiff a fair opportunity to present its claims to a jury.”
Linda Lenox first inked the distribution deal with Medtronic in 2000 for a bone mill made by her firm, Lenox MacLaren Surgical Corp., hoping the pact would provide the scale to put the devices in every orthopedic surgical suite in the world, according to court documents.
But 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 the 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.
They accuse 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.
"The arbitrators found that Ron Moore, a sales executive for Medtronic Neurologic Technologies, an affiliate of MSD USA, urged its sales force to call on the domestic customers immediately after the recall as persuasive evidence of an intent to interfere with the business of Lenox by clearing the Lenox bone mills out of the market and found that the recall was wrongful," Matsch wrote. "To remedy the tortious interference, the arbitrators awarded Lenox $246,000 in damages based on the profits to Medtronic from the sales of the Midas Rex mills to ‘former Lenox bone mill owners [sic].’"
