New Trial on Damages Ordered Where Expert's Reliance on 25% Rule Was Inappropriate in Light of Uniloc and Availability of Non-Infringing Substitute Was Not Considered

December 5, 2011

Spine Solutions, Inc. ("SSI") sued Medtronic Sofamor Danek ("Medtronic") for patent infringement alleging that three of Medtronic's artificial disc implants infringed an SSI patent. The case proceeded to trial and the jury awarded $5.7 million in lost profits and an 18 percent royalty on the other infringing sales. The jury also determined that the infringement was willful.

Following the jury verdict, the district court doubled the damages and awarded attorneys' fees against Medtronic. The district court also entered a permanent injunction. On appeal, the Federal Circuit reversed the decision in part, vacated in part and affirmed in part. With respect to the finding of lost profits, the Federal Circuit determined that lost profits were unavailable due to lack of standing. It also reversed a finding of the district court that one of the Medtronic products (the O-Mav) infringed the patent-in-suit and directed that the district court enter a finding of non-infringement with respect to that product. The Federal Circuit also reversed the willfulness finding and the injunction due to certain extraterritorial restrictions in the injunction. On remand, the Federal Circuit directed that, among other things, the district court determine the proper reasonable royalty to which SSI might be entitled on the infringing sales for which the jury awarded lost profits.

As a result of the ruling by the Federal Circuit, Medtronic moved for a new trial on damages and SSI opposed the request. Medtronic asserted that the jury's damages award was fundamentally tainted by the use of the 25 percent rule because SSI's expert established his baseline reasonable royalty rate using the 25 percent rule, which was found invalid by the Federal Circuit's decision in Uniloc. Medtronic also asserted that a new trial was necessary because the Federal Circuit's reversal on the O-Mav product meant that a non-infringing substitute was available and therefore the royalty base would need to be determined in a new trial. SSI argued that the Uniloc decision did not amount to a change in the law that would justify a new trial because it was decided by a panel of the Federal Circuit and therefore could not overturn prior Federal Circuit precedent and Medtronic had not objected to the 25% rule prior to the jury's verdict. SSI also argued that granting a new trial on damages because of the Federal Circuit's ruling that the O-Mav did not infringe would exceed the district court's mandate on remand.

The district court rejected both of SSI's arguments and ordered a new trial on damages. First, the district court found that the Uniloc decision did provide a basis for a new trial on damages, even though Medtronic had not challenged the 25% rule before trial. The district court determined that it would not have been unreasonable for Medtronic to fail to object to the 25% rule given its widespread acceptance before the Uniloc decision. "Here, SSI's expert based his reasonable royalty calculations on the now-inadmissible rule of thumb' consequently, an evidentiary foundation on which the jury made a reasonable royalty finding may not now be considered. The jury arrived at an 18 percent reasonable royalty rate after having heard testimony based on the 25 percent rule of thumb. Thus, the jury's verdict, based on the 25 percent rule, is no longer valid. It would be unjust for the Court, as SSI urges, to simply multiply the infringing sales of the Maverick and the A-Mav by the 18 percent royalty set by the jury, because the jury's damage considerations were 'tainted' by the use of inadmissible evidence."

Second, the district court determined that a new trial on damages was appropriate in light of the reversal of the finding of infringement by Medtronic's O-Mav product. "The Federal Circuit instructed this Court to enter a judgment of noninfringement with respect to the O-Mav. It would make little sense for the Court to enter a judgment of noninfrinement with respect to the O-Mav, but the for the jury not to consider the O-Mav as a noninfring substitute when determining damages."

Accordingly, the district court ordered a new trial on damages.


Spine Solutions, Inc. v. Medtronic Sofamor Danek, Case No. 2:07-02175-JPM-dkv (W.D. Tenn. Nov. 23, 2011)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.