Medtronic Sofamor Danek Usa v. Globus Medical

• Decision Date: 16 July 2009
• Docket Number: Civil Action No. 06-4248.
• Parties: MEDTRONIC SOFAMOR DANEK USA, INC., Warsaw Orthopedic, Inc., Medtronic Puerto Rico Operations Co., and Medtronic Sofamor Danek Deggendorf, GmbH v. GLOBUS MEDICAL, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

Page 290

637 F.Supp.2d 290

MEDTRONIC SOFAMOR DANEK USA, INC., Warsaw Orthopedic, Inc., Medtronic Puerto Rico Operations Co., and Medtronic Sofamor Danek Deggendorf, GmbH v. GLOBUS MEDICAL, INC.

Civil Action No. 06-4248.

United States District Court, E.D. Pennsylvania.

July 16, 2009.

COPYRIGHT MATERIAL OMITTED

Charles S. Marion, Pepper Hamilton LLP, Philadelphia, PA, Cynthia D. Vreeland, Michael J. Summersgill, Nathan P. Goldstein, Sarah A. Beigbeder, Timothy R. Shannon, Wilmer Cutler Pickering Hale & Dorr LLP, Boston, MA, Gregory H. Lantier, Wilmer Cutler Pickering Hale & Dorr LLP, Washington, DC, for Medtronic Sofamor Danek USA, Inc., Warsaw Orthopedic, Inc., Medtronic Puerto Rico Operations Co., and Medtronic Sofamor Danek Deggendorf, GmbH.

Frederick A. Tecce, Conrad O. Kattner, John P. McShea, McShea Tecce PC, Frank R. Emmerich, Jr., John A. Guernsey, Conrad O'Brien Gellman & Rohn PC, Philadelphia, PA, George A. Hovanec, Jr., Buchanan Ingersoll & Rooney PC, Alexandria, VA, Ryan P. Farley, Stefan C. Grant, Buchanan Ingersoll & Rooney PC, New York, NY, for Globus Medical, Inc.

OPINION

NORMA L. SHAPIRO, District Judge.

This patent infringement action was filed by Medtronic Sofamor Danek USA, Inc. ("Medtronic USA"), Warsaw Orthopedic, Inc. ("Warsaw"), Medtronic Puerto Rico Operations Co. ("MPRO") and Medtronic Sofamor Danek Deggendorf, GmbH ("Deggendorf") against Globus Medical, Inc. ("Globus") under 35 U.S.C. § 1, et seq. A jury found Globus liable for infringement; the parties stipulated to a bench trial on damages and injunctive relief. At the bench trial, plaintiffs presented evidence of injuries suffered by Medtronic USA, but not Warsaw, MPRO or Deggendorf. After the close of evidence, Globus filed a Post-Trial Brief arguing that Medtronic USA, MPRO and Deggendorf lacked constitutional standing to recover for infringement of the patents at issue. Medtronic USA, MPRO and Deggendorf contend they have standing, but in the alternative, request that the court re-open the evidentiary record on damages. This opinion will address: (1) plaintiffs' request to re-open the evidentiary record; (2) constitutional standing of Warsaw, Medtronic USA, MPRO and Deggendorf; and (3) plaintiffs' entitlement to damages and injunctive relief.

I. BACKGROUND

The United States Patent and Trademark Office issued United States Patent Numbers 6,530,929 ("the '929 patent") and 7,008,422 ("the '422 patent") to three inventors named on the patent applications: Kevin Foley, Michael Sherman and Jeff Justice. PX 1 (copy of '929 patent, issued March 11, 2003); PX 2 (copy of '422 patent, issued March 7, 2006). Foley, Sherman and Justice assigned title to SDGI Holdings, Inc.¹ PX 1; PX 2. Warsaw, created by the merger of SDGI Holdings, Inc. and Sofamor Danek Holdings, Inc., acquired title as SDGI Holdings, Inc.'s successor in interest. PX 17 (certificate of merger). Warsaw granted licenses to MPRO, Deggendorf and Medtronic USA to practice certain aspects of the '929 and '422 patents. Warsaw, MPRO, Deggendorf and Medtronic USA filed this action for infringement.²

The '929 and '422 patents pertain to devices and methods used by spinal surgeons to stabilize bony structures. PX 1; PX 2. Plaintiffs manufacture and market a commercial embodiment of the patented inventions called the Sextant System. Plaintiffs claimed Globus infringed by manufacturing, marketing and demonstrating a product called the Pivot System. After a 14-day trial on liability, a jury found the '929 and '422 patents valid and infringed by the Pivot System. See Interrogatories to the Jury with Answers Thereof (paper no. 235). Following unsuccessful settlement discussions, plaintiffs' claims for damages and injunctive relief were presented to the court without a jury by agreement of the parties. At the bench trial, plaintiffs sought: (1) an award of $2,866,405 for lost profits to compensate for Medtronic USA's sales of the Sextant System lost because of the infringement; (2) an award of $1,327,866 for statutory royalties on sales of the Pivot System for which Medtronic USA did not claim lost profits; and (3) entry of a permanent injunction prohibiting Globus from selling the Pivot System. Plaintiffs' claims for lost profits and injunctive relief were based entirely on injuries to Medtronic USA; Warsaw, MPRO and Deggendorf did not present evidence of lost profits or irreparable harm.

II. DISCUSSION

A. Plaintiffs' Request to Re-Open the Evidentiary Record

Plaintiffs, having obtained a verdict of infringement, sought recovery of damages and injunctive relief. In an action for patent infringement, a patentee may recover damages "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." 35 U.S.C. § 284. A patentee may also be entitled to injunctive relief. 35 U.S.C. § 283 ("The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.").

At trial, plaintiffs based their claims for lost profits and injunctive relief solely on evidence of injuries suffered by Medtronic USA. After the close of evidence, Globus submitted a Post-Trial Brief arguing that Warsaw was the only party with constitutional standing to recover for patent infringement.³ Plaintiffs contend the evidence of record demonstrates Medtronic USA, MPRO and Deggendorf have constitutional standing, but in the alternative, argue the evidentiary record should be re-opened to admit additional documents and testimony supporting their claim for damages.⁴ Plaintiffs argue they are entitled to present additional evidence because Globus untimely repudiated the parties' trial stipulation regarding ownership of the patents:⁵ Globus's new argument that Medtronic USA lacks standing to recover damages for its lost Sextant sales reflects a basic misunderstanding of the way in which the '929 and '422 patents have been licensed. This misunderstanding is not entirely surprising: Globus took no discovery on this issue and, in fact, represented to the Court that it would not challenge Medtronic USA's standing to assert the '929 '422 patents in its pretrial brief. If there were truly any question as to the plaintiffs' standing to bring this lawsuit, one might have expected Globus to raise this issue sometime before the Court empanelled [sic] a jury for a three-week trial on liability.

Pls.' Post-Trial Reply Br. at 3.

Plaintiffs claim Globus "had never before mentioned, argued, or briefed this defense during two years of litigation,"⁶ but it is clear that plaintiffs recognized the standing problem earlier in the proceedings. Plaintiffs considered the standing implications of Warsaw's licensure of the patents in their pleadings:

Plaintiff Warsaw is the owner, by assignment, of the '422 patent [and '929 patent]. Plaintiffs Medtronic USA, Medtronic Puerto Rico, and Medtronic Deggendorf are co-exclusive licensees of the '422 patent [and '929 patent] and, together with Plaintiff Warsaw, share the exclusive right to bring suit for infringement of the patent[s].

Fourth Am. Compl. ¶¶ 18, 24 (paper no. 139). Globus denied plaintiffs' standing allegations in its answer, see Am. Ans. ¶¶ 18, 24 (paper no. 122),⁷ but did not further assert the defense before trial. At the liability trial, plaintiffs remained sufficiently uncertain about their right to recover that they had Globus stipulate, word-for-word, to the standing allegations asserted in the Fourth Amended Complaint. Compare Stipulation (paper no. 211) with Fourth Am. Compl. ¶¶ 18, 24 (paper no. 132). Despite valid concern about their right to obtain relief, plaintiffs did not seek adjudication of constitutional standing before the close of evidence or present evidence preserving Warsaw's claim for damages. Instead, plaintiffs avoided the issue by procuring a stipulation on standing. Plaintiffs, under the mistaken assumption the standing issue would not resurface, then pursued relief solely on behalf of Medtronic USA, the party likely to have suffered the largest quantum of monetary damages and capable of presenting the most compelling case for injunctive relief.

But plaintiffs' reliance on the stipulation was unjustified because constitutional standing cannot be conferred by stipulation. See Part II.B. Each plaintiff could have presented evidence supporting its claims at trial or requested a ruling from the court. During the course of these proceedings, plaintiffs repeatedly sought rulings on matters of far less importance than constitutional standing; plaintiffs filed more than 20 motions concerning discovery, evidentiary and other matters. Given plaintiffs' willingness to approach the court for relief, their decision not to seek a ruling or present evidence supporting their right to recover suggests an attempt to avoid or delay adjudication of the issue.

Even if plaintiffs initially failed to appreciate the inherent risk of their strategy, they had notice of Globus' intent to challenge standing and an opportunity to preserve Warsaw's claims for lost profits and injunctive relief before the close of evidence. On October 28, 2008, before plaintiffs presented evidence of lost profits and irreparable harm in their case in chief, Globus deposed the vice president of Medtronic Corporate Development. Dep. of Shawn McCormick, Tr., p. 7 (Oct. 28, 2008). At the deposition, counsel for Globus referred the witness to PX 20, PX 21 and PX 22 (the documents proffered by plaintiffs as evidence of constitutional standing), and inquired extensively into the written license and distribution agreements between Warsaw, MPRO, Deggendorf and Medtronic USA. Id. at pp. 117-26. This line of questioning placed plaintiffs on notice that Globus might assert a standing defense.

At the bench trial, co...