Tuesday, October 12, 2004

Jury orders Medtronic to pay $400 million in punitives

Further to an earlier compensatory award of $159 million, a federal jury in Memphis, Tennessee awarded Dr. Gary K. Michelson $400 million in punitive damages against Medtronic Inc., the world's biggest maker of spinal implants, for violating contracts.

There had been a determination on September 28, 2004 that Medtronic's violations of its contracts with Los Angeles spinal surgeon Dr. Gary K. Michelson were ``reckless, intentional, fraudulent and malicious.'' The punitive award totaled $400 million, said Michelson spokesman Jonathan Gasthalter.

In September, 2004, the jury awarded Michelson $109 million in damages for breach of contract and at least $50 million for patent infringement [refer to earlier post on IPBiz.] Jurors also told Medtronic to pay him 10 percent royalties on spinal-implant products that infringe patents, including Infuse Bone Graft System and LT Cage.

UPDATE: On October 15, 2004, Medtronic stated that a newly designed screw with improved color-coding features is on the market and will be fully phased in before the effective date of the injunction, Medtronic said. Medtronic expects to continue to serve customers and their patients without interruption.

The Medtronic vs. Michelson/Karlin case is an example of a case where the "little guy" prevailed against the "big guy." Furthermore, it is an example of a countersuit case, wherein the initial action was a lawsuit by Medtronic against Michelson/Karlin.
(The legal dispute was initiated by Medtronic in 2001. The Minneapolis company charged Michelson was interfering with its business by trying to sell some of the inventions to competitors. http://www.reuters.com/newsArticle.jhtml;jsessionid=WIRVFWNIMAMX4CRBAEZSFFA?type=topNews&storyID=6518332).

Thus, the Medtronic suit illustrates the need to contemplate the intellectual property implications of a lawsuit BEFORE bringing the suit.

** from the Kirkland & Ellis website-->

Co-lead counsel for Dr. Michelson and Karlin were Marc Marmaro of Jeffer, Mangels, Butler & Marmaro LLP and Robert Krupka of Kirkland & Ellis, LLP, all based in Los Angeles where Dr. Michelson practiced. Stan Gibson, a Jeffer Mangels Butler & Marmaro partner, also played a major role at the trial.

"This verdict represents vindication for Dr. Michelson and Karlin Technology, Inc. in their dispute with Medtronic Sofamor Danek. The jury is to be complimented for sorting through the complex issues involved in this case and coming to a fair resolution. The decision that punitive damages are warranted confirms that Medtronic Sofamor Danek's conduct in breaching its agreements with Dr. Michelson and Karlin Technology, Inc. was reprehensible," said Mr. Marmaro.

"We are pleased with this verdict, which is a tremendous victory for Dr. Michelson, a man who has devoted his entire life to helping others and advancing medical technology, against a $60 billion global company," said Mr. Krupka. "This outcome compensates Dr. Michelson for some of Medtronic's egregious conduct."

According to Mr. Gibson, "the jury verdict demonstrates that a major corporation cannot breach its agreements with impunity."


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