In the News Corporate Counsel

Deals & Suits: Michelson v. Medtronic

Biomedical device manufacturer Medtronic, Inc., has sustained a large financial wound. On October 12 an eight-person jury in U.S. district court in Memphis ordered its spinal products subsidiary, Medtronic Sofamor Danek, Inc., to pay surgeon and wealthy inventor Gary Michelson $400 million in punitive damages for patent infringement, plus another $159 million in unpaid royalties.

At issue were the rights to inventions and techniques developed by Michelson for spinal fusion surgery.

In 1994 Michelson and his company, Karlin Technology, Inc., sold the rights to Sofamor Danek, which was acquired five years later by Medtronic. Medtronic claimed that it gained access to spinal fusion techniques that Michelson developed after his 1994 agreement with Sofamor Danek; Michelson disagreed.

Medtronic started the legal fight in 2001 by suing Michelson for $200 million, claiming that his refusal to allow use of his post-1994 inventions constituted breach of contract. Michelson countersued, alleging that Medtronic underpaid his royalties as well as infringed his post-1994 patents.

Although the jury forced Medtronic to pay damages, it decided the company could still use all of Michelson's pre-1994 inventions, which bring the company about $500 million in sales every year. The two parties are currently negotiating a new deal for Michelson's post-1994 inventions, says Robert Krupka, Michelson's lawyer.

Michelson's victory was hard-won. He moved more than 50 lawyers to a Memphis office, and his legal team filled more than 60 hotel rooms with witnesses and experts, 30 of whom were called at trial. Krupka says that Michelson spent an estimated $62 million on the case.

The inventor may still have to spend some more. In a statement after the October jury verdict, Medtronic said that it plans to pursue "posttrial remedies" for the "unjustified and excessive" awards. Michelson, meanwhile, may seek an injunction to stop Medtronic from further patent infringement.

For plaintiff Gary Michelson and Karlin Technology, Inc. (Los Angeles)

  • Jeffer, Mangels, Butler & Marmaro (Los Angeles): Stanley Gibson, Marc Marmaro, Dan Sedor, Alex Tamin, and associates Jim Bauch and Devorah Cohen. According to Gibson, Jeffer has represented Michelson in corporate matters for almost 20 years.
  • Kirkland & Ellis (Chicago): Marc Cohen, Luke Dauchot, Christopher Heck, Melissa Ingalls, Robert Krupka, Xanath Owens, Rick Richmond, Heiko Schultz, and associates Lindsay Casamassima, Lori Chang, Philip Chen, J. Drew Diamond, Adam Hagen, Jane Park, Nick Saros, and Laura Thomas. (All are in Los Angeles.) Michelson met Kirkland's Krupka through a friend at Jeffer, Mangels who wasn't involved in the case. Other lawyers from Kirkland and Jeffer also went to Memphis to work on the case.
  • Bowen Riley Warnock & Jacobson (Nashville): Jay Bowen and associates Amy Everhart and Chris Vlahos. Marmaro had worked with the firm before, says Bowen.
  • Wyatt, Tarrant & Combes (Memphis): Robert Craddock, Jr., and Glen Reid, Jr. The firm had worked on other cases against Medtronic, says Reid. He examined several witnesses at trial.

For defendant Medtronic Sofamor Danek, Inc. (Memphis)

  • McDermott Will & Emery (Chicago): Jack Lever, Jr., Raphael Lupo, Ronald Pabis, Michael Switzer, Donna Tanguay, Melvin White, and associates Steven Allis and Stephanie Nagel. (All work in Washington, D.C.) McDermott and Medtronic refused to comment on their relationship.
  • Baker, Donelson, Bearman, Caldwell & Berkowitz (Memphis): Leo Bearman, Jr., and Bradley Trammell. Baker Donelson and Medtronic declined to comment on their relationship.