Digest of WARSAW ORTHOPEDIC, INC. V. NUVASIVE, INC., No. 2013-1576 (Fed. Cir. Mar. 2, 2015) (precedential). On appeal from S.D. Ca. Before Lourie, Dyk, and Reyna.
Procedural Posture: After a jury trial Plaintiff Warsaw Orthopedic (“Warsaw”), which asserted U.S. Pat. Nos. 5,860,973 (“the ’973 patent”) and 6,945,933 (“the ’933 patent”), and Defendant/Counterclaimant NuVasive, Inc. (“NuVasive”), which asserted U.S. Pat. No. 7,470,236 (“the ’236 patent”), each appealed the district court’s denials of their respective motions for a new trial or judgment as a matter of law relating to the jury’s findings of patent validity and infringement, and the award of damages. CAFC affirmed the validity and infringement determinations for all three patents and reversed and remanded with respect to damages for the ’973 and ’933 patents.
- Claim Construction: With respect to the ’973 patent, which is directed to oversized spinal implants, the district court found that the preamble of the asserted claims was not limiting but nonetheless instructed the jury that “said implant” in the preamble required “a spinal implant capable of being inserted translaterally.” The CACF found that this construction was not erroneous.
- Anticipation: The district court correctly denied JMOL because substantial evidence had been presented distinguishing the ’973 patent from a prior art reference. Warsaw had presented evidence showing that several features of the device of the prior art reference made it not capable of lateral insertion. Thus, the jury was entitled to find that the reference did not anticipate or render obvious the asserted claims of the ’973 patent.
- Indefiniteness: The fact that the asserted claims of the ’973 patent use relative terms like “a length that is greater than one half the transverse width of the vertebrae,” “said length being substantially greater than the depth of the vertebrae,” “a height for contacting each of the two adjacent vertebrae,” and “a width that is at least as great as the height,” did not render the claims indefinite because the average dimensions of the human vertebrae are well-known, easily ascertainable, and well-documented in the literature.
- Doctrine of Equivalents: With respect to the ’933 patent, which is directed to a two-pronged device for minimally invasive tissue retraction during surgery, the district court did not error in sustaining the jury’s finding that NuVasive’s accused product, which has three prongs, infringes under the doctrine of equivalents. Warsaw submitted substantial evidence, including admissions by NuVasive’s own witnesses, that the differences between the accused device and the patented technology were insubstantial.
- Indirect Induced Infringement: With respect to the ’236 patent, which is directed to a method for detecting nerves during surgery, the CAFC affirmed the district court’s finding that there was substantial evidence to support the jury’s finding of induced infringement. NuVasive presented evidence that Medtronic Sofamor Danek USA, Inc. (“MSD”), which is a related company to Warsaw, was aware of the patent prior to the litigation and had taught doctors to use the product during the surgical procedures in an infringing manner.
- Claim Construction: While the asserted claims of the ’236 patent require “stopping the emission of said stimulus signal,” Warsaw did not request a construction of this phrase beyond its plain and ordinary meaning and no construction was presented to the jury. Sufficient evidence was presented to the jury to support the finding that the accused product, which continuously emits pulses, does “stop” because the series of pulses continually increased until eliciting a response, at which point the pulse strength dropped and the gradual increase in pulse strength started over. This “restart” was a type of “stop” that was envisioned by the claims.
- Lost Profits: The CAFC concluded that Warsaw’s sale of fixations, e.g., rods and screws for holding implants in place, are not recoverable as “convoyed sales.” Warsaw failed to prove that there was a functional relationship between the fixations and the patented product, and never presented testimony that the fixations had no independent function apart from that product. As a result, the district court erred in not granting JMOL on this issue.
- Lost Profits: The CAFC concluded that Warsaw could not recover lost royalty payments from two related companies as lost profits and that the district court erred in denying NuVasiv’s JMOL on these grounds. Lost profits can only derive from the lost sales of the patentee’s products or services. Because the lost royalties resulted from sales made by related companies and not Warsaw, they could not properly be part of a lost profits award.
- Lost Profits: The CAFC concluded that the inclusion of “true-up” payments in Warsaw’s lost profits award was improper and that the district court erred in denying NuVasiv’s JMOL to exclude these payments. “True-up” payments are post hoc transfers to ensure that Warsaw receives fair-market value of products or services exchanged between Warsaw and MSD. But, the payments appeared to include royalties that are not recoverable as lost profits. Additionally, Warsaw made no effort to distinguish what percentage of the true-ups was attributable to the patented technology as opposed to payments on unrelated transactions.
- Reasonable Royalty: While Warsaw is not entitled to lost profits, it is entitled to a reasonable royalty sufficient to compensate it for the value of the patented technology. Since it was not clear what portion of the jury award provided for a reasonable royalty, the case was remanded for a new trial. Also, as the ongoing royalty rate impermissibly included a lost profits component, the district court should determine an appropriate ongoing royalty rate on remand.