Partially reversing a $226.3 million damages award, the Court of Appeals for the Federal Circuit held that a jury should not have awarded damages on non-infringing “pull-through” products sold in conjunction with patented screws. DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., Case Nos. 2008-1240, -1253, -1401 (Fed. Cir., June 1, 2009) (Linn, J).
In September 2007, a jury found that Medtronic’s Vertex screws infringed DePuy’s patent for a polyaxial screw implant device that stabilizes spinal column segments during surgery. The verdict directed Medtronic to pay the plaintiffs $226.3 million in lost profits, $149.1 million in lost profits on patented pedicle screws and $77.2 million in lost profits on unpatented, “pull-through” products.
On appeal, the district court judgment was affirmed in part and reversed in part. In particular, the Federal Circuit found that the lower court properly denied the defendant’s ensnarement defense, as the combination of two reference patents did not render the hypothetical claim obvious; correctly denied the defendant’s motion for judgment as a matter of law (JMOL) on lost profits of patented screws, and thus properly awarded the plaintiff lost-profits damages; improperly awarded lost-profit damages on the unpatented pull-through products, as the products did not compete or function with the patented invention; properly denied the plaintiff’s motion for a new trial on the issue of reasonable-royalty damages as the plaintiff failed to timely object to the jury's inconsistent award; properly granted the defendant’s motion for JMOL of no willfulness in the infringement; and erred in its exceptionality finding, and thus also in the imposition of attorneys’ fees and sanctions against defendant for litigation misconduct.
The Court reversed the $77.2 million in lost profits awarded against Medtronic for the related, non-infringing products, but refused to alter the other $149.1 million in lost profits that the jury had granted DePuy. The Court rejected the jury’s award of damages for “pull-through” products—such as head braces and vests—that do not compete directly with DePuy’s spinal screws, stating “the jury had no legal basis to award lost profits on DePuy’s un-patented pull-through products, which neither compete nor function with its patented pedicle screws.” The Court explained that “a patentee may recover lost profits on unpatented components sold with a patented item, a convoyed sale, if both the patented and unpatented products ‘together were considered to be components of a single assembly or parts of a complete machine, or they together constituted a functional unit.’” Lost profits cannot be recovered on unpatented items that may have been sold with an infringing device only as a matter of convenience or business advantage.