February delivered a double-whammy to Medtronic Inc., after two federal courts in two states separately slapped it with significant sanctions over its litigation tactics in patent cases, even as the company scored a huge victory in the Supreme Court.
In each of the two cases, the court found that the company's sanctionable conduct included the manner in which its lawyers used expert witnesses at trial.
The sanctions against the two Medtronic divisions came in the form of attorneys' fees awards and penalties – the most recent in Massachusetts for $10 million-plus and the other just weeks earlier in Colorado estimated to total several million dollars.
Ironically, in between the two sanction orders, Medtronic won a major victory February 20th in the Supreme Court when the court ruled in Riegel v. Medtronic that federal law preempted state common law claims over the safety of a medical device it manufactured.
The $10 million award was ordered February 25th by U.S. District Senior Judge Edward F. Harrington against Medtronic Sofamor Danek Inc. He issued the award in favor of plaintiff Depuy Spine Inc. after concluding that Medtronic had improperly resisted the construction of the patent claims mandated by the Federal Circuit Court of Appeals earlier in the case.
"The defendants prolonged the proceedings unnecessarily (thus unduly imposing upon the jury's time), they sought to mislead both the jury and the Court, and they flouted the governing claim construction as set forth by the Federal Circuit," Harrington wrote.
In addition, he ordered payment of 15 percent of plaintiffs' attorneys' fees from the date of the Federal Circuit's mandate through the date of the verdict.
In Colorado, U.S. District Senior Judge Richard P. Matsch was so infuriated by the trial conduct of counsel for Medtronic Navigation Inc. that he had already overturned a jury's $51 million verdict in its favor. Then, on February 12th, he ordered Medtronic to pay the fees and costs of the defendant, the German company BrainLAB Inc., an award yet to be calculated but estimated to total several million dollars.
In ordering the sanction, Matsch cited the "cavalier and abusive" conduct of the two lawyers from the law firm McDermott, Will & Emery who represented Medtronic during the 13-day patent infringement trial.
In both cases, the judges' decisions to award sanctions followed from their conclusions that Medtronic and its lawyers had continued to litigate the cases in manners that defied the courts' constructions of the patent claims – in the Massachusetts case even after the Federal Circuit Court of Appeals affirmed the construction in an interim appeal.
And, in both, the sanctionable conduct included Medtronic's use of and reliance on expert opinions that were contrary to those claim constructions.
In the Massachusetts case, which involved technology used in spinal surgery, Judge Harrington found that the defendants had refused to accept the claim construction throughout the course of the trial. In fact, he wrote, virtually their entire defense was "based on an attempt to obscure, evade, or minimize" the Federal Circuit's construction.
"Even as early as the defendants’ opening statements, they essentially urged the jury to adopt an interpretation of the patent claims developed by their experts instead of the construction mandated by the Federal Circuit," Judge Harrington wrote.
This strategy was underscored by Medtronic's reliance on two expert witnesses, both of whom testified that the patent at issue required a certain type of mating surface that Medtronic's technology lacked.
But the Federal Circuit had already concluded that the patent did not require mating or matching surfaces as these experts contended. By insisting otherwise, the defendants "clearly sought to take advantage of the technical and legal complexities inherent in this case" and mislead the jurors, Judge Harrington wrote.
In imposing a sanction as weighty as $10 million, the judge explained that he based his decision on two factors, "The sanction reflects not only to the magnitude of the malfeasance, but also the need to provide a disincentive for such conduct in the future."
In the Colorado case, decided February 12th, Judge Matsch said the trial would never have gone forward but for Medtronic's improper conduct. The court's claim construction should have put an end to "the fairly debatable issues" in the case, he said, and Medtronic's lawyers' continued prosecution of the claims through trial "was in disregard of their obligations as officers of the court."
"The fairness of the adversary system of adjudication depends upon the assumption that trial lawyers will temper zealous advocacy of their client's cause with an objective assessment of its merit and be candid in presenting it to the court and to opposing counsel," he wrote. "When that assumption has been contradicted by a trial record of conduct reflecting a winning is all that is important approach to the trial process, the court has a duty to redress this resulting harm to the opposing party."
That record included Medtronic's use of expert witnesses, the judge found. Throughout its presentation of expert testimony, Medtronic insisted on pursuing the claim construction that it had already argued and lost, Judge Matsch explained.
"The opinions of Medtronic's experts were crafted to fit the infringement theories put forward by Medtronic's counsel, and those theories were legally and factually untenable in light of the court's claim construction," he wrote. "Medtronic pursued a strategy of giving superficial recognition to the court's claim construction rulings, while pressing its own interpretations of the claims."
Once the court issued its ruling on claims construction, Medtronic should have either challenged it through an interlocutory appeal or conceded its loss, the judge said.
"Rather than accept that the claims construction rulings stripped the merits fromthis case, counsel chose to pursue a strategy of distorting those rulings, misdirecting the jury to a different reading of the claim language, and blatantly presenting the jury with a product to product comparison contrary to established law and the Court’s cautionary instructions."
Notably, Judge Matsch imposed the fee sanction not just against Medtronic's lawyers, but also against their law firm, relying on 28 U.S.C. § 1927, which imposes liability for excessive trial costs on any lawyer who extends a case "unreasonably and vexatiously." While recognizing that courts are split over whether the statute authorizes fee awards against law firms, he concluded that an award against the firm in this case would be proper.
Although Medtronic's two lead trial lawyers were most visible in the litigation, numerous other lawyers and support staff at their firm participated in the litigation and the trial, to the extent that the firm should bear the liability, he said. Even if the statute is found not to support such an award, it would be proper "under the court's inherent authority," he added.
The Massachusetts case is Depuy Spine Inc. v. Medtronic Sofamor Danek Inc. Civil Action No. 01-10165-EFH (Feb. 25, 2008).
The Colorado case is Medtronic Navigation Inc. v. BrainLAB Medizinische Computersystems GMBH, Civil Action No. 98-cv-01072-RPM (Feb. 12, 2008).