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MEDTRONIC INC. Spinal inplants dispute settled for $1.35 billion



Published: Sat, April 23, 2005 @ 12:00 a.m.



The company will pay Dr. Gary Michelson $800 million for the intellectual property.

LOS ANGELES TIMES

LOS ANGELES -- A Minneapolis medical device manufacturer said Friday that it would pay a Los Angeles back surgeon and his nonprofit company $1.35 billion to end a long-running dispute over rights to spinal implants and other instruments invented by the doctor.

The deal is believed to be one the largest ever involving an intellectual property dispute. Under its terms, Medtronic Inc. will pay $800 million to acquire many of Dr. Gary Michelson's inventions and an additional $550 million to settle all legal claims.

Dr. Michelson, 56, a former surgeon at Centinela Hospital Medical Center in Inglewood, and his licensing firm, Karlin Technology, will share the total payment.

The deal concludes a four-year legal battle over technology that helped make Medtronic a world leader in spinal implants. Despite its size, the agreement is less than the $1.7 billion Dr. Michelson had been seeking in federal court.

Dr. Michelson, a prolific inventor whose many patents include a new-fangled paper clip, said he was pleased that dispute was over. Dr. Michelson said it cost him more than $60 million to fight Medtronic, an all-consuming battle that put his professional life on hold.

"This has been a terrible distraction," he said. "I feel very good about being able to put this behind."

Future plans

Dr. Michelson said he plans to start a research foundation, contributing $200 million of the money he will be receiving from Medtronic. He has chosen a name -- Medical Research Foundation Trust -- but has not yet settled on a focus.

Medtronic, too, said it was pleased with the deal because the company would get all of Dr. Michelson's spine-related inventions -- a portfolio of more than 100 U.S. patents, more than 110 pending U.S. patents and 500 patents in foreign countries. The company also would get rights to Dr. Michelson's future spinal inventions for the next 15 years.

"With this agreement, we come full circle in our relationship with Dr. Michelson," said Michael DeMane, head of Medtronic's spinal business.

The dispute centered on rights to implants, surgical tools and techniques that Dr. Michelson had licensed in the mid-1990s to Sofamor Danek, a company acquired in 1999 by Medtronic.

In 2001, Medtronic sued Dr. Michelson, charging that the surgeon was interfering with Medtronic's business by marketing some of the inventions to competitors. It sought $225 million in damages, plus an order that could have tripled that figure.

Dr. Michelson countersued, charging that Medtronic had violated its agreement with him by not developing and selling the inventions he had licensed to the company. He said Medtronic had failed to give him credit for his inventions and was depriving him of tens of millions of dollars in royalties.

Previous ruling

Last fall, a federal jury in Memphis, Tenn., ruled in favor of Dr. Michelson and ordered Medtronic to pay $510 million in compensatory and punitive damages. The jury also said Medtronic owned royalties on sales of products that used Dr. Michelson's inventions -- an amount that could have totaled $1 billion over two decades.

Medtronic, which posted a $1.96 billion profit on sales of $9 billion last year, called the verdict "unjustified and excessive" and said it would appeal.

Neither side would say what led to the agreement announced Friday.

Despite his long fight with Medtronic, Dr. Michelson said he is comfortable putting his inventions in Medtronic's hands.

"After four years of protracted battle, it could leave both sides fairly bitter, but the truth of the matter is, I don't feel anything like that," Dr. Michelson said.

"Now that this is behind us, I look forward to having them do what they do best," he said.




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