Kyphon Sues Medtronic Over Trade Secrets

Kyphon Inc. (Sunnyvale, CA), a manufacturer of medical devices to restore spinal function using minimally invasive techniques, and an orthopedic surgeon have jointly filed suit against Medtronic Sofamor Danek (Memphis), the spinal business unit of Medtronic Inc. (Minneapolis). The suit, unsealed in mid January, alleges that Medtronic stole trade secrets surrounding inventions for the treatment of vertebral compression fractures. The complaint claims the inventions were developed by Harvinder Sandhu, MD, who recently granted their exclusive license to Kyphon for $20 million.

Medtronic’s Wehrly: Complaint ‘without merit.’

“We believe this complaint is without merit,” said Pete Wehrly, Medtronic corporate vice president and president of Medtronic’s spinal and surgical navigation divisions. “We believe patients benefit when there is competition in the marketplace, and we will defend our right to be in this segment of the spine market.”

According to Kyphon, the suit was filed in November 2005 and unsealed at Kyphon’s request after the two parties failed to reach an agreement. The suit seeks compensatory and punitive damages and injunctive relief for breach of contract, trade secret theft, fraud, unjust enrichment, and correction of inventorship of several patents and patent applications currently owned by Medtronic.

In the lawsuit, Kyphon and Sandhu claim that Sandhu developed the disputed inventions, which are related to an expandable, mechanical bone tamp, in the late 1990s. According to the suit, Sandhu disclosed and discussed his inventions with Medtronic in 1999 under a nondisclosure agreement. The suit states that soon after these discussions, Medtronic filed for several patents encompassing the inventions without Sandhu’s permission. The suit claims that Medtronic also incorporated Sandhu’s inventions into its internal Equestra project without his permission.

Kyphon reports that, in late 2005, Sandhu licensed to Kyphon all of the intellectual property rights to his inventions after failing to reach an agreement with Medtronic in regard to the dispute.

Medtronic denies that it used Sandhu’s alleged invention in its patent filings and product development, and reports that it plans to “vigorously defend that position.” The company states that Kyphon, as the sole player in the vertebral compression fractures market, has a financial interest in keeping other players out of the market. Medtronic, which has not yet launched a system in this market segment, also notes that Sandhu never received a patent on the invention in dispute.

FDA approved Medtronic’s Equestra system, designed to enable surgeons to inject bone cement to the surgical site in orthopedic procedures, in 2004. The system is not yet commercially available.

At press time, no court dates had been set in the dispute, and Kyphon reported that it was awaiting Medtronic’s response to the suit.

Lawsuits over spinal device patents are not new territory for Medtronic. The Kyphon dispute comes less than a year after Medtronic Sofamor Danek agreed to pay $1.3 billion to Gary Karlin Michelson, MD, a Los Angeles-based orthopedic surgeon and inventor, to settle a long-standing patent dispute. In settling the case, Medtronic gained access to Michelson’s portfolio of spinal product patents, valued at $800 million. The agreement also included $550 million to settle all outstanding legal claims between the two parties.

At the beginning of this month, Medtronic announced that it had filed suit against Biomet Inc. (Warsaw, IN), a manufacturer of products for hip, knee, shoulder, elbow, and other small-joint replacements. The suit claims that Biomet and its subsidiary EBI Spine have infringed seven Medtronic patents, three of which were purchased from Michelson.

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