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Doctor gets $1.35 billion in patent settlement

Medtronic Inc., said Friday it will pay about $1.3 billion to settle a patent dispute with a Los Angeles doctor who previously sued and won a lawsuit against the medical-device company. (Associated Press / The Spokesman-Review)
Associated Press
Medtronic Inc., said Friday it will pay about $1.3 billion to settle a patent dispute with a Los Angeles doctor who previously sued and won a lawsuit against the medical-device company. (Associated Press / The Spokesman-Review)

MINNEAPOLIS — Medtronic Inc. ended a long-running patent fight on Friday by agreeing to pay $1.35 billion to a Los Angeles doctor who invented much of its spinal-treatment technology.

The settlement with Dr. Gary K. Michelson and his company, Karlin Technology Inc., calls for Medtronic to pay $800 million to buy spinal-fusion technology and $550 million to settle the legal claims.

“I am very happy,” Michelson said of the settlement. “I am looking forward to working with Medtronic to see how many of the devices we can develop to help patients.”

Michelson had sought $1.7 billion in the dispute with Medtronic, and a jury awarded him about $510 million in punitive and compensatory damages last fall, saying Medtronic broke agreements that cover an implant used to treat damaged or diseased spinal discs. He had claimed that Medtronic breached patent agreements he made with spinal implant maker Sofamor Danek a decade ago before it was acquired by Medtronic in 1999.

Medtronic had pledged to appeal the jury verdict, but the settlement announced Friday takes its place.

Under the settlement, Medtronic gets more than 100 patents, 110 patent applications and about 500 foreign counterparts, as well as related contracts and rights.

Medtronic said the deal also gives it ownership of any new Michelson spinal inventions in the next 15 years, though attorneys for Michelson, 56, said he has been working full-time on the legal case since it began with a lawsuit by Medtronic in 2001.

The cash-rich medical device company said the settlement would not hurt earnings. Medtronic ended its third quarter with $4.1 billion in cash, and expects to end the fiscal year April 30 with $4.5 billion in cash.

Medtronic chief financial officer Gary Ellis told analysts on a conference call that $550 million would be recorded as a fourth-quarter expense. Another $75 million to $175 million will be accounted for as research and development, with the rest to be amortized over as many as 20 years, he said.

Medtronic shares fell 61 cents to close at $50.54 Friday on the New York Stock Exchange.