Background
Warsaw Orthopedic (a Medtronic subsidiary) and NuVasive compete in the highly profitable market for spinal surgery products — implants, surgical instruments, and related devices used in spine procedures. Warsaw sued NuVasive for infringing two patents: U.S. Patent No. 7,470,273 (claiming oversized spinal implants for lateral lumbar interbody fusion) and U.S. Patent No. 7,582,058 (claiming methods and devices for retracting tissue to create a working channel for minimally invasive spinal access). NuVasive filed counterclaims, asserting that Warsaw infringed NuVasive’s own neuromonitoring patent.
Following a jury trial, Warsaw won on infringement and validity of its two patents, and NuVasive won on its neuromonitoring patent counterclaim. The jury awarded Warsaw substantial lost profits damages, including damages based on sales of spinal fixation hardware — implants not themselves covered by Warsaw’s patents but typically sold alongside the patented access and implant devices as part of complete spinal fusion procedures. Warsaw argued it was entitled to lost profits on these fixation hardware sales as “convoyed sales” — sales of unpatented products that a buyer would typically purchase together with the patented product.
The Court’s Holding
The Federal Circuit, written by Judge Prost, affirmed the jury’s liability findings as to infringement and validity of all three patents, but vacated the damages award and remanded for a new trial on damages for Warsaw’s two patents. The court identified two separate errors in the damages analysis.
First, on the basic lost profits claim: the Panduit test for lost profits requires that, among other things, the patentee had the ability to make the infringing sales. The Federal Circuit held that lost profits must be based on sales of products that the patentee itself was actually selling in the market. Warsaw had licensed certain rights to Medtronic’s distributor (MSD), which made some of the relevant sales, rather than selling directly through Warsaw itself. The court held Warsaw could not recover lost profits for sales it did not itself make.
Second, on convoyed sales: to recover lost profits for unpatented products sold alongside the patented product, the patentee must prove a functional relationship between the patented product and the unpatented convoyed product — the products must function together as a unit, not merely be purchased together by the same customer. The court found that spinal fixation hardware, while commonly sold in the same procedure as the patented implants, was not functionally necessary for or integrated with the patented products — surgeons used fixation hardware independently, and its purchase was not dictated by the patented implant. The absence of a functional relationship defeated the convoyed sales claim.
Key Takeaways
- Lost profits in patent cases are limited to products the patentee itself sells — a patentee cannot recover lost profits for sales made by a licensee or related entity that holds separate rights to make those sales.
- Convoyed sales damages (for unpatented products sold alongside the patented product) require a functional relationship between the two products — they must function together as an integrated unit, not merely be purchased together by the same customer in the same surgical procedure.
- Customer purchasing patterns (buying related products in the same transaction) do not alone establish the functional relationship required for convoyed sales lost profits.
- Liability (infringement and validity) findings by the jury were affirmed, meaning complex multi-patent medical device litigation can succeed on the merits while still failing on the damages theory — requiring a new trial to quantify appropriate compensation.
Why It Matters
Warsaw Orthopedic v. NuVasive clarifies important limitations on patent damages in the medical device industry, where patented technology (a specific implant design or surgical access method) is often sold as part of a broader product ecosystem (the complete system of implants, instruments, and fixation hardware for a given procedure). The ruling means that patent holders cannot automatically claim lost profits on the full procedure revenue when only one component of the procedure is patented.
The functional relationship requirement for convoyed sales is particularly significant. Medical device companies frequently bundle patented and unpatented products together and argue for damages across the entire bundle. After Warsaw Orthopedic, courts will scrutinize whether the unpatented products actually depend on or function together with the patented component — mere bundling or common customer purchasing patterns are not enough. For patent strategy, the case reinforces the importance of drafting claims that cover as many components of a product system as possible, and of structuring sales arrangements so that the patent holder directly participates in relevant sales revenue rather than licensing to intermediaries.