Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-13-01576/USCOURTS-ca13-13-01576-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 

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United States Court of Appeals 

for the Federal Circuit ______________________ 

WARSAW ORTHOPEDIC, INC.,

Plaintiff/Counterclaim Defendant-Appellant

MEDTRONIC SOFAMOR DANEK USA, INC.,

Counterclaim Defendant-Appellant

MEDTRONIC PUERTO RICO OPERATIONS CO., 

MEDTRONIC SOFAMOR DANEK DEGGENDORF, 

GMBH,

Counterclaim Defendants

v.

NUVASIVE, INC.,

Defendant/Counterclaimant-Cross Appellant

______________________ 

2013-1576, 2013-1577

______________________ 

Appeals from the United States District Court for the 

Southern District of California in No. 08-CV-1512, Judge 

Cathy Ann Bencivengo.

______________________ 

Decided: March 2, 2015 

______________________ 

LUKE DAUCHOT, Kirkland & Ellis LLP, Los Angeles, 

CA, argued for plaintiff/counterclaim defendantCase: 13-1576 Document: 77-2 Page: 1 Filed: 03/02/2015
2 WARSAW ORTHOPEDIC, INC. v. NUVASIVE, INC. 

appellant, counterclaim defendant-appellant. Also represented by ALEXANDER FRASER MACKINNON, NIMALKA R.

WICKRAMASEKERA, SHARRE LOTFOLLAHI; JOHN C. O’QUINN,

LIAM PATRICK HARDY, Washington, DC. 

DEANNE MAYNARD, Morrison & Foerster LLP, Washington, DC, argued for defendant/counterclaimant-crossappellant. Also represented by BRIAN ROBERT MATSUI; 

RYAN MALLOY, Los Angeles, CA; FRANK SCHERKENBACH, 

Fish & Richardson, P.C., Boston, MA; CRAIG EARL 

COUNTRYMAN, MICHAEL ARI AMON, TODD GLEN MILLER, 

San Diego, CA; MICHAEL J. KANE, Minneapolis, MN. 

______________________ 

Before LOURIE, DYK, and REYNA, Circuit Judges.

DYK, Circuit Judge. 

Warsaw Orthopedic (“Warsaw”) brought suit against 

NuVasive, Inc. (“NuVasive”) for infringement of U.S. 

Patent Nos. 5,860,973 (“the ’973 patent”) and 6,945,933 

(“the ’933 patent”). NuVasive counterclaimed for infringement of U.S. Patent No. 7,470,236 (“the ’236 patent”) against Warsaw and its related company, 

Medtronic Sofamor Danek USA, Inc. (“MSD”). For each of

the three patents, the district court sustained jury findings of infringement, awarded damages for past infringement, and awarded an ongoing royalty rate. Both parties 

appealed. We affirm the district court with respect to 

invalidity and infringement of all three patents, but we 

remand for a new trial on damages with respect to 

the ’973 and ’933 patents. 

BACKGROUND

We limit our discussion to the patents relevant to this 

appeal: the ’973 patent, the ’933 patent, and the ’236 

patent. Warsaw owns the ’973 patent and the ’933 paCase: 13-1576 Document: 77-2 Page: 2 Filed: 03/02/2015
WARSAW ORTHOPEDIC, INC. v. NUVASIVE, INC. 3

tent. The ’973 patent claims oversized spinal implants. 

The ’933 patent claims methods and devices for retracting 

tissue to create a working channel for minimally invasive

spinal surgery. NuVasive owns the ’236 patent, which 

relates to neuromonitoring during surgery. 

On October 6, 2008, Warsaw and MSD filed a complaint against NuVasive, alleging infringement of the ’973 

and ’933 patents. NuVasive counterclaimed, asserting 

infringement of the ’236 patent. At trial, Warsaw asserted claims 24, 41, 42, 57, and 61 of the ’973 patent and 

claims 21, 57, and 66 of the ’933 patent. NuVasive asserted claims 1, 5, and 9 of the ’236 patent. On September 20, 2011, the jury found that the asserted claims of 

the ’973 patent were not invalid (infringement was not in 

dispute), that the asserted claims of the ’933 patent were 

infringed under the doctrine of equivalents (validity was 

not in dispute), and that the asserted claims of the ’236 

patent were infringed (validity was not in dispute). The 

jury awarded damages for each.

After trial, Warsaw filed motions seeking supplemental damages and a permanent injunction with respect 

to the ’973 and ’933 patents, and a motion for judgment as 

a matter of law (“JMOL”) or a new trial with respect to 

the jury’s finding of infringement of the asserted claims of 

the ’236 patent. NuVasive also moved for JMOL or a new 

trial, challenging the jury’s finding of no invalidity of the 

asserted claims of the ’973 patent, infringement of the

asserted claims of the ’933 patent, and Warsaw’s entitlement to lost profits. The district court denied the motions 

for JMOL or a new trial and denied Warsaw’s requests for 

supplemental damages and a permanent injunction for 

infringement of the ’973 and ’933 patents. The court set 

ongoing royalty rates. 

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Warsaw appealed, arguing that the district court 

erred in denying supplemental damages to compensate for 

NuVasive’s infringement between the close of discovery 

and trial and in declining to award a higher ongoing 

royalty rate. Warsaw also argues that the district court 

erred in determining that MSD infringed the ’236 patent. 

NuVasive cross-appealed, challenging the determinations 

that the asserted claims of the ’973 patent were not 

invalid, the determination that NuVasive infringed the

asserted claims of the ’933 patent, and the damages 

calculation for infringement of the asserted claims of 

the ’973 and ’933 patents. 

We have jurisdiction pursuant to 28 U.S.C. § 1295. 

We review denials of motions for judgment as a matter of 

law de novo. See Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 563 F.3d 1358, 1370 (Fed. Cir. 2009); Janes v. 

Wal-Mart Stores, Inc., 279 F.3d 883, 886 (9th Cir. 2002). 

We review the district court’s claim construction under 

the standard set forth in Teva Pharm. USA, Inc. v. 

Sandoz, Inc., No. 13-854, slip op. at 13 (Jan. 20, 2015). 

We review underlying factual determinations concerning 

extrinsic evidence for clear error. Id. at 12. We review 

intrinsic evidence and the ultimate construction of the 

claim de novo. Id. Infringement is a question of fact, 

DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 

F.3d 1005, 1013 (Fed. Cir. 2006), reviewed for substantial 

evidence. Transocean Offshore Deepwater Drilling, Inc. v. 

Maersk Drilling USA, Inc., 699 F.3d 1340, 1356–57 (Fed. 

Cir. 2012). We review damages determinations by the 

court for “an erroneous conclusion of law, clearly erroneous factual findings, or a clear error of judgment amounting to an abuse of discretion.” Micro Chem., Inc. v. 

Lextron, Inc., 318 F.3d 1119, 1122 (Fed. Cir. 2003) (internal quotation marks, citation omitted). 

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DISCUSSION

I. Invalidity and Infringement

We address first the arguments with respect to the 

district court’s liability determinations as to the asserted 

claims of the ’973, ’933, and ’236 patents. 

A. ’973 Patent Invalidity

 The ’973 patent claims are directed to oversized spinal 

implants capable of lateral insertion. The human spine 

has a series of stacked vertebrae. In between each vertebrae is a disk, which is composed of spongy material and 

provides flexibility to the spine. Prior to the invention, 

implants were typically smaller than the size of the 

corresponding vertebrae and were inserted either anteriorly or posteriorly, i.e., from the front or back, rather than 

the side. The claims of the ’973 patent disclosed an oversized spinal implant capable of lateral insertion. The 

oversized implant arguably provided more stability than 

the smaller implants, and the lateral directionality of the 

insertion arguably made the surgery safer. Although 

claim 35 is not asserted, most of the asserted claims 

depend from claim 35,1 and NuVasive appears to argue 

that the invalidity of the asserted claims turns on the 

invalidity of claim 35. Claim 35 covers:

A translateral spinal implant for insertion from 

the lateral aspect of the spine in the disc space between two adjacent vertebrae, said implant having

1 Claim 24 depends from independent claim 1; 

claims 41, 42, and 57 depend from independent claim 35; 

and claim 61 is an independent claim. 

 

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a length that is greater than one half the transverse width of the vertebrae, 

said length being substantially greater than the 

depth of the vertebrae,

a height for contacting each of the two adjacent 

vertebrae, and

a width that is at least as great as the height.

’973 patent, col. 13 ll. 1–7 (line breaks added). NuVasive 

argues that the claim is anticipated and obvious in light 

of two prior art references: spinal implants used by surgeon Dr. John Brantigan before the critical date and U.S. 

Patent No. 5,192,327 to Brantigan (collectively, the

“Brantigan references”).

The district court construed the preamble of claim 35

not to be limiting, but nonetheless instructed the jury 

that “said implant” refers to “a spinal implant capable of 

being inserted translaterally,” and that “capable” should 

be given its plain meaning. See J.A. 206. We see no error 

in the court’s determination that the claims require 

lateral insertion, and NuVasive therefore fails to show its 

entitlement to a new trial on that issue. 

Warsaw also presented substantial evidence to the 

jury distinguishing the ’973 patent from the Brantigan 

references. Warsaw argued that the Brantigan references 

were not “capable” of lateral insertion because (1) the 

FDA had not approved the implant for lateral insertion,

(2) the ridges, grooves, and tool holes of the Brantigan 

references suggested they were intended for anterior or 

posterior insertion, not lateral insertion, and (3) the lack 

of tapering or rounding on the Brantigan implant made it 

ill-suited for lateral insertion. Because there was substantial evidence for the jury to conclude that the Brantigan references did not teach an implant capable of lateral 

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insertion, the jury was entitled to find that the Brantigan

references did not anticipate or render obvious the asserted claims of the ’973 patent. 

NuVasive also argues that the asserted claims of 

the ’973 patent are indefinite because, given the relative 

nature of the claim limitations, one cannot know whether 

an implant infringes until it is selected for a particular 

patient. Under the Supreme Court’s decision in Nautilus, 

Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014), a 

claim is indefinite if “viewed in light of the specification 

and prosecution history,” it does not “inform those skilled 

in the art about the scope of the invention with reasonable clarity.” Id. at 2129. The relative nature of the claim 

does not itself make it indefinite, and NuVasive failed to 

establish, by clear and convincing evidence, that human 

anatomy varies so significantly that reliance on the wellknown dimensions of human vertebrae makes the claims 

indefinite. See Howmedicia Osteonics Corp. v. Tranquil 

Prospects, Ltd., 401 F.3d 1367, 1371–73 (Fed. Cir. 2005). 

Indeed, the parties stipulated that “[t]he average dimensions of the human vertebrae are well-known, easily 

ascertainable, and well-documented in the literature.” 

J.A. 2882.

B. ’933 Patent Infringement

The ’933 patent is directed to instruments and methods for minimally invasive tissue retraction during surgery. It discloses a two-pronged device in which each 

prong forms one-half of a hollow cylinder. In combination, 

the two prongs form a working channel through the 

cylinder, through which the surgeon can pass instruments 

for spinal surgery. Neither prong is fixed—both can be 

moved away from each other and pivoted to adjust the 

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size of the channel. Although claim 1 is not asserted, one 

of the asserted claims depends from claim 1,2 and NuVasive appears to argue that the infringement of the asserted claims turns on the infringement of claim 1. Claim 1

provides:

A tissue retractor for percutaneous surgery in a 

patient, comprising:

a first portion having a proximal end and a distal 

end; and

a second portion having a proximal end and a distal end, said second portion forming with said first 

portion a working channel in communication with 

an exterior of said first and second portions at 

said proximal ends and said distal ends with said 

working channel being enclosed by said first portion and said second portion between said distal 

and proximal ends, wherein said working channel 

is enlargeable by laterally moving each of said 

first and second portions away from one another 

and pivoting each of said distal ends of said first 

and second portions away from one another such 

that only a portion of said working channel is enclosed by said first and second portions.

’933 patent, col. 13 ll 32–48.

As NuVasive identifies, the accused product has 

three, not two, portions. Moreover, one of the portions is 

fixed—incapable of lateral movement or pivoting. Thus,

although NuVasive does not dispute that the other claim

limitations are met, NuVasive argues that the accused 

2 Claim 21 depends from independent claim 1, 

claim 57 depends from independent claim 56, and claim 

61 depends from independent claim 63. 

 

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device does not literally infringe the asserted claims of 

the ’933 patent because there are three, not two, prongs, 

and the third prong is not capable of lateral movement or 

pivoting. Warsaw argues that the jury did not err in 

finding infringement under the doctrine of equivalents. 

NuVasive disagrees. 

Warsaw submitted substantial evidence that the differences between the accused device and the patented 

technology are insubstantial. For example, there are 

admissions by NuVasive’s own witnesses that a working 

channel enclosed by three prongs “i[s] the same working 

channel as with only two [prongs]” and that “when the 

working channel is in the closed position, two and three 

[prongs] are equivalent.” J.A. 10735, 11755–56. Thus, 

substantial evidence exists to support a finding of infringement under the doctrine of equivalents because a 

jury could find that two enclosing prongs capable of 

lateral movement and pivoting was equivalent to three 

enclosing prongs, two of which were capable of lateral 

movement and pivoting.3

C. ’236 Patent Infringement

The ’236 patent is directed to a method for detecting 

the presence of and measuring the distance to a nerve 

3 NuVasive argues that application of the doctrine 

of equivalents would result in claim vitiation. As we 

recently explained, vitiation is not a separate argument 

from insubstantiality. See Brilliant Instruments, Inc. v. 

GuideTech, LLC, 707 F.3d 1342, 1347 (Fed. Cir. 2013) 

(“‘Vitiation’ is not an exception to the doctrine of equivalents, but instead a legal determination that the evidence 

is such that no reasonable jury could determine two 

elements to be equivalent.” (quoting Deere & Co. v. Bush 

Hog, LLC, 703 F.3d 1349, 1356 (Fed. Cir. 2012))). 

 

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during surgery. During surgery, surgeons want to avoid 

contact with or damage to any nerves, as doing so could 

result in patient paralysis. The patented monitoring 

device sends a series of signals in increasing strength. 

When a nerve fires after receiving a signal, the device can 

predict its proximity to the nearest nerve based on the 

signal strength most recently sent by the device. The 

farther away it is from a nerve, the stronger the signal 

must be to trigger a response. Claim 1 is representative. 

It provides:

A method for assessing the proximity of a spinal 

nerve relative to a distal end of at least one probe 

or surgical tool being introduced towards at least 

one of a lumbar region and thoracic region of a patient's spine, said lumbar region and said thoracic 

region of said spine having a ventral column and a 

dorsal column, said ventral column including a 

plurality of vertebral bodies and a plurality of intervertebral discs disposed in between said vertebral bodies, said vertebral bodies and 

intervertebral discs each having an anterior aspect, a posterior aspect opposite from said anterior 

aspect, and a lateral aspect extending between 

said anterior and posterior aspects, said dorsal 

column including a plurality of bone elements extending from said vertebral bodies to form a spinal canal that contains and protects the spinal 

chord, said spinal nerve exiting from said spinal 

canal and disposed generally parallel to a longitudinal axis of said spine along said lateral aspect, 

the method comprising:

(a) emitting a stimulus signal from an electrode 

disposed on a probe or surgical tool as said probe 

or tool is introduced towards a lateral aspect of at 

least one of a vertebral body and an intervertebral 

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disc of at least one of a lumbar region and thoracic 

region of a patient's spine;

(b) electromyographically monitoring muscles 

coupled to said spinal nerve to determine if a predetermined neuromuscular response is elicited by 

the stimulus signal;

(c) increasing the intensity level of said stimulus 

signal until said predetermined neuro-muscular 

response is elicited by said stimulus pulse and 

stopping the emission of said stimulus signal immediately after said predetermined neuromuscular response is detected; and

(d) communicating to an operator said intensity 

level of said stimulus signal required to elicit said 

predetermined neuro-muscular response, wherein 

said intensity level required to elicit said predetermined neuro-muscular response represents the 

proximity of said spinal nerve to said probe or 

surgical tool.

’236 patent, col. 17 l. 47–col. 18 l. 6. The court construed 

“stimulus signal” to mean “an electrical signal for eliciting 

a neuromuscular response.” J.A. 208.

MSD argues that its product, the NIM-Eclipse, does 

not infringe because, contrary to step (c), the NIM-Eclipse 

does not “stop[] the emission of said stimulus signal 

immediately after said predetermined neuromuscular 

response is detected.” ’236 patent, col. 17 ll. 58–60. 

According to MSD, “stopping” requires the termination of 

subsequent pulses, whereas the accused product continues to emit pulses, just at a lower level of power. MSD 

also argues that there is insufficient evidence to prove 

induced infringement. 

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NuVasive urges that the NIM-Eclipse signal does 

“stop.” According to NuVasive, a “signal” is a series of 

increasing pulses. Signal strength decreases when a 

neuromuscular response is elicited. By decreasing the 

signal strength, the old signal terminates and a new one 

begins. This understanding is consistent with the claim 

construction presented to the jury. The district court 

defined “stimulus signal” in functional terms, to mean “an 

electrical signal for eliciting a neuromuscular response.” 

J.A. 208. Thus, according to NuVasive and consistent 

with the claim construction, the old signal successfully 

elicited a response, and the decreased pulse is not part of 

the previous series of increasing pulses. Instead, it is the 

first pulse of a new signal. This “restart” involves a stop 

followed by a start. 

There was substantial evidence to support a finding of 

infringement. Treating a “restart” as a type of stop was 

clearly envisioned by the claims. For example, dependent 

claims 4, 5, 6, 8, 9, and 10 all claim methods in which the 

method of claim 1 is repeated. And, NuVasive’s expert 

testified that a “stimulus signal,” which he interpreted to 

be a series of continually increasing pulses, stopped after 

eliciting a response because the pulse strength dropped 

and the gradual increase in pulse strength started over. 

Additionally, NuVasive put forth enough evidence to 

support a jury finding of induced infringement. There 

was evidence that MSD was aware of the patent prior to 

the litigation and that MSD specifically taught doctors to 

use the product during the surgical procedures in an 

infringing manner.

In rebuttal, MSD argues that interpreting the stopping step in such a way is barred by the prosecution 

history, in which “stop” was added to overcome a prior art 

reference. But, no construction of the “stopping” step was 

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presented to the jury, nor did Warsaw request a construction beyond its plain and ordinary meaning. We have 

previously explained that, “where the parties and the 

district court elect to provide the jury only with the claim 

language itself, and do not provide an interpretation of 

the language in the light of the specification and the 

prosecution history, it is too late at the JMOL stage to 

argue for or adopt a new and more detailed interpretation 

of the claim language and test the jury verdict by that 

new and more detailed interpretation.” Hewlett-Packard 

Co. v. Mustek Sys., Inc., 340 F.3d 1314, 1321 (Fed. Cir. 

2003).

II. ’973 and ’933 Damages Issues

Having sustained the district court’s determinations 

with respect to liability under the three asserted patents, 

we consider Warsaw’s and NuVasive’s appeals from the 

damages awards for the ’973 and ’933 patents. Warsaw 

does not appeal the denial of injunctive relief.

Although Warsaw owns the ’933 and ’973 patents, it 

does not practice the patented technologies. Rather, it (1) 

licenses the technologies to related companies Medtronic 

Sofamor Danek Deggendorf, GmBH (“Deggendorf”) and 

Medtronic Puerto Rico Operations Co. (“M Proc”), which

manufacture and sell the patented products to MSD and 

pay royalties to Warsaw on those sales and (2) manufactures “fixations,”4 which it sells to MSD for profit. MSD 

packages the fixations and the patented products together

into medical kits, which it sells to hospitals and surgeons. 

4 “Fixations” are medical products such as surgical 

rods and screws that are used in connection with the 

patented devices during surgery. 

 

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Warsaw asserts it has three sources of income related 

to the patented technologies. First, it receives revenue 

from the sale of fixations to MSD, which it argues should 

be treated as convoyed sales; second, it receives royalty 

payments from M Proc and Deggendorf; third, it receives 

payments from MSD resulting from an inter-company 

transfer pricing agreement, which are characterized by 

Warsaw as “true-up” payments. 

At trial, Warsaw characterized all three sources of income as representing potential lost profits to Warsaw and 

sought to recover revenue declines allegedly the result of 

infringement by NuVasive. Warsaw also sought to recover a reasonable royalty. The jury awarded Warsaw 

$101,196,000 in total damages. The verdict form indicated that the $101 million award was for “Lost Profit Damages (with royalty remainder)” and provided royalty rates 

for each patent. It is impossible to determine from the 

verdict form what portion of the verdict is attributable to 

lost profits and what portion is attributable to a reasonable royalty, much less how much of the lost profits portion 

is attributable to each of the three different revenue 

streams.

After trial, the district court denied Warsaw’s request 

for supplemental damages, and it set the ongoing royalty 

rate for the ’973 patent at 13.75% of sales of infringing 

implants and set the ongoing royalty rate for the ’933 

patent at 8.25% of sales of infringing retractors. NuVasive challenges the award of lost profits. Warsaw challenges the district court’s refusal to award supplemental 

damages and the ongoing royalty rate. 

Our treatment of damages is guided by the statute, 

which provides in part: “the court shall award the claimant damages adequate to compensate for infringement, 

but in no event less than a reasonable royalty for the use 

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made of the invention by the infringer.” 35 U.S.C. § 284. 

Our case law recognizes two measures of damages: lost 

profits and reasonable royalties. As we have previously 

explained:

Through section 284, Congress sought to ensure 

that the patent owner would in fact receive full 

compensation for any damages he suffered as a 

result of the infringement. Damages is the 

amount of loss to a patentee. A patentee may 

seek to recover actual damages, usually, the 

amounts of profits actually lost, or if unable to 

prove actual damages, the patentee is entitled to a 

reasonable royalty.

SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 

F.2d 1161, 1164 (Fed. Cir. 1991) (internal quotation 

marks, citations omitted).

At least with respect to any particular sale, a patentee 

is entitled to either a reasonable royalty or lost profits—

not both. See id. at 1164. At oral argument, counsel for 

Warsaw admitted it was not entitled to both a reasonable 

royalty and lost profits on a single sale, nor was it seeking 

both.

Lost profits and reasonable royalties measure damages differently. Lost profits as a measure of damages is 

intended to make the party whole—to compensate the 

patent holder for profits lost as a result of the infringement. It is not solely a “but for” test. Rite-Hite Corp. v. 

Kelley Co., Inc., 56 F.3d 1538, 1546 (Fed. Cir. 1995) (en 

banc).

A reasonable royalty, on the other hand, is intended 

to compensate the patentee for the value of what was 

taken from him—the patented technology. See Aqua 

Shield v. Inter Pool Cover Team, 774 F.3d 766, 770 (Fed. 

Cir. 2014) (“The ‘value of what was taken’—the value of

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the use of the patented technology—measures the royalty.” (quoting Dowagiac Mfg. Co. v Minn. Moline Plow Co., 

235 U.S. 641, 648 (1915))). 

Under our case law a patentee may not claim, as its 

own damages, the lost profits of a related company. See

Poly-America, L.P. v. GSE Lining Tech., Inc., 383 F.3d 

1303, 1311 (Fed. Cir. 2004) (explaining that related 

companies “may not enjoy the advantages of their separate corporate structure and, at the same time, avoid the 

consequential limitations of that structure—in this case, 

the inability of the patent holder to claim the lost profits 

of its non-exclusive licensee”); see also Mars, Inc. v. Coin 

Acceptors, Inc., 527 F.3d 1359, 1365 (Fed. Cir. 2008) 

(refusing to award “lost profits” to the patent holder when

its subsidiary corporation lost sales due to infringement), 

mandate recalled and amended on other grounds, 557 

F.3d 1377 (Fed. Cir. 2009). Indeed, Warsaw admits it is 

not entitled to the lost profits of Deggendorf, M Proc, or 

MSD.

A. Convoyed Sales

NuVasive challenges treating decreases in revenue 

from the sale of fixations (e.g., rods and screws for holding 

the implant and vertebrae in place) as “lost profits.” At 

trial, Warsaw’s damages expert testified that NuVasive’s 

infringement of the patented technologies resulted in 

Warsaw’s making fewer sales of fixations to MSD, because MSD itself lost sales of the patented medical kits as 

a result of NuVasive’s infringement. The expert calculated that Warsaw lost $27.8 million in lost sales, $24.5 

million of which was lost profits (the remaining $3.3 

million was recouped in cost savings). Such a claim is 

based on the theory that the sales were convoyed sales. A 

convoyed sale is a sale of a product that is not patented, 

but is sufficiently related to the patented product such 

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that the patentee may recover lost profits for lost sales. 

See Am. Seating Co. v. USSC Grp., Inc., 514 F.3d 1262, 

1268 (Fed. Cir. 2008). 

To be entitled to lost profits for convoyed sales, the related products (e.g., the fixations) must be functionally 

related to the patented product and losses must be reasonably foreseeable. See Rite-Hite, 56 F.3d at 1546–50. 

Being sold together merely for “convenience or business 

advantage” is not enough. Am. Seating, 514 F.3d at 1268. 

If the convoyed sale has a use independent of the patented device, that suggests a non-functional relationship. 

See, e.g., DePuy Spine, Inc. v. Medtronic Sofamor Danek, 

Inc., 567 F.3d 1314, 1333 (Fed. Cir. 2009).

On appeal, NuVasive argues that the sale of fixations 

to MSD are not recoverable as “convoyed sales” because 

there is no functional relationship between the alleged 

convoyed sales and the patented products. That is, according to NuVasive, the unpatented components “can be 

and are frequently used independently of the patented 

implants and retractors.” NuVasive’s Opening Br. 48. In 

rebuttal, Warsaw argues that these sales are recoverable

as convoyed sales because the unpatented components are 

part of comprehensive medical kits that “contain everything necessary for a fusion procedure.” Warsaw’s Reply 

Br. 48. 

The fixations here are not convoyed sales recoverable 

as lost profits. Warsaw failed to prove a functional relationship necessary to support a jury verdict awarding lost 

profits for convoyed sales. Warsaw points to its marketing material, in which it touted the kits’ “comprehensive 

set of instruments and implants including fully integrated 

neuromonitoring, streamlined access instrumentation, 

anatomically designed implants and percutaneous fixation systems.” J.A. 20587. This does not establish a 

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functional relationship. This is the precise sort of convenience or business strategy excluded by American Seating. 

See Am. Seating, 514 F.3d at 1268 (“Our precedent has 

not extended liability to include items that have essentially no functional relationship to the patented invention 

and that may have been sold with an infringing device 

only as a matter of convenience or business advantage.” 

(quoting Rite-Hite, 56 F.3d at 1538)). Warsaw never 

presented testimony that the fixations it sold to MSD had 

no independent function—that is, that they would not 

work as well in other surgeries not involving the patented 

technologies. Therefore, the district court erred in denying NuVasive’s JMOL motion on this issue. 

B. Royalty Payments from M Proc and Deggendorf

NuVasive next challenges the inclusion of lost royalty 

payments from M Proc and Deggendorf in the lost profits 

award. At trial, Warsaw explained that, under its business model, it would license the patented technologies to 

related companies such as Deggendorf and M Proc, who 

would manufacture the patented devices. NuVasive’s 

infringement detrimentally affected those manufacturers’ 

sales, which in turn negatively affected the royalty payments they made to Warsaw. 

On appeal, NuVasive argues that Warsaw is effectively claiming as “lost profits” the lost profits of its related 

companies. That is, that Deggendorf and M Proc are the 

companies actually harmed by NuVasive, and that by 

claiming “lost profits,” Warsaw is seeking to recover the 

lost profits of those companies. Warsaw recognizes that 

Poly-America prohibits it from claiming its related companies’ lost profits as its own, but it argues that it is not 

seeking damages that other companies suffered. Rather, 

because those companies would remit money back to 

Warsaw, Warsaw argues it is asking for that money—the 

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money it would have received but-for NuVasive’s infringement. 

To be entitled to lost profits, we have long recognized 

that the lost profits must come from the lost sales of a 

product or service the patentee itself was selling. As we 

explained in Rite-Hite, “[n]ormally, if the patentee is not 

selling a product, by definition there can be no lost profits.” 56 F.3d at 1548. Similarly, in Poly-America we 

noted, “the patentee needs to have been selling some item, 

the profits of which have been lost due to infringing sales, 

in order to claim damages consisting of lost profits.” 383 

F.3d at 1311. Here, there is a failure of proof and as a 

result the revenue stream is not recoverable.5

C. True-Up Payments

NuVasive’s final challenge is to the inclusion of the 

“true-up” payments from MSD to Warsaw. At trial, 

Warsaw’s accounting witness explained that Warsaw 

engages in various transactions with related companies 

throughout the year. But, those initial transactions do 

not necessarily reflect the fair market value of the product 

or service exchanged. To comply with relevant tax and 

accounting laws, a transfer pricing agreement is used to 

require those related companies to transfer funds back 

and forth to compensate each other for the fair market 

value of the property previously exchanged. The “true-up” 

payments are post hoc transfers to ensure that Warsaw 

receives fair-market-value. The number is substantial; 

MSD remits back 95% of the profit it made from the sale 

5 Warsaw also argues that Warsaw, not its related 

manufacturers, was the one that really made the sales 

because the manufacturers were nothing more than 

Warsaw’s contractual agents. The evidence does not 

support this characterization. 

 

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of patented technologies, and that accounts for the majority of the total lost profits requested by Warsaw. 

It is not immediately clear from Warsaw’s accounting 

witness’ testimony what the underlying transactions were 

that made the 95% true-up payments necessary. The 

true-up payments from MSD to Warsaw appear to result 

from a variety of transactions. Some are for royalty 

payments, suggesting an implied licensing agreement 

between MSD and Warsaw for the sale of various patented technologies. Others, as suggested by spreadsheets in 

the record, are for other transactions—for example, 

management fees or implied licenses on other patents. 

See J.A. 23556–637; see also Medtronic Sofamor Danek 

USA, Inc. v. Globus Med., Inc., 637 F. Supp. 2d 290, 309 

(E.D. Pa. 2009).

Warsaw apparently contends that the true-up payments are recoverable because they contain, in part, 

royalty payments from MSD to Warsaw for sales of the 

patented products to surgeons and hospitals. But Warsaw makes no effort to distinguish what percentage of the 

true-ups was attributable to those payments as opposed to 

payments on unrelated transactions. Indeed, the transfer 

pricing policies indicate that the true-ups are established 

on a company-by-company, not a technology-bytechnology or even a product-by-product, basis.

The district court erred in denying JMOL as to these 

payments. Just as the payments from M Proc and Deggendorf are not recoverable as lost profit, so too are the 

true-up payments not recoverable as lost profit.

D. Reasonable Royalty

Our rejection of Warsaw’s claims for lost profits does 

not mean that Warsaw is precluded from any recovery. 

Warsaw is entitled to a reasonable royalty sufficient to 

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compensate it for the value of what was taken from it—

the value of the patented technology. As we recently 

explained, a reasonable royalty compensates the owner 

not for the damage he suffered, but for the value of what 

was taken. See Aqua Shield, 774 F.3d at 770 (“The ‘value 

of what was taken’—the value of the use of the patented 

technology—measures the royalty.” (quoting Dowagiac, 

235 U.S. at 648)). Neither party argues it is possible to 

parse out and compute a reasonable royalty based on the 

jury verdict. Although the jury verdict did state a reasonable royalty rate, it is not entirely clear the period for 

which that reasonable royalty was determined or whether 

the jury impermissibly relied on evidence not probative of 

the value of the patented technology. We therefore remand for a new trial to determine a reasonable royalty on 

the patented technologies. 

Evidence of a number of existing royalty agreements 

entered into at arms-length can be evidence of the value 

of the patent. See Georgia-Pacific Corp. v. U.S. Plywood 

Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (listing 

“[t]he royalties received by the patentee for the licensing 

of the patent in suit, proving or tending to prove an 

established royalty” as the first factor in determining a 

reasonable royalty); Monsanto Co. v. McFarling, 488 F.3d 

973, 978–79 (Fed. Cir. 2007) (“An established royalty is 

usually the best measure of a ‘reasonable’ royalty for a 

given use of an invention because it removes the need to 

guess at the terms to which parties would hypothetically 

agree.”). But, royalties paid by related parties have little 

probative value as to the patent’s value. See Allen Archery, Inc. v. Browning Mfg. Co., 898 F.2d 787, 790 (Fed. 

Cir. 1990) (rejecting agreements between related parties 

as establishing a royalty rate because the transactions 

were not arms-length).

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22 WARSAW ORTHOPEDIC, INC. v. NUVASIVE, INC. 

Here, the parties are related. As we discussed above, 

the true-up payments have no relevance to the calculation 

of the reasonable royalty because Warsaw made no effort 

to determine what percentage of these payments represented royalties for the asserted patents. At this juncture, we do not decide whether royalty payments by 

Deggendorf and M Proc have any relevance in determining a reasonable royalty.6 We leave that question to the 

district court on remand to determine in the trial proceedings.7

6 We note that Judge Shapiro in Medtronic Sofamor

described the relationship between Warsaw and its related companies as follows: 

Warsaw, the patentee, is entitled to royalties under its license agreements with [M Proc] and Deggendorf. Under those agreements, Warsaw 

receives royalties of 23% of net sales by the licensee. However, since [M Proc] and Deggendorf are 

corporate entities related to Warsaw, the royalty 

rates provided under the license agreements do 

not prove a royalty rate established by an armslength transaction. There is no evidence that 

Warsaw licensed the patents to unrelated parties 

(although it retained the right to do so), so there is 

no established royalty rate for the patents in suit. 

This factor has no effect on the royalty rate.

637 F. Supp. 2d at 309. 7 We note that it is established that the impact in 

the United States that granting a license might have on 

sales of the patented inventions by Warsaw’s related 

companies can be relevant to the hypothetical negotiation, 

even if the amounts of intercorporate transfers are not. 

 

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E. Supplemental Damages

Warsaw challenges the district court’s denial of supplemental damages. Discovery closed in June of 2010, but 

the jury did not render its verdict until September of 

2011. Neither the court’s instructions nor the verdict 

form specified the period of infringement during which 

the jury should award damages. The district court held 

that whether damages for the gap period were awarded 

was within the province of the jury. Because the court 

lacked “critical information about the jury’s calculations, 

the court would . . . be unable to formulate a supplement[al] damages award that would be consistent with 

the jury’s verdict.” J.A. 30259. Any attempt to do so, the 

court explained, “would be an improper invasion of the 

provi[]nce of the jury.” Id. Warsaw contends on appeal 

that the district court erred in not awarding supplemental 

damages.

We need not resolve this issue because, as noted 

above, we are remanding for a new trial on damages. At 

the new trial, Warsaw may appropriately assert a claim 

for supplemental damages limited to a reasonable royalty. 

But, the time period of the claim must be presented to the 

jury with clarity so as to avoid the ambiguity that existed 

at the first trial. The jury instruction and jury verdict

forms should make clear the period for which the jury is 

supposed to determine damages. If that period ends

before the date of the jury verdict, the district court may

award supplemental damages in light of that gap period.

See Union Carbide Chems. & Plastics Tech. Corp. v. Shell 

Oil Co., 425 F.3d 1366, 1378 (Fed. Cir. 2005), overruled on 

other grounds, Cardiac Pacemakers, Inc. v. St. Jude Med., 

Inc., 576 F.3d 1348 (Fed. Cir. 2009) (en banc). 

 

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24 WARSAW ORTHOPEDIC, INC. v. NUVASIVE, INC. 

F. Ongoing Royalty

Finally, Warsaw challenges the district court’s determination of an ongoing royalty. Warsaw argues that the 

award is too low because it does not fully compensate 

Warsaw for lost profits, fails to account for the fact that 

validity and infringement must be assumed when determining ongoing royalties, and fails to account for the fact 

that some kits were used multiple times, thus resulting in 

multiple acts of infringement of the method claims. 

NuVasive argues that that the ongoing royalty determination should be redone because it includes a lost profits 

component. Because the ongoing royalty impermissibly 

includes a lost profits component, we vacate the award 

and remand for the district court to determine an appropriate ongoing royalty rate in light of this opinion and the

jury verdict after a new trial. 

CONCLUSION

We affirm the district court with respect to invalidity 

and infringement for the ’973, ’933, and ’236 patents. We 

vacate Warsaw’s damages award and remand for a new 

trial on damages consistent with this opinion. At the new 

trial, Warsaw will be limited to a reasonable royalty and 

cannot recover lost profits. 

AFFIRMED-IN-PART, VACATED-IN-PART, AND 

REMANDED-IN-PART

COSTS

Costs to neither party. 

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