Case 3:18-cv-00347-CAB-MDD Document 342-9 Filed 10/29/21 PageID.31433 Page 1 of 10
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`EXHIBIT 8
`TO TRENT TANNER DECLARATION ISO
`NUVASIVE’S COMBINED MOTIONS IN LIMINE
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`Case 3:18-cv-00347-CAB-MDD Document 342-9 Filed 10/29/21 PageID.31434 Page 2 of 10
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF CALIFORNIA
`SAN DIEGO DIVISION
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`NUVASIVE, INC.,
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` Plaintiff,
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`v.
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`ALPHATEC HOLDINGS, INC. and
`ALPHATEC SPINE, INC.,
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` Defendants.
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`CASE NO. 18-cv-00347-CAB-MDD
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`SUPPLEMENTAL REBUTTAL EXPERT REPORT OF KEITH R. UGONE, PH.D.
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`December 18, 2020
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`HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY
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`EXHIBIT 8, Page 126 of 134
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`Case 3:18-cv-00347-CAB-MDD Document 342-9 Filed 10/29/21 PageID.31435 Page 3 of 10
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`SUPPLEMENTAL REBUTTAL EXPERT REPORT OF KEITH R. UGONE, PH.D.
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`December 18, 2020
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`I. 
`II. 
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`OVERVIEW OF ASSIGNMENT ................................................................................... 1 
`SUMMARY OF OPINIONS ............................................................................................ 4 
`A.  Evaluation Of NuVasive’s Claimed Lost Profits Damages As Presented In The
`Inglish Supplemental Damages Report ......................................................................... 5 
`B.  Reasonable Royalty For A License To The Patents-In-Suit ......................................... 9 
`C.  Monetary Damages Are Adequate To Compensate NuVasive For Alphatec’s
`Alleged Infringement .................................................................................................. 11 
`III.  QUALIFICATIONS AND EXPERIENCE .................................................................. 12 
`IV. 
`FACTS, DATA, AND INFORMATION RECEIVED ................................................. 13 
`V. 
`OVERVIEW OF PARTIES ........................................................................................... 16 
`A.  NuVasive..................................................................................................................... 16 
`B.  Alphatec ...................................................................................................................... 16 
`VI.  OVERVIEW OF PATENTS-IN-SUIT ......................................................................... 17 
`VII.  MARKET AND PRODUCT OVERVIEW .................................................................. 19 
`A.  Overview Of Spinal Fusion Surgery And Market For Lateral Lumbar Interbody
`Fusion Products ........................................................................................................... 19 
`1.  Spinal Fusion Surgery ........................................................................................... 19 
`2.  Market For Lateral Lumbar Interbody Fusion Products ....................................... 23 
`B.  NuVasive’s MAS Platform And Embodying Products .............................................. 26 
`1.  Description Of NuVasive’s MAS Platform And XLIF Offerings ........................ 26 
`2.  NuVasive’s Sales Associated With Its MAS Platform/XLIF Procedure .............. 27 
`C.  Alphatec’s Battalion Lateral System And Accused Products ..................................... 28 
`1.  Description Of Alphatec’s Battalion Lateral System And Accused Products ...... 28 
`2.  Alphatec’s Sales Associated With Its At-Issue Battalion Lateral System ............ 34 
`VIII.  SUMMARY OF NUVASIVE’S CLAIMED DAMAGES AS PRESENTED BY MR.
`INGLISH ......................................................................................................................... 35 
`A.  Mr. Inglish’s Claimed Lost Profits Opinion ............................................................... 36 
`B.  Mr. Inglish’s Claimed Royalty Opinion ..................................................................... 38 
`EVALUATION OF NUVASIVE’S CLAIMED LOST PROFITS DAMAGES AS
`PRESENTED IN THE INGLISH SUPPLEMENTAL DAMAGES REPORT......... 40 
`A.  Alphatec Had Acceptable Non-Infringing Alternatives ............................................. 41 
`1.  Acceptable Non-Infringing Alternatives To The Access Patents ......................... 42 
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`IX. 
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`2.  Acceptable Non-Infringing Alternatives To The Implant Patents ........................ 46 
`B.  Alphatec’s Sales Of The Battalion Lateral System Are Attributable To Factors
`Unrelated To The Patents-In-Suit ............................................................................... 51 
`1.  Safety And Reproducibility Are Not Unique To The Patented Technology ........ 52 
`2.  Experienced Sales Representatives And Strong Relationships With Surgeons
`Are Key Drivers Of Demand For Lateral Spine Surgery Products/Platforms ...... 54 
`3.  Non-Accused Lateral Spine Surgery Products Have Been Commercially
`Successful Without Using The Asserted Claims Of The Patents-in-Suit ............. 62 
`C.  Lack Of Evidence That NuVasive Would Have Made Alphatec’s At-Issue Sales
`Absent The Alleged Infringement .............................................................................. 67 
`1.  Mr. Inglish Inappropriately Assumes NuVasive Would Have Made All Of
`Alphatec’s Alleged “Diverted Sales” (In One Scenario) ...................................... 68 
`2.  NuVasive Does Not Identify Alphatec As A “Significant Competitor” ............... 71 
`3.  Alphatec’s At-Issue Battalion Lateral System Is Differentiated From
`NuVasive’s MAS Platform/XLIF Offerings ......................................................... 73 
`D.  Adjustments to NuVasive’s Claimed Lost Profits ...................................................... 75 
`1.  Adjustments To Mr. Inglish’s Claimed Lost Profits Associated With The Access
`Patents ................................................................................................................... 75 
`2.  Adjustments to Mr. Inglish’s Claimed Lost Profits Associated With The Implant
`Patents ................................................................................................................... 87 
`E.  Conclusion Relating To NuVasive’s Lost Profits Claim ............................................ 95 
`REASONABLE ROYALTY FOR A LICENSE TO THE PATENTS-IN-SUIT ...... 96 
`A.  Patent Infringement Royalty Damages ....................................................................... 98 
`1.  Hypothetical Negotiation Framework And The Georgia-Pacific Factors ............ 98 
`2.  Hypothetical Negotiation Date And Parties ........................................................ 100 
`3.  Hypothetical Negotiation Predicates ................................................................... 102 
`B.  NuVasive’s Negotiating Position .............................................................................. 103 
`1.  Claimed Benefits Of The Patents-In-Suit ........................................................... 104 
`2.  The Significant Investment To Develop The Patented Products And MAS
`Platform / XLIF Procedure ................................................................................. 107 
`3.  NuVasive Would Acknowledge That The Sales Of Its Embodying Products Is
`Attributable To Factors Unrelated To The Patents-In-Suit ................................. 108 
`4.  NuVasive Would Assert That Alphatec Would Be A Competitor With Respect
`To NuVasive’s MAS Platform/XLIF Offerings ................................................. 115 
`C.  Alphatec’s Negotiating Position ............................................................................... 116 
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`HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY
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`X. 
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`EXHIBIT 8, Page 128 of 134
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`1.  Alphatec Would Have Had Acceptable Non-Infringing Alternatives To The
`Patents-In-Suit..................................................................................................... 116 
`2.  Sales Of Alphatec’s At-Issue Battalion Lateral System Are Not Attributable To
`The Patents-In-Suit ............................................................................................. 117 
`3.  Alphatec Was Under Significant Financial Stress At The Time Of The
`Hypothetical Negotiation .................................................................................... 118 
`4.  Alphatec Would Stress That There Are Numerous Competitors In The Lateral
`Surgery Market ................................................................................................... 119 
`D.  Value Indicators For A License To The Patents-In-Suit .......................................... 120 
`1.  NuVasive’s License Agreements ........................................................................ 120 
`2.  Alphatec’s Agreements ....................................................................................... 123 
`E.  Outcome Of The Hypothetical Negotiation .............................................................. 131 
`1.  Running Royalty Payment Constrained By The Costs Of Implementing Non-
`Infringing Alternatives ........................................................................................ 133 
`2.  Running Royalty Payment Applied To All Sales ............................................... 135 
`3.  Conclusion As To The Outcome Of The Hypothetical Negotiation ................... 137 
`XI.  MONETARY DAMAGES ARE ADEQUATE TO COMPENSATE NUVASIVE
`FOR ALPHATEC’S ALLEGED INFRINGEMENT ................................................ 138 
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`EXHIBIT 8, Page 129 of 134
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`Supplemental Rebuttal Expert Report of Keith R. Ugone, Ph.D.
`December 18, 2020
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`related to the products identified in Mr. Inglish’s allegedly infringing combinations.307 In
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`addition, based upon a discussion with Alphatec’s personnel, I understand that the implants
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`and other components are sold together in Alphatec’s Battalion Lateral System out of
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`convenience for Alphatec’s customers and business strategy (and not because these
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`components are functionally related).308 Consequently, I understand the trier-of-fact may
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`determine NuVasive’s lost profits associated with the Access Patents cannot include profits
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`associated with implants in this matter.
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`111. For example, in a similarly-situated matter between Warsaw and NuVasive, it is my
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`understanding that the United States Court of Appeals found that Warsaw could not recover
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`lost profits attributable to unpatented components because there was not a functional
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`relationship between the unpatented components and the accused products.309 In the
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`Warsaw v. NuVasive matter, Warsaw accused NuVasive of infringing patent claims
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`relating to spinal implants, methods and devices for retracting tissue to create a corridor
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`for minimally invasive spinal surgery, and neuromonitoring.310 I understand that Warsaw
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`pointed to its marketing material touting a “comprehensive set” of implants, access tools,
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`307 Sachs Rebuttal Report (12/4/2019), ¶¶ 14 – 28. Also based upon a discussion with Dr. Barton Sachs. In addition,
`according to the declaration of Ms. Howell, lateral spine surgery products generally are interchangeable. Ms. Howell
`noted that “[f]rom a technological and clinical standpoint, one company’s retractor can be used to perform a surgery
`using another company’s implant.” Ms. Howell further noted that while manufacturers “do not favor this approach,”
`mixing products is “technologically feasible, clinically possible, and entirely within the discretion of the operating
`surgeon.” (Howell Declaration, p. 3.) I understand that Ms. Howell’s statements support Alphatec’s position that its
`implants and other components to the Battalion Lateral System are not functionally related.
`308 Based upon a discussion with Mr. Mike Aleali. In addition, I understand from Mr. Aleali that Alphatec has sold
`implants to surgeons without loaning or selling any other products, as well as lending and selling other disposables
`without selling implants. In fact, Alphatec’s sales data shows that orders have been made where only implants are
`sold to the surgeon. (See Alphatec Sales Data. (ATEC_LLIF000854525_Highly Confidential - Attorney's Eyes
`Only.xlsx, “By Case” tab.)) I understand that this further demonstrates the lack of a functional relationship between
`the implants and other components of Alphatec’s Battalion Lateral System.
`309 Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365 (2015).
`310 Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365 (2015), p. 5. Warsaw accused NuVasive of infringing
`certain claims of the following patents: U.S. Patent Nos. 5,860,973, 6,945,933, and 7,470,236.
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`Supplemental Rebuttal Expert Report of Keith R. Ugone, Ph.D.
`December 18, 2020
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`integrated neuromonitoring, and fixations as evidence that fixations should be recoverable
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`as lost profits. In response to Warsaw’s contentions, NuVasive argued that the sale of
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`fixations are not recoverable as “convoyed sales” because there is “no functional
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`relationship between the alleged convoyed sales and the patented products.”311 The United
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`States Court of Appeals agreed with NuVasive’s position, ordering that fixations were “not
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`convoyed sales recoverable as lost profits.”312 In particular, the United States Court of
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`Appeals noted that Warsaw’s use of marketing material touting a “comprehensive set” of
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`components “does not establish a functional relationship” and “is the precise sort of
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`convenience or business strategy excluded by American Seating.”313
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`112. Deposition testimony from spine surgeons that have utilized lateral techniques in surgery
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`and NuVasive and Alphatec personnel further demonstrate the lack of a functional
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`relationship between the products used in lateral spine surgery procedures.
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`a. Dr. Neville Alleyne. Dr. Alleyne testified to using (i) retractors from Biomet,
`Medtronic, and NuVasive and (ii) fixations from K2, Stryker, J&J, and Alphatec.314
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`b. Dr. Payam Moazzaz. Dr. Moazzaz testified to specifically using a Biomet retractor to
`place K2M implants when performing lateral spine surgery.315 Dr. Moazzaz also
`testified to having used lateral offerings from NuVasive, Medtronic, and Globus.316
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`c. Mr. Scott Robinson. Mr. Scott Robinson, an engineering manager at Alphatec involved
`in creating the Battalion platform, testified to having seen surgeons “use the Battalion
`platform to do transpsoas lateral lumbar interbody fusion” without using Alphatec’s
`shim and/or 4th blade.317 Mr. Scott Robinson also testified that it is possible to “mix
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`311 Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365 (2015), p. 10.
`312 Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365 (2015), p. 10.
`313 Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365 (2015), p. 10.
`314 Deposition transcript of Neville Alleyne, M.D. taken on November 4, 2019 (“Alleyne Deposition”), pp. 66 – 67
`and 151 – 153.
`315 Moazzaz Deposition, p. 18.
`316 Moazzaz Deposition, p. 17.
`317 Deposition Transcript of Scott Robinson taken on October 29, 2019 (“Robinson Deposition”), pp. 151 – 152.
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`Supplemental Rebuttal Expert Report of Keith R. Ugone, Ph.D.
`December 18, 2020
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`164. According to the Inglish Supplemental Damages Report, NuVasive contends that the
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`technologies included in these agreements are not technologically or clinically comparable
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`to the Patents-in-Suit.454 Mr. Inglish also concluded that the settlement and patent license
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`agreement between NuVasive and Warsaw “lacks economic comparability” to the
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`hypothetical license due to a number of reasons including the fact that it includes a cross
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`license with patents that do not appear related to the Patents-in-Suit (according to Mr.
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`Inglish). 455 Therefore, the agreements provided by NuVasive in this matter are not
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`probative as to the amount of a reasonable royalty for a license to the Patents-in-Suit at the
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`hypothetical negotiation between NuVasive and Alphatec.
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`165. While NuVasive’s agreements are not probative to the amount of a reasonable royalty
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`NuVasive and Alphatec would have agreed upon for the hypothetical license to the Patents-
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`in-Suit, these agreements would provide guidance as to NuVasive’s awareness of the
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`potential royalty stacking issue. Specifically, NuVasive’s license agreement with Theken
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`includes an anti-royalty stacking provision, under which the royalty due to NuVasive is to
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`be reduced in the event that Theken has to pay additional running royalties to third parties
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`such that the total running royalty exceeds 8% of the net sales of L-Pod devices. 456
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`Therefore, NuVasive’s agreements would indicate (at least evident by the NuVasive /
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`Theken agreement) (a) NuVasive’s understanding of the potential royalty stacking issue
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`454 Inglish Supplemental Damages Report, pp. 180 – 184.
`455 Inglish Supplemental Damages Report, p. 184.
`456 According to the agreement, the running royalty due to NuVasive would be reduced by 0.25% of the net sales of
`L-Pod devices for each 1.5% of total royalty due to NuVasive and the third parties that exceeds 8% (up to a maximum
`reduction of 1.25% where the total royalty due to NuVasive and the third parities is not less than 14%). (License
`Agreement between NuVasive, Inc. and Theken Spine, LLC dated October 1, 2007, p. 5. (NUVA_ATEC0236552 –
`563, at 556.))
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`Supplemental Rebuttal Expert Report of Keith R. Ugone, Ph.D.
`December 18, 2020
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`and (b) NuVasive’s willingness to make downward adjustments to the royalty payments to
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`address the royalty stacking concern.
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`2. Alphatec’s Agreements
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`166. Alphatec’s agreements and their relevance as indicators of value for the Patents-in-Suit are
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`discussed below.
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`i. Overview Of Alphatec’s Agreements
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`167. Alphatec has produced eight agreements in this matter: (a) three patent license agreements
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`(with one amendment); (b) four product development agreements; and (c) one purchase
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`and sale agreement.457 Summaries of these agreements are provided below.
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`a. Patent License Agreements.
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`i. JGMG Bengochea / Alphatec Agreement (September 2007). On September 11,
`2007, Alphatec entered an exclusive license agreement with JGMG Bengochea,
`LLC. (“JGMG Bengochea”) in which Alphatec received an exclusive royalty-
`bearing license (including the right to grant sublicenses) to the following Licensed
`Patent Rights and technology to develop, make, use, sell, import, and export the
`Licensed Products and to practice the licensed technology worldwide.458
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` Licensed Patent Rights. The Licensed Patents Rights include (i) U.S.
`Provisional Patent Application Serial No. 60/900,594, entitled “Guided Lumbar
`Interbody Fusion Method and System,” and U.S. Patent Application Serial No.
`11/706,895, entitled “Dynamic Inter-Spinous Device,” and related patents;459
`or (ii) any patent application arising from the licensed technology and related
`patents.460
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`457 In addition, Alphatec has produced consulting agreements that NuVasive contends “lack direct comparability to
`the hypothetical license for the patents-in-suit for a number of reasons, including, but not limited to: (1) they are with
`physicians, (2) they do not include patent rights, and/or (3) they do not appear to involve comparable technologies.”
`(Inglish Supplemental Damages Report, p. 180.)
`458 Exclusive License Agreement between JGMG Bengochea, LLC and Alphatec Spine, Inc. dated September 11,
`2007, p. 4. (ATEC_LLIF000854416 – 435, at 419.)
`459 According to Mr. Inglish, U.S. Provisional Patent Application Serial No. 60/900,594 “led to a nonprovisional
`application that issued as U.S. Patent No. 8,152,714 (“the ’714 Patent”) and that U.S. Patent No. 8,425,602 [] is a
`continuation-in-part of the ’714 Patent.” (Inglish Supplemental Damages Report, p. 196.)
`460 Exclusive License Agreement between JGMG Bengochea, LLC and Alphatec Spine, Inc. dated September 11,
`2007, p. 2 and Exhibit A. (ATEC_LLIF000854416 – 435, at 417 and 434.)
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`Supplemental Rebuttal Expert Report of Keith R. Ugone, Ph.D.
`December 18, 2020
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`reliably calculated through royalty payments based upon the data available from
`Alphatec.
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`* * * * * *
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`182. My analyses and opinions contained in this report are based upon information available to
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`date. I reserve the ability to review documents, deposition transcripts, or other information
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`still to be produced by the parties to this dispute and to supplement my opinions based upon
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`that review.
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`__________________
`Keith R. Ugone, Ph.D.
`December 18, 2020
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`EXHIBIT 8, Page 134 of 134
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