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`DECLARATION OF TRENT D. TANNER
`IN SUPPORT OF
`NUVASIVE'S OPPOSITION TO
`DEFENDANTS' MOTIONS IN LIMINE NOS. 1-10
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF CALIFORNIA
`SAN DIEGO DIVISION
`
`Case No. 18-cv-0347-CAB-MDD
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`NuVasive, Inc.,
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`Plaintiff,
`
`v.
`
`Alphatec Holdings, Inc. and Alphatec
`Spine, Inc.,
`
`Defendants.
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`SUPPLEMENTAL EXPERT REPORT OF BLAKE INGLISH
`CONFIDENTIAL
`SUBJECT TO PROTECTIVE ORDER
`
`November 20, 2020
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`INTRODUCTION .............................................................................................................. 1
`I
`I.A Experience / Qualifications .................................................................................................................. 1
`I.B
`Compensation ...................................................................................................................................... 2
`I.C Assignment / Scope of Work ............................................................................................................... 2
`I.D
`Basis for Opinions ............................................................................................................................ 3
`I.E
`Incomplete / Conflicting Information Provided by Alphatec ............................................................... 4
`
`II
`II.A
`II.B
`
`SUMMARY OF CONCLUSIONS, ......................................................................................... 9
`Lost Profits ....................................................................................................................................... 9
`Reasonable Royalty ....................................................................................................................... 10
`
`BACKGROUND AND ANALYSIS ....................................................................................... 11
`III
`Dispute .......................................................................................................................................... 11
`III.A
`Asserted Patents ........................................................................................................................... 12
`III.B
`III.B.1
`Access Patents ...................................................................................................................... 12
`III.B.1.a
`The ‘801 Patent .............................................................................................................................. 12
`III.B.1.b
`The ‘780 Patent .............................................................................................................................. 15
`III.B.1.c
`The ‘832 Patent .............................................................................................................................. 17
`III.B.1.d
`The ‘227 Patent .............................................................................................................................. 21
`III.B.1.e
`The ‘270 Patent .............................................................................................................................. 23
`III.B.1.f
`The ‘859 Patent .............................................................................................................................. 25
`III.B.1.g
`The ‘531 Patent .............................................................................................................................. 31
`III.B.2
`Implant Patents .................................................................................................................... 36
`III.B.2.a
`The ‘156 Patent .............................................................................................................................. 36
`III.B.2.b
`The ‘334 Patent .............................................................................................................................. 37
`Parties ............................................................................................................................................ 39
`III.C
`III.C.1
`NuVasive Overview ............................................................................................................... 39
`III.C.1.a
`XLIF Procedure ................................................................................................................................ 44
`III.C.1.b Modulus Technology ...................................................................................................................... 48
`III.C.2
`Alphatec Overview ................................................................................................................ 49
`III.C.2.a
`SafeOp Neuromonitoring ............................................................................................................... 53
`III.C.2.b
`Transcend and IdentiTi implants .................................................................................................... 55
`III.C.2.c
`Accused Products ........................................................................................................................... 57
`The Minimally Invasive Spinal Implant Market ............................................................................. 58
`III.D
`III.D.1
`Procedures / Platforms and Procedure-Based Revenue Generation ................................... 61
`III.D.1.a
`Procedures / Platforms ................................................................................................................... 61
`III.D.1.b
`Adoption of Procedures / Platforms ............................................................................................... 69
`III.D.1.c
`Procedure-Based Revenue Generation (“Razor / Razor blade”) .................................................... 91
`III.D.2
`Drivers of Demand ................................................................................................................ 95
`III.D.3
`Longevity of Customer Relationships ................................................................................. 120
`
`IV LOST PROFITS .............................................................................................................. 124
`IV.A
`Panduit Factor #1: Demand for Patented Product ...................................................................... 124
`IV.B
`Panduit Factor #2: Absence of Acceptable Non-Infringing Substitutes ....................................... 126
`IV.C
`Panduit Factor #3: Manufacturing and Marketing Capacity ....................................................... 135
`IV.D
`Panduit Factor #4: Quantification of Profits ................................................................................ 137
`
`V
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`REASONABLE ROYALTY ................................................................................................ 143
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`Factual Support for NuVasive’s Reasonable Royalty Damages ................................................... 145
`V.A
`BENEFITS OF THE PATENTS-IN-SUIT ........................................................................................ 145
`V.A.1
`Benefits to Alphatec ........................................................................................................................................ 152
`V.A.1.a
`Benefits to Surgeon-Customers and Patients ............................................................................... 160
`V.A.1.b
`Conclusion .................................................................................................................................... 179
`V.A.2
`LICENSING ............................................................................................................................... 179
`V.A.2.a
`No Basis for an Established Royalty .............................................................................................. 180
`Rates Paid by Alphatec for Use of Comparable Patents, .............................................................. 184
`V.A.2.b
`V.A.2.c
`NuVasive Seeks to Exclude Others From Using Its Patent Rights ................................................. 215
`V.A.2.d
`Structure of the Hypothetical License .......................................................................................... 215
`V.A.2.e
`Conclusion .................................................................................................................................... 215
`V.A.3
`PROFIT CONTRIBUTION ........................................................................................................... 216
`V.A.3.a
`Products Made Under the Patents-in-Suit Are Profitable ............................................................ 216
`V.A.3.b
`Products Made Under the Patents-in-Suit Are Commercially Successful and Popular ................ 217
`V.A.3.c
`Alphatec’s Contributions Related to Non-Patented Elements, the Manufacturing Process,
`Business Risks and Features / Improvements ................................................................................................. 218
`V.A.3.d
`Conclusion .................................................................................................................................... 219
`V.A.4
`RELATIVE BARGAINING POSITION / HYPOTHETICAL NEGOTIATION ....................................... 219
`V.A.4.a
`NuVasive and Alphatec Considered Each Other Competitors ...................................................... 220
`V.A.4.b
`Conclusion .................................................................................................................................... 234
`V.A.4.c
`Alphatec and NuVasive Recognized the Importance of Convoyed Sales, Also Known as Pull-
`through Revenue, on the Accused Products ................................................................................................... 235
`V.A.4.d
`Conclusion .................................................................................................................................... 250
`Conclusion Regarding Reasonable Royalty .................................................................................. 251
`
`V.B
`
`VI
`VI.A
`VI.B
`
`INADEQUACY OF MONETARY DAMAGES ...................................................................... 259
`Economic Considerations ............................................................................................................ 259
`Conclusion ................................................................................................................................... 263
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`I
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`INTRODUCTION
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`I.A
`
`Experience / Qualifications
`
`1.
`
`I am a founder and Senior Managing Director of InFact Experts LLC (“InFact”) and a
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`related entity1 which provides intellectual property, financial, forensic, data analytics, and
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`dispute advisory services to clients across the nation, as well as in other countries. I have
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`approximately two decades of experience in providing litigation related and non-litigation
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`related intellectual property services in areas such as economic damages, IP portfolio
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`assessment management, licensing / settlement negotiations, licensing enforcement /
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`compliance, strategy and commercialization, and valuation. I have analyzed and/or quantified
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`the economic value of hundreds of intellectual property rights and/or assets, including patents,
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`trademarks, copyrights, and trade secrets. I have assisted clients in efforts to monetize
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`intellectual property outside of litigation through licensing, commercialization, and sales /
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`acquisitions / mergers.
`
`2.
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`I have testified at trial and been qualified as an expert in intellectual property damages
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`in multiple district courts, including the Southern District of California, Central District of
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`California, Northern District of California, District of Delaware, District of Nevada, and the
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`Eastern District of Texas. I have authored multiple publications focused on intellectual property
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`issues. I have been a featured speaker, lecturer, and instructor in a wide array of settings,
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`including state and national conferences, business schools, law schools and engineering schools
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`in major universities, global consulting firms, AM Law 100 firms, and corporations.
`
`1 My work in this matter is on behalf of Fact Synthesis LLC.
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`properly consider this information, the opinions contained in this report should be considered
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`preliminary in nature.2
`
`I.E
`
`Incomplete / Conflicting Information Provided by Alphatec
`
`Comments Subsequent to Mr. Judd’s November 5, 2019 Deposition Testimony
`
`7. Due to incomplete / conflicting data and information provided by Alphatec, I am now
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`required to make a number of assumptions in this report that I plan to revisit should more
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`reliable or complete information become available. Examples of areas of Alphatec’s data and
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`information that are incomplete or inconsistent include, but are not limited: (1) sales/usage
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`data for the accused products; and (2) cost and profit information related to the accused
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`products.
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`8. First, I understand from counsel for NuVasive, that Alphatec has failed to provide
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`information sufficient to show the sales and/or usage of all accused products in a procedure,
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`along with any other products sold or used in conjunction with the accused products in a
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`procedure. I understand that Alphatec has produced spreadsheets created by filtering data
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`stored in Alphatec’s “sales cube” system. I understand that Alphatec designated Robert Judd
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`on NuVasive’s 30(b)(6) topics related to damages, including products sold with the accused
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`products. Mr. Judd confirmed that the data in the sales cube had been filtered by “product
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`code” to create the spreadsheets.3 Mr. Judd testified that the list of “product codes” used to
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`filter were not included in the spreadsheet and there would be no way to tell from the
`
`2 I understand that on November 18, 2020, Alphatec produced new financial information: ATEC_LLIF000971397,
`ATEC_LLIF000971398, and ATEC_LLIF000971399. As of the date of this report, I have not had the opportunity to
`properly analyze the impact that this new information has on my damages opinions. Accordingly, my opinions
`remain preliminary until I can perform this analysis, and supplement or revise my opinions, to the extent
`appropriate and allowed.
`3 11/5/19 Deposition Transcript of Robert Judd, 150:5-151:11.
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`Zimmer Biomet
`In 2018, Zimmer Biomet held a 5% share of the total MIS interbody device
`market. Zimmer Biomet’s total share was contributed by its notable shares of
`the MIPLIF/MITLIF, LLIF and OLIF markets…In 2011, Zimmer introduced the
`PathFinder NXT, an improved version of the original PathFinder system
`developed by Abbott. The system facilitates both mini-open and percutaneous
`approaches. The PathFinder NXT provides surgeons with a MIS option in
`performing multi-level constructs.
`
`RTI Surgical
`RTI Surgical was the seventh-leading competitor in the MIS interbody device
`market, with a share of 1.1%. The company gained its share in this market
`through its 2013 acquisition of Pioneer Surgical. RTI Surgical had a modest share
`of the LLIF market, while the majority of its share in the total market was in the
`MIPLIF/MITLIF segment.
`
`Other
`[As noted in the Figure 6-8, other competitors in the MIS interbody device
`market include Alphatec Spine, Aurora Spine, Centinel Spine, Clariance, CoreLink
`Surgical, CTL Amedica, Life Spine, Medacta International, Orthofix, Osteomed,
`Pinnacle Spine Group, Spineart, Titan Spine, etc.]
`
`III.D.1.b Adoption of Procedures / Platforms
`
`49. It is my understanding, based on the expert opinions of Dr. Youssef, discussions with
`
`NuVasive representatives including Matt Link and Kyle Malone, and other information available,
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`that the basis for the adoption and usage of lateral platforms/procedures, such as NuVasive’s
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`MAS Platform/XLIF procedure and Alphatec’s LIF Platform, is at the procedure level and that
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`each of these platforms includes integrated components that have been specifically designed
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`to operate collectively as a functional unit in order to achieve a safe and reproducible, minimally
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`invasive, and successful spinal fusion. Dr. Youssef has provided the following opinions related
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`to this issue:
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`Expert Report of Dr. Jim Youssef129
`Based on my experience, surgeons base their usage/adoption decisions for
`lateral procedures at the platform-level versus the component-level. This is
`primarily based on the fact that lateral platforms such as NuVasive’s MAS
`platform include integrated components such as a neuromonitoring system,
`access system (including MaXcess retractor), neuromonitoring disposables,
`MaXcess disposables, and implants, each of which have been specifically
`designed to operate collectively as a functional unit in order to achieve a safe
`and reproducible, minimally invasive, and successful lateral spinal fusion. The
`three main components necessary for performance of an XLIF procedure – (1)
`access tools; (2) implants; and (3) neuromonitoring – collectively function in such
`a way that allows surgeons to achieve safe and reproducible, minimally invasive,
`and clinically successful interbody fusions. Additionally, because the absence of
`any one of these components would dramatically impair surgeons’ ability to
`achieve these objectives, it is my opinion that each of these components
`contributes equally but in different ways to the adoption and continued use of
`the XLIF procedure and platform. For example, the implant, by itself, is of little
`value without neuromonitoring and access systems as the surgeon would have
`no safe and reproducible way to place the implant in the targeted disc space.
`Similarly, the retractor and/or neuromonitoring components would provide
`significantly reduced value without an implant, which are required for fusion,
`restoring the disc height, and providing stability to the spine. Therefore, it is my
`opinion that no one of these three key components of XLIF has more clinical
`value to a surgeon than any other.
`
`Moreover, it is my opinion that a surgeon who has chosen to perform spinal
`fusion surgery via a non-lateral approach (e.g., ALIF, PLIF, or TLIF) would not
`choose any of the components of XLIF for such a surgery because they are
`specifically designed for a lateral procedure, and as such do not work as well or
`provide the same level of utility of platforms specifically designed for these other
`approaches. The retractor, implants and neuromonitoring are specifically
`designed for lateral interbody fusion surgery or some variation of lateral surgery
`(i.e. corpectomy, lateral disc herniations, etc.). None of the implants for a lateral
`approach are designed for use in a method using a different approach (i.e. ALIF,
`TLIF, PLIF), and the retractor is not designed to provide visualization for different
`approaches. Additionally, the type of neuromonitoring used in XLIF is designed
`to navigate the lumbar plexus and not used in procedures using a different
`approach as it would be less relevant or clinically beneficial in those procedures.
`Furthermore, NuVasive’s MaXcess disposables and neuromonitoring disposals
`are designed specifically for use with the MaXcess retractor in an XLIF procedure.
`
`129 Expert Report of Jim Youssef Re Damages, dated 11/8/19, para. 26, 29. Based on discussions with Dr. Youssef.
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`Supplemental Expert Report of Dr. Jim Youssef 130
`In Section 4 of my November 8, 2019 Damages Report, I provided opinions
`regarding surgeons’ usage/adoption decisions and how they are based at the
`platform level versus the component level. I was asked to consider those
`opinions in relation to additional implants that have become relevant to this
`phase of the case. In particular, I was asked to consider Alphatec’s Transcend LIF
`and IdentiTi LIF implants. As detailed in my Analysis above in Section XV,
`Alphatec’s Transcend LIF Implants are interchangeable with NuVasive’s CoRoent
`XL and XLW implants while Alphatec’s IdentiTi LIF implants are interchangeable
`with NuVasive’s Modulus XL, XLW, and XLXW Ti implants. Thus, my opinions in
`Section 4 of my November 8, 2019 Damages Report apply to NuVasive’s MAS
`platform, including the CoRoent XL and Modulus implants. In particular, CoRoent
`XL and Modulus implants are one of the integrated components that have been
`specifically designed to operate collectively with the other integrated
`components of NuVasive’s MAS platform as a functional unit in order to achieve
`a safe and safe and reproducible, minimally invasive, and successful lateral spinal
`fusion. Based on my analysis of NuVasive’s Modulus implants and Alphatec’s
`Transcend and IdentiTi implants, nothing about them changes any of the
`opinions in Section 4 of my November 8, 2019 Damages report and I incorporate
`by reference the opinions in that section. Additionally, Alphatec’s press release
`for the Transcend and IdentiTi implants indicate that both are designed to
`function with the same instrumentation. This further supports my opinions that
`the (1) access tools; (2) implants; and (3) neuromonitoring components of
`NuVasive’s MAS Platform and Alphatec LIF platform are specifically designed to
`operate collectively as a functional unit in order to achieve a safe and
`reproducible, minimally invasive, and successful lateral spinal fusion.
`
`50. The following testimony from Pat Miles has helped inform my understanding of
`
`NuVasive’s procedure-driven strategy:
`
`Testimony of Pat Miles (Alphatec’s Executive Chairman & CEO; Former
`NuVasive COO)
`In little more than a decade, NuVasive has grown from a small medical device
`startup to the company it is today, helping thousands of patients. At the center
`of NuVasive’s success has been its XLIF procedure and associated equipment.
`(‘The majority of NuVasive’s revenue is directly related to XLIF procedures and its
`related devices. The XLIF procedure is the most rapidly growing MIS interbody
`fusion procedure, and comprises the vast majority of NuVasive’s market share in
`the LLIF segment.’) Without the invention of our method to safely and
`reproducible traverse the psoas muscle along the lateral trans-psoas path using
`nerve monitoring-enabled distraction and retraction assemblies (that are also
`
`130 Opening Expert Report of Jim Youssef, dated 11/20/20, para. 446. Based on discussions with Dr. Youssef.
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`optionally nerve monitoring enabled) with a nerve monitoring system, none of
`this would have been possible.131
`
`Importantly, NuVasive’s success has been driven by our XLIF procedure and
`instruments, namely the nerve monitoring enabled distractor and a retractor
`(which is also optionally nerve monitoring enabled) that integrate NuVasive’s
`nerve monitoring system.132
`
`Q. Okay. Can you turn to paragraph 27 of your declaration. I think it's around page 27.
`Starts on 26. The first sentence of paragraph 26 -- excuse me, paragraph 27 on page 26,
`states (reading):
`NuVasive's success has been driven by our XLIF procedure and instruments, namely, the
`nerve monitoring enabled distractor and a retractor. How did the retractor derive
`success?
`…Q. Did the retractor derive success?
`A. I think whenever you're trying to fulfill the obligations of a surgery, and -- and you
`provide the necessary tools to predictably fulfill the obligation of surgery, those tools,
`in essence, enable success. And that was the -- that was a connotation of that
`description.
`Q. Which features of the retractor were important to the success?
`….THE WITNESS: Yeah. The -- the intended communication was that multiple items have
`been core to the fulfillment of a reproducible surgery, and those included nerve
`monitoring and a retractor. And so if you'd like to read into it more, you're welcome to.
`That was the intent of this.
`BY MR. OLIVER: Q. Was there anything special about the retractor that helped with the
`success?
`…THE WITNESS: In certain applications there -- there are certain benefits associated
`with the retractor that we have hopefully designed in for predictability sake.
`BY MR. OLIVER: Q. And what are those?
`A. A fixed posterior blade.
`Q. Okay. MR. MILLER: You can give more --
`THE WITNESS: Yeah. There's a multitude of them that he's not interested in. But the –
`BY MR. OLIVER: Q. That's fine.133
`
`Q. Was the design of the CoRoent XL implant important to the success of the XLIF
`procedure?
`…A. Which CoRoent implant?
`Q. Any of the XLs.
`…A. The assembly of the technology was core to the success of the XLIF procedure.
`Q. What do you mean by "assembly of the technology"?
`
`131 Exhibit-1069 – 7/8/14 Declaration of Patrick Miles, p. 20 [emphasis added].
`132 Exhibit-1069 – 7/8/14 Declaration of Patrick Miles, p. 24 [emphasis added].
`133 9/4/14 Deposition Transcript of Pat Miles, pp. 90-92 [emphasis added].
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`A. The assembly of a retractor. The assembly of automated neurophysiology. The
`assembly of an implant. The fulfillment of the requirements associated with a specific
`need a patient has creates the likelihood for success of a procedure.
`Q. You said "assembly of the implant." Do you mean the design of the implant?
`A. I didn't say that. I said the assembly of the -- of the goods.
`Q. You said assembly of an implant. Could you -- are you talking about the design of the
`implant?
`A. No. My -- my intended communication was that it is not in any one component. It is
`in the assembly of all of those goods that creates an environment for safety and
`reproducibility that ultimately reflects commercial success.
`Q. And what are all of those goods?
`A. The foundation goods for XLIF is a -- is a retractor called MaXcess, an automated
`neurophysiology system referred to as M5 and an interbody implant.
`Q. And what's the interbody implant referred to as?
`A. We refer to it as CoRoent XL. And it comes in a variety of sizes, shapes, forms, for all
`kinds of different things. 134
`
`As I have stated repeatedly, XLIF’s success is directly related to the innovative
`procedure and systems that combine nerve monitoring enabled distraction and
`retraction (also optionally nerve monitoring enabled) with NuVasive’s nerve
`monitoring system to safely and reproducibly navigate the psoas muscle,
`avoiding the nerve roots, to reach the target disc space to perform a fusion or
`other procedure. If the XLIF system and method could not safely traverse the
`nerve-rich psoas muscle, surgeons would never have adopted XLIF and there
`would have been no commercial success.
`
`The success of the XLIF procedure is not due to brand name recognition or being
`a market leader. When the XLIF procedure hit the market, NuVasive was a small
`start-up company and it had no brand name recognition. Nor was XLIF’s success
`due to being part of an already growing market. There was no lateral fusion
`market at the time of the XLIF procedure. It is a testament to the procedure
`(and the instruments which enabled it, especially nerve monitoring) that
`NuVasive was able to essentially create a new market. Finally, XLIF’s success
`was not just a product of great marketing. Although marketing was and is
`important for XLIF, it did not create the demand for the XLIF procedure. XLIF was
`and continues to be such a success because of the efficacy and safety the
`procedure offers.”135
`
`Deposition Testimony of Matt Link (NuVasive’s former President)
`Q. But as far as the way in which NuVasive markets its products or tries to sell its
`products to surgeons and hospitals, NuVasive tries to sell those products as part
`
`134 9/4/14 Deposition Transcript of Pat Miles, pp. 145-146 [emphasis added].
`135 Exhibit-1069 – 7/8/14 Declaration of Patrick Miles, pp. 27-28 [emphasis added].
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`of a platform, they want to sell them together to provide the hospital with
`implant, access tool, and neuromonitoring systems, correct?
`A. So broadly across NuVasive's portfolio, we have focused our technology
`development efforts and commercial promotion on the ability to provide
`comprehensive solutions to surgeons based on specific patient anatomic and
`pathologic needs.
`And so the intent is to market and promote a solution for any spine pathology,
`for any approach that provides a comprehensive and complete procedural
`solution.
`Q. And part of the reason why NuVasive has focused on that particular strategy
`is because it makes it easier and more convenient for the surgeon to deliver that,
`correct?
`…A. The reason why NuVasive -- in my experience and my opinion based on the
`14 and a half years and years prior at another spine company, the reason why
`NuVasive focuses on that is because it supports safe and reproducible outcomes
`and the best likelihood of positive -- you know, clinical results for patients.
`Q. Right, which I understand. But it also allows for an element of convenience for
`surgeons, correct?
`A. I don't know that I'd characterize convenience as accurate.
`Q. Why not?
`A. Because I believe ultimately it is about providing the best and most safe and
`reproducible clinical intervention for a patient that supports the best outcome to
`the extent that clinical intervention and solution is different than what a surgeon
`is normally accustomed to. It may not be particularly convenient, but they may
`make that decision because it is in the best interest of their patient.136
`
`Q. NuVasive provides all the materials the user needed to complete an XLIF as
`part of its business strategy to provide surgeons with a comprehensive set of
`tools needed to achieve a certain clinical outcome. Is that a fair characterization?
`…A. In my experience, the business strategy was predicated on a clinical strategy
`which was providing the best tools and technology assembled in a manner to
`create a more predictable and reproducible and safe intervention. Our mantra at
`the time was good medicine is good business, not convenience is good business.
`And so, you know, with that in mind, good medicine is good business, the intent
`was to assemble the best tools and technology integrated in a manner to drive
`and support the safest and most producible clinical outcomes.
`Q. Is that still NuVasive's motto?
`A. I believe that our overarching goal and mission is to provide tools and
`technologies that support the safest most reproducible and predictable
`outcomes for patients, yes.137
`
`136 10/29/20 Deposition Transcript of Matt Link, pp. 75-76.
`137 10/29/20 Deposition Transcript of Matt Link, pp. 78-79.
`Page 74 of 264
`
`EXHIBIT 5
`Page 49
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`

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`Case 3:18-cv-00347-CAB-MDD Document 350-5 Filed 11/06/21 PageID.32080 Page 13 of
`106
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`HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY
`
`Q. In your experience, in the way that the product is -- in the sort of marketing
`and commercialization of the CoRoent XL implant, have you ever received any
`feedback from surgeons commenting on how it's nice to be able to get
`everything that's needed from one provider, as opposed to having to do it
`piecemeal from various other providers?
`A. On occasion, surgeons h