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Sasso v. Warsaw Orthopedic, Inc.

Court of Appeals of Indiana

November 6, 2015

Rick C. Sasso, M.D., and SEE LLC, Appellants-Plaintiffs,
Warsaw Orthopedic, Inc., Medtronic Sofamor Danek, Inc., and Medtronic, Inc., Appellees-Defendants

          Appeal from the Kosciusko Circuit Court. The Honorable Curtis D. Palmer, Special Judge. Trial Court Cause No. 43C01-1308-PL-94.

         ATTORNEYS FOR APPELLANTS: Frederick D. Emhardt, Brett E. Nelson, Ryan T. Leagre, Plews Shadley Racher & Braun LLP, Indianapolis, Indiana.

         ATTORNEYS FOR APPELLEES: Michael T. Nilan, Teresa J. Kimker, Nilan Johnson Lewis PA, Minneapolis, Minnesota; L. Alan Whaley, Adam Arceneaux, Mark Alson, Ice Miller LLP, Indianapolis, Indiana.


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          Baker, Judge.

         [¶1] SEE LLC appeals the trial court's order denying its motion for summary judgment and granting the defendants' cross-motion for summary judgment. It argues that it is entitled to unpaid royalties stemming from a 1998 contract. Finding this contract unenforceable as a matter of law, we affirm the judgment of the trial court.


         [¶2] Dr. Rick Sasso is a spinal surgeon and inventor. The president of Indiana

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Spine Group in Carmel, Indiana, he is the named inventor on several United States patents related to rehabilitation of the spine.

         [¶3] In 1994, Sasso filed his first patent application, with co-inventor Dan Justin, for a spine implant device. Justin later assigned his entire interest to Sasso, making Sasso the sole owner. This device involves screws and rods that provide stability in the upper neck area. Sasso formed a company, SEE LLC (SEE), with his brother and father-in-law to manage his intellectual property. In July 1997, Patent 5,643,259 (" the Patent" ) issued.

         Background to This Suit

         [¶4] In 1998, Sasso began negotiating a potential business venture with Sofamor Danek Group (SDG), the predecessor to the defendants,[2] in which he would transfer the Patent and provide expertise in exchange for monetary compensation. SDG's first draft of a contract was written as an agreement between SDG and Sasso, but Sasso edited the contract to replace his name with SEE's. Appellants' App. 569-79. The parties signed this 1998 contract (" the Agreement" ) after these edits had been made. Id. at 251-58.

         [¶5] After the edits, one of the representations reads, " See further warrants and represents that it owns solely, as evidenced by a copy of an assignment attached hereto in Schedule A, all right, title, and interest in the Patent and the Intellectual Property Rights . . . ." Id. at 571. There is no such document attached to the contract.[3] Indeed, there is no formal assignment document establishing SEE's rights to the Patent anywhere in the record. The right to the Patent was the heart of the deal, as SEE purported in the Agreement to " irrevocably transfer[], assign[], and convey[] to SDG all its entire right, title, and interest in and to" the Patent. Id. at 254.

         [¶6] SDG agreed to pay three types of consideration in exchange for the rights to the Patent. First, it agreed to pay, and did in fact pay, $100,000 to SEE. Second, it agreed to grant, and did in fact grant, 1,500 shares of SDG stock to SEE.

         [¶7] The third form of payment (" 4(B)(iii) payment" ) constitutes the subject of this lawsuit:

A contingency payment in the amount of five percent (5%) of the worldwide Net Sales of the Medical Device, if covered by the Intellectual Property Rights, and two and one-half percent (21/2%) if the Medical Device is not covered by the Intellectual Property Rights.

Id. at 254. " Medical Device" is defined as " any device, article, system, apparatus or product including the Invention." Id. at 252. " The Invention" is defined as " any product, method or system relating to spinal or cranial surgery. . . ." Id. " Intellectual Property Rights" is defined as the Patent and associated know-how. Id.

         [¶8] Also in the definition of " Medical Device," however, is the following statement: " Such Medical Devices shall be listed in accordance with SDG catalog numbers and descriptions in an addendum to be attached to this Agreement as agreed upon in writing between the parties." Id. Just as there was no " Schedule A" attached

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to the contract to show assignment of the Patent, no such addendum listing the products covered by the agreement was ever negotiated, agreed upon, written down, or attached to the Agreement. The defendants have never made a single 4(B)(iii) payment. Until the commencement of this lawsuit, SEE never made a demand for 4(B)(iii) payments, nor did ...

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