Medical Device Link.

Originally Published MX May/June 2003

BUSINESS NEWS

In what many industry analysts see as a surprise, 'Why now?' move, perennial market rivals Intuitive Surgical (Sunnyvale, CA) and Computer Motion (Goleta, CA) have not only agreed to set aside their long-standing legal challenges—but also to merge into a single company.

The early March announcement came less than four weeks after the District Court for the Central District of California ruled that Intuitive Surgical had infringed on a patent held by Computer Motion. In another patent infringement case between the two companies, a Delaware court had several months earlier ruled in favor of Intuitive Surgical. Since the beginning of 2000, the two companies have filed literally dozens of patent lawsuits against one another, creating a legal dispute that BusinessWeek once termed the "battle of the robosurgeons."

Computer Motion president and COO Joe DeVivo.

Prior to the merger announcement, both companies competed in the market for computer-assisted robotics for minimally invasive surgical procedures—Computer Motion with its Zeus platform, and Intuitive Surgical with its daVinci System.

Explaining their decision to merge, both companies cited the sapping of financial resources by their legal actions. Noting that neither company is currently profitable, Computer Motion president and COO Joe DeVivo explained that such a state could be attributed in large measure to "the persistent and protracted patent infringement action" of the two rivals. "Now, with the merger, rather than using capital to fight lawsuits, we can put our financial resources toward advancing product development."

Under the terms of the merger, Intuitive Surgical will acquire Computer Motion for an estimated $64.5 million in stock. Computer Motion shareholders will own 32% of the company, while Intuitive Surgical shareholders will own 68%. The new company will be traded on the NASDAQ exchange under a symbol yet to be determined.

TTC's medtech intellectual property attorney Mark D. Barrish.

According to Mark D. Barrish, an intellectual property (IP) attorney and leader of the medical device practice group for Townsend and Townsend and Crew LLP (San Francisco), the merger decision by two companies that have previously contested one another's patent claims is not all that surprising. "As companies embark on long, drawn-out legal IP challenges with multiple suits in different jurisdictions, they often gain access and insight into not only their competitor's patent portfolio, but the breadth and depth of their talent pool as well.

"At the end of the day, rational businesspeople may end up thinking, 'Hey, instead of giving all this money to the lawyers, maybe we should resolve this for the mutual benefit of our employees, our customers, and our shareholders'."

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