What is going on with the now famous David and Goliath Synthes vs. Globus legal battle? Is it a nuisance suit designed by Synthes to distract Globus management or does it have merit? Over the last three years the docket has been building and, on Wednesday, a civil jury began hearing testimony in the U.S. District Court of Eastern Pennsylvania. The coutroom arguments help shed some light on this ongoing saga.
Tens, if not hundreds of millions of dollars is at stake here. Since its inception in 2003, Globus has achieved a gravity-defying rise posting over $80 million in revenues last year. In the annals of venture capital and business formation, such a feat is considered a miracle. In fact, $0 to $80 million in three years with minimal outside funding is such an aberration it is bound to attract attention, jealousy and, in this case, a lawsuit. In this case the plaintiff is the prior employer of the Globus founders - the almighty Synthes.
Our own historic view is that this was a nuisance suit by Synthes to squash a competitor started by former employees. A mosquito at the Globus picnic. One example is that the suit has been about trademark infringement and non-competes which is often small beer compared to the sometimes earth shattering intellectual property claims seen in orthopedics. Furthermore, the suit hasn't been a dealbreaker for Globus' recent efforts to privately raise $100 million from Bank of America. But if we reflect a little further, Synthes hasn't exactly taken great lengths to sue other independent competitors such as Blackstone, Seaspine, Pioneer or the like.
Why Globus? Some of the stuff coming out of the courtroom, while the subject of industry rumors for years, is telling. On Wednesday, some very expensive attorneys started lobbing grenades at each other with the Synthes camp accusing Globus of downloading and stealing product blueprints, blatantly stealing customers and the Globus camp thumbing their noses at Synthes saying "you rejected our good ideas so we left".
So it's clear that the axe Synthes has to grind isn't about new competitors generally, but this one new competitor who jettisoned out of the mother company and turned against her with apparent malice. Nor is this a mere nuisance lawsuit. If the Synthes allegations are true, there was some hitting below the belt here. If the Globus arguments are fair, Synthes is a slow lumbering giant unable to get good products to the market and - sorry guys - but business is a contact sport. Like so many others, this case will resolve in ways to be determined. The only thing we can be sure of is that it will take years.
