Report on the historical Intuitive Surgical vs. Computer Motion case

Back in 2002, competition between Intuitive Surgical Inc. and Computer Motion Inc. () began to mount fiercely, as the market become ready to embrace surgical robotic technology. Those days, the sales numbers were still very low. (Zeus: 30 units sold in the USA, 15 in Europe, 5 in Asia; da Vinci: 50, 34, 5, respectively.) First, Computer Motion sued Intuitive Surgical for infringement of nine patents. Then, Intuitive and IBM filed the patent infringement suit against Computer Motion in reference to the voice-controlled technology. In 2002, the District Court for the Central District of California has ruled that the da Vinci Surgical System literally infringed Computer Motion's 6,244,809 patent. Then, a federal jury in 2003 issued a ruling requiring Computer Motion to pay Intuitive and IBM $4.4 million for infringing a patent covering aspects of Intuitive's system. After further complications, on March 7. 2003 the two company announced that "they are merging into one company that combines their strengths in operative surgical robotics, telesurgery, and operating room integration, to better serve hospitals, doctors and patients." This meant a goodbye to Computer Motion. "The reason that Intuitive paid a premium price for CMI is that they believed that they would lose one of the patent infringement cases that CMI was pursuing. The reason that CMI agreed to the acquisition, is that (while they believed they would ultimately prevail in the patent infringement case) they simply didn't have the financial resources to sustain them over the period that IBM's deep pockets would allow Intuitive to keep the litigation going."

"Under the terms of the definitive merger agreement, Computer Motion's equity holders would receive 32 percent of the combined company on a fully diluted basis (including out-of-the-money options and warrants), and Intuitive's equity holders would receive 68 percent. The merger agreement exchange ratio formula anticipates that each outstanding share of Computer Motion common stock would be converted into approximately 0.52 shares of Intuitive common stock. In the event that Computer Motion's common stock trades at an average of less than $1.86 per share before the merger, the exchange ratio will be reduced, but shall in no event be less than approximately 0.48. Under the merger agreement, it is anticipated that Intuitive will issue an aggregate of approximately 15.39 million shares, on a net fully diluted basis, in exchange for all of Computer Motion's outstanding common stock, preferred stock, options and warrants. The merger is subject to the approval of a majority of the shareholders of each company and is intended to be a tax-free reorganization. In addition, Intuitive may provide a bridge loan to Computer Motion to provide working capital for its operations through the closure period if necessary." (You can read further promises about the post-merger world here.)
After the merger, the Zeus was discontinued, the support for the product decreased and many of the engineers fired, as they did not want to leave Santa Barbara for Mountain View. CMI CEO (at time of acquisition), Bob Duggan is now the largest individual shareholder in Intuitive. Yulun Wang, founder of Computer Motion become the CEO of inTouch Health, and developed the RP-7 robot.