Source: Instrument Family

Recently, the Supreme Court of Delaware ruled to partially overturn the lower court's decision, which required Johnson & Johnson (JNJ) to pay $1 billion (approximately RMB 7 billion) in compensation to former shareholders of Auris Health. The court found that Johnson & Johnson's internal bidding process violated the merger and acquisition agreement but dismissed part of the accountability related to the FDA approval pathway. The case has been sent back to the Court of Chancery of Delaware for recalculation of the compensation amount.

Public information shows that in February 2019, Johnson & Johnson completed the acquisition of Auris Health, a surgical robotics company, for $3.4 billion. At the time, the acquisition agreement explicitly stipulated that Johnson & Johnson must fully promote the regulatory milestones of the iPlatform. However, immediately after the acquisition, Johnson & Johnson shifted the resources of the Auris team to Verb Surgical, causing the technology to be reduced to nearly a "parts workshop" for Verb.

Eventually, the two parties ended up in court. In September 2024, the Delaware Court of Chancery ruled that Johnson & Johnson should pay $1 billion in compensation. Johnson & Johnson subsequently appealed, leading to this reversal. The case has also sparked widespread discussion and attention within the industry.

On January 12, the latest ruling by the Delaware Supreme Court set key boundaries for this years-long dispute.

The court upheld the lower court's core ruling that Johnson & Johnson breached its contract: After acquiring Auris Health for $3.4 billion in 2019, Johnson & Johnson failed to fulfill its contractual obligation to advance the iPlatform surgical robot to achieve regulatory milestones and is responsible for breaching the $2.35 billion milestone payment.

Among the disputes, the focal point, the "Manhattan Plan," became the key to the verdict. The court explicitly pointed out that Johnson & Johnson's forced inclusion of Auris in an internal technology bidding process—pitting its iPlatform soft tissue surgical system against the technology from Verb Surgical (a joint venture between Johnson & Johnson and Verily, a Google-affiliated company)—directly violated the contractual commitment of "commercially reasonable efforts," causing delays in the regulatory approval of iPlatform. "This is the critical juncture where Johnson & Johnson’s actions deviated from their contractual commitments for the first time after the acquisition," the ruling stated, hitting at the core pain point of mergers and acquisitions in medical technology: acquirers often dilute the resources of target companies under the guise of 'internal integration.'

However, the court also overturned part of the accountability: as the FDA later changed the iPlatform approval pathway from 510(k) to De Novo (the innovative medical device channel), which was an unforeseeable regulatory change at the time of the agreement signing, Johnson & Johnson is not responsible for the failure of the first milestone. However, the court emphasized that the De Novo approval can serve as the basis for subsequent 510(k) submissions, and Johnson & Johnson is still responsible for future milestones.

Currently, the case has been sent back to the Chancery Court for recalculation of damages, with the industry expecting the final amount to potentially be reduced to $500-800 million.

This dispute stems from a blockbuster deal in the medical device industry in 2019. At that time, Johnson & Johnson acquired Auris Health for $3.4 billion in cash plus $2.35 billion in milestone payments, setting a record for mergers and acquisitions in the surgical robotics field that year. Johnson & Johnson's rationale for the bid was to secure the technological achievements of Dr. Frederic Moll, known as the "father of surgical robotics," and to break the market dominance of Intuitive Surgical's da Vinci system.

Obviously, Dr. Moll's industry status is the core attraction of the deal. This serial entrepreneur has founded three industry benchmark companies, including Intuitive Surgical (the parent company of the da Vinci system) and Hansen Medical. Auris Health is his fourth startup and is considered his magnum opus.

Johnson & Johnson particularly values two key assets of Auris: one is the Monarch robotic platform for lung diagnosis and treatment, which has received FDA approval. Its flexible endoscopic technology enables precise diagnosis of small nodules in the periphery of the lungs and is hailed by the industry as the "next-generation da Vinci system"; the other is the iPlatform soft tissue surgical robot, currently under development, which covers multiple fields such as general surgery and thoracic surgery, and is highly anticipated to break the monopoly held by the da Vinci system.

Therefore, in the acquisition agreement, Johnson & Johnson explicitly committed to “fully promoting iPlatform to achieve regulatory milestones,” which became the core safeguard for Auris' former shareholders. However, according to the allegations by Auris' former shareholders, after the acquisition, Johnson & Johnson favored Verb Surgical technologically: transferring Auris’ core R&D team and patent resources to Verb Surgical, draining iPlatform’s R&D efforts through an internal bidding process known as the “Manhattan Project,” and ultimately reducing the platform to a “component supplier” for Verb Surgical technology.

In September 2024, the Court of Chancery ruled that Johnson & Johnson should pay $10 billion in damages. Johnson & Johnson immediately appealed, leading to this reversal.

A Review of Auris Health's Ten-Year Journey: A Typical Sample of the Rise and Fall of Industry Innovators. When Dr. Moll founded the company in San Carlos, California, in 2007, it operated in "stealth mode," only revealing its technical direction through patent applications. Patents such as the three-dimensional coordination system and controllable surgical tools early on revealed ambitions to rival the da Vinci system.

2016 was a turning point for Auris, as its first product, the ARES endoscopic robot, received FDA approval. It is capable of performing surgeries such as gastric repair and tumor treatment in a non-invasive manner and is predicted to serve millions of obese and reflux disease patients in the U.S. This product demonstrated the breakthrough potential of "flexible robotics" and paved the way for subsequent financing. In 2017, Auris completed a $280 million Series D financing round, with its valuation jumping to billions of dollars, competing on the same stage as the internet unicorns of the time.

In 2018, the approval of the Monarch platform brought Auris to its peak. This robotic system, designed for lung cancer diagnosis, addressed the challenge of traditional bronchoscopes struggling to reach peripheral lung nodules through 3D navigation and game controller-like operation. At that time, with over 155,000 annual lung cancer deaths in the U.S., Monarch’s commercial prospects were widely anticipated, directly prompting Johnson & Johnson's acquisition.

After the acquisition, Auris' technological fate took a sharp downturn. According to former employees, Johnson & Johnson integrated Monarch's sales channels into its own respiratory business line but suspended core R&D for the iPlatform, opting instead to use its sensor technology for Verb’s product development. This "robbing Peter to pay Paul" approach to integration turned Auris from a hidden unicorn into a technological sacrifice, ultimately triggering shareholder lawsuits.

In fact, Johnson & Johnson's layout for surgical robots has always revolved around "breaking the da Vinci monopoly." As a global medical device giant, Johnson & Johnson holds advantages in fields such as orthopedics and cardiovascular, but lags behind Intuitive Surgical in the surgical robot market, where the latter's da Vinci system occupies over 80% of the global laparoscopic surgical robot market share.

To break this deadlock, Johnson & Johnson has on one hand been deeply engaged in self-developed innovation through Verb Surgical, having invested a hefty $1 billion in a joint venture with Verily back in 2015, aiming at the next-generation endoscopic system; on the other hand, it has quickly filled gaps through acquisitions, with the acquisition of Auris Health being a prime example of this strategy.

In October 2025, Tim Schmid, Global Executive Vice President and Chairman of Johnson & Johnson Medical Technologies, stated that Johnson & Johnson is entering a new growth cycle centered on surgical robotics, cardiovascular technology, and portfolio transformation. Surgical robotics has become one of Johnson & Johnson's key investment areas for the future. Currently, Johnson & Johnson is building a complementary landscape in the fields of laparoscopy and endoscopy with a dual-core technology approach that integrates hardware and data-driven solutions.

It is reported that the laparoscopic robot Ottava integrates four robotic arms into an electric operating table, which can be stored when not in use, optimizing space utilization and operational smoothness. It has completed FDA Investigational Device Exemption and the first clinical surgery, with registration submission expected to start in 2026.

In addition, the respiratory endoscopy robot Monarch, based on Auris Health's technical expertise, focuses on the precise diagnosis of early-stage lung cancer. The upgraded AI navigation "Quest" module received FDA approval in 2025 and is planned to expand into multiple fields such as neurosurgery and urology in the future, maximizing the platform's value.

Notably, Johnson & Johnson has also broken away from its self-developed framework in emerging markets, with localized cooperation as the key to breaking the deadlock. In September 2025, Johnson & Johnson Ventures led the investment in China's Rui Long Surgical and reached a strategic cooperation, incorporating the latter’s detachable laparoscopic surgical robot into its global layout. It is reported that this product of Rui Long Surgical adopts a four independent cart structure, with each cart corresponding to one robotic arm, allowing flexible configuration and distributed operation in narrow spaces, which fits the layout and surgical needs of operating rooms in Chinese hospitals.

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From an industry perspective, this game is actually a conflict between platform integration and technological independence. Johnson & Johnson attempted to quickly fill the gap in surgical robots through acquisitions but neglected the need for innovative technologies to have an independent R&D environment, eventually leading to a breach of contract dispute.

Currently, the surgical robot market is entering a golden growth period, with technological routes extending from endoscopy to multiple specialties, and competition shifting from hardware to data empowerment, making the industry increasingly competitive. Johnson & Johnson's dual-mainline and localized strategy not only corrects past lessons but also provides new directions for the industry to explore.

So, after experiencing the dispute, how will Johnson & Johnson and Auris resolve the related issues in the future? And how will Johnson & Johnson break through in its strategic layout for surgical robots? We will continue to follow these developments.