How can smaller medtech companies protect their IP?
The medical device industry is a haven for start-up companies looking to move from concept to creation. One way to achieve this is to partner with a larger, well-established company that has the financial and manufacturing capabilities to take a start-up to the next level. But with that step comes a new wave of intellectual property issues that smaller companies need to overcome. Chloe Kent takes a look at IP in medtech, and how it can impact smaller businesses.
n 2017, SensorRx released an app called MigrnX, which chronic migraine sufferers can use to track their symptoms. Patient estimates of how many headaches they had experienced in the past 90 days, a metric of questionable accuracy, were replaced by a day-by-day record of complaints.
Researchers found that MigrnX users were able to reduce their monthly headaches by 40%, as the more detailed register of symptoms allowed them to receive more appropriate treatment from their healthcare provider.
So far so good, that was until SensorRx entered into talks with healthcare giant Eli Lilly.
The company alleges that Eli Lilly ran with the MigrnX concept to launch its own migraine app, Vega Migraine.
The conglomerate stands accused of using the information it gleaned from SensorRx to develop its own competing product. Eli Lilly denies these accusations, maintaining that Vega Migraine was in development before its talks with SensorRx and that it did not use confidential information to develop its technology.
The ongoing legal battle highlights a key issue facing smaller medtech companies.
If a medtech start-up hasn’t made some sort of move to protect their intellectual property (IP) before entering into talks with a larger corporation, disclosing sensitive information about how their product works can and them in hot water later down the line.
So, when entering into discussions with larger companies, how can the small fries protect their intellectual property from the big fish?
IP law firm Reddie & Grose partner Robin Ellis says: “You have to make a call quite early on whether you want to actually file to protect your IP via patents, trademarks or design rights, or if you want to keep it as a trade secret.”
The problems with patents
Perhaps the most obvious method of IP protection is patenting an invention, but this is something that, at times, is easier said than done.
A patent registers an invention in a certain territory and allows the patent holder to take legal action against anyone who makes, uses, sells or imports the invention without their permission for a certain period of time – in the UK, it’s up to 20 years.
After the requisite time is up, product developers are often seen to artificially evergreen their patents by submitting a new application for an improved, updated version of the originally patented invention.
“It’s quite a convoluted process,” says IP firm Withers & Rogers head of medical technology James Gray. “You have to write a patent application, which has to fully describe how the innovation works and set out the monopoly which the applicant is seeking to acquire.”
Both the UK Patents Act and the European Patent Convention rule that a patent may only be granted for inventions that are new, inventive and can be used in industry. In some circumstances, the process can take years. It can also be far more difficult to get digital health products such as apps approved compared to physical medical devices.
It can be far more difficult to get digital health products approved compared to physical medical devices.
“One of the difficulties is the framework of the patent system and its roots back in the industrial revolution when things were physical, and the way we define inventions nowadays is still restrained by those requirements,” says Gray.
Both in the UK and EU, patenting software is far more complex than patenting a tangible object. In the UK, ‘software as such’ cannot be patented, which through case law has come to mean that software can be protected under patent law only if certain criteria are met. In Europe, software can only be patented if it achieves a technical contribution to the ‘prior art’ – all of the information that has been made publicly available before a given date that might be relevant to the patent’s claims of originality.
“Software as such is not patentable,” says Browne Jacobson LLP partner Giles Parsons. “But if you can show that it’s not just software as such, if you can show that it’s making the computer act as a better computer, if it’s doing something more efficiently, or quicker, or it’s saving energy, or if it’s helping you design a better drill bit or if it’s having an effect outside of the computer, then it’s patentable.”
Trademarks, design rights and trade secrets
Patenting isn’t always an option. Companies in the early stages of development often aren’t ready to go through with the process, even when they’re in discussions with bigger businesses about potential investments or acquisitions. But trademarks, design rights and trade secrets can provide some helpful alternatives.
Trademarks constitute a recognisable sign, design or expression which identify a product as coming from a particular source, whether that be a business, organisation or legal entity. For a medical app developer, protecting the brand name of their software is a relatively cheap way of protecting the company’s own goodwill on the market. Even if the product hasn’t been patented yet, a recognisable trademark can make it harder for the competition to catch up.
“The problem is a trademark only really makes sense if you’ve already generated value in that name because if you haven’t then a larger company can just come along, take your idea and change the name,” says Ellis. “They’re a good idea if you’ve already started marketing yourself, but if you’re still in development it’s less likely to be useful.”
Design rights, meanwhile, pertain less to applications and more to physical devices. They refer to protecting the visual appearance of a device so that another manufacturer cannot release a physically identical product. A company that manufactures wrist-borne wearables, for example, may register the rights for the design of the device – in an increasingly saturated market, it helps to make sure your invention has a unique, eye-catching appearance which no one else can copy.
If you are disclosing confidential information for the purpose of an acquisition or joint venture, keep track of it.
Ellis says: “A stent, a drill or even a scalpel if you have a certain way that it looks that it’s directly relevant to how it works, could also be a way of protecting your IP.”
Trade secrets are a less visible component of IP, which differ in definition between territories, but essentially boil down to information that is economically valuable due to not being widely known, and which the owner takes reasonable precautions to keep confidential. A smaller medtech may choose to protect its product as a trade secret by asking representatives of a larger company it is in talks with to sign a non-disclosure agreement (NDA).
Parsons says: “If you are disclosing confidential information for the purpose of an acquisition or joint venture, keep track of it and make sure you have a way of retrieving this and getting it deleted from the other party’s systems if the process doesn’t work out. Most NDAs include terms that say this will happen.”
It almost goes without saying, but trade secrets can be much murkier legally than other IP protection options.
Ellis says: “You have to have a very strong agreement in place but, much like how a patent can be infringed, an agreement can be broken. As soon as infringement of a patent, intellectual property right or confidentiality agreement is broken, the only option is to sue.”
Who owns the IP anyway?
One other key issue to be aware of when it comes to medtech patent law is who exactly can be credited as the inventor of a medical device.
The general rule is that if an invention is created by an employee as part of their employment, then their employer owns the rights for it. The individual who developed the device or software doesn’t personally own the IP. But medtech companies often utilise outside consultants or contract workers, which is where things can get complicated.
“If you develop the invention with outside health consultants or contract workers you need to make sure 100% of your innovation is owned by the company,” says Gray. “I’ve seen things fall down there because businesses use consultants on a handshake agreement, and then it turns out people named on the patent application as inventors weren’t employees.”
The same thing can apply to universities – if their departmental resources are utilised by a medtech company when developing a new product, they may have a right to a slice of the IP pie.
You need to make sure 100% of your innovation is owned by the company.
Factoring outside help into IP rights is hardly ruinous, especially given the huge benefit that utilising external resources can be to start-ups, but it’s vital that which parties have the rights to what is ironed out well in advance of any discussions with bigger businesses.
Ellis says: “If you’re going to try and protect yourself, at least try and get an IP application on file. It makes it more difficult for a larger company to just take your idea and makes you more attractive as a company because if they do buy you, they’ve then got those rights that they can then enforce against other people.
“It also makes it easier to have open conversations with a larger company – as long as you stay within the boundaries of what you’ve put in your patent.”