I’m sure you’ve heard that patents are important for medical device startups but have you ever wondered which patents are the most important, and how should you prioritize your patent filings? What parts of your medical device technology value chain should you protect? When should you protect first? How should you prioritize your patent filings?
Many articles will tell you why patents are valuable for your medical device company but fail to communicate what you can get out of them that can translate into value for your business.
If you want a broad framework of the patent strategy and some explanation of how it can tangibly add value to your company, you’ve come to the right place.
Is it important to develop a strategic patent portfolio?
Patent protection is important for medical device companies at all stages of development. For early-stage companies, patents allow investors to place value in the company's technology because sales are usually down the line after FDA or EMA approval. Before sales, patents become a currency for securing venture capital investment. For Later-stage medical device companies, patents generate revenue through licensing. Patent protection also allows a company to adopt a defensive or offensive competitive stance in the market by eliminating infringing competitors or defending its own intellectual property from competitors that seek to join the market.
We can all agree that patents are important, but a strategic patent portfolio can do a whole lot more. According to the Harvard Business Review, medical device companies with strategic patent portfolios generally have higher valuations and revenues. Choosing not to pursue a good patent strategy leaves money on the table. A good IP strategy involves maximizing patent protection with respect to the company’s revenue model.
Let’s look at some examples. IBM is a shining example of how strategic patent portfolios add value to companies. While initially selling computer hardware components in the early 80s and 90s, IBM switched its revenue model to focus on using its strategic patent portfolio of fundamental computer components. Rather than aggressively market its products against the likes of Dell, IBM focused on utilizing its patents and licensing opportunities as its main source of revenue. In doing so, IBM turned Dell, once a competitor, into a customer. Now, IBM has cultivated this customer relationship with some of the biggest technology companies in the world and has reached a total revenue of roughly $1 billion per year in patent licensing alone.
Another strategic patent portfolio success story is with Guidant, a manufacturer of cardiovascular medical products, and its multi-link stent. Until 1997, three companies manufactured stents: Johnson & Johnson, Boston Scientific, and Arterial Vascular Engineering. This all changed when Guidant’s multi-link stent was approved by the FDA which threatened these three big stent companies. Johnson & Johnson proceeded to file suit against Guidant. Guidant responded by buying EndoVascular Technologies, a company that held onto a fundamental stent patent that was issued two years before Johnson & Johnson’s. Not only did Guidant get out of the patent infringement suit but it also made $350 million in the first six months of owning the patent because of this bold move.
Now you can see why using patents as a tool for cornering markets and staying competitive with other companies can be very lucrative. Let’s talk about how to set up your company with a patent strategy framework
Patent Strategy Framework for Medical Device Startups
We think you can develop a strategic patent portfolio by making sure you protect the right things, and by undertaking certain IP activities at the right time.
What should you protect?
Some medical device businesses fall short with patent protection by only protecting their device and not the entire revenue model. A device could be vulnerable to competitors because while the device itself is patented, the means of manufacturing, distribution, and treatment could not be.
Claiming other elements of the revenue models other than the product itself allows the patent owner to gain sole proprietorship over the product, method of use, and assembly. This allows robust coverage over all parts of the device from manufacturing to the end-user. Here are some examples of what to protect.
Core Technology and/or Innovations
Technology Around Revenue Model Implementation
Product itself (distinguish function vs implementation)
Key Components
Disposables
Methods of Manufacturing (assembly)
Method of Treatment
Product Distribution
Surgical use/procedure
Combination Therapies and Therapeutic Uses
Ancillary products & services
When should you protect your medical device innovations?
Startup medical device technology companies should file patent applications as early as their budget permits. Often, a strategic patent portfolio is the most valuable part of an early-stage medical device startup. However, the need to develop a strategic patent portfolio must be balanced against the legal costs associated with doing so. The timing strategies articulated below will vary based on your startup's specific needs and go-to-market strategies, but here is a general timeline recommendation:
Step 1: Perform a freedom-to-operate analysis
A freedom-to-operate analysis is conducted by searching existing patent literature for issued or pending patents that your device might infringe upon if filed or sold. This analysis also includes examining the scope of existing patents because some aspects of the existing patented devices might not be covered by the scope of the patents. Figuring out how your device treads this line is important for ensuring that you don’t run into any litigation down the line.
Step 2: Perform a validity analysis
A validity analysis is a determination of your device’s patentability. This analysis includes determining whether your device falls under the USPTO criteria that is patentable. This is also when you evaluate the strength and value of your device which can give you an idea of whether patenting it is worthwhile.
Step 3: File patents on core technologies.
Sometimes core technologies that underlie the device you are patenting are patentable. Patenting the technologies that are at the foundation of your device can be an added element of protection. Here is a timeline of filing that you should follow:
US Provisional
PCT Applications (12 months after US Provisional)
National Phase Entry (18 months after PCT)
It is prudent (and considered best practice) to file patent applications prior to public disclosures, publication, or offer for sale.
Note, the US legal standards permit applicants to file up to one year after public disclosure (in other words, you have 1 year from your first public disclosure date to file your patent application). But, in most foreign jurisdictions, the patent application must be filed before the first public disclosure. Failure to file a patent application prior to public disclosure will result in the loss of potential international patent rights. To ensure both U.S. and international patent coverage, a patent application should be filed before any public disclosure.
Step 4: Perform a patent landscape analysis.
A patent landscape analysis is a broad search of all the related patenting activity within a section of market innovation. This paints a picture of the particular industry you are entering. Performing a patent landscape analysis can identify the competitive impact, competitors, and strength of your device’s patent in relation to the broader market.
Step 5: File patents on a go-to-market strategy or revenue implementation innovations.
This is an often overlooked aspect of developing a robust patent portfolio for early-stage companies are innovations in the go-to-market strategies or revenue model innovations. Most startup founders are rightly often focused on technology innovations as a core driver of patent development. However, suppose you are innovating on your go-to-market strategy, for example. In that case, it may be valuable to prevent larger incumbents or other new entrants from copying your go-to-market strategy.
How should you implement your patent strategy?
Patent Claims
In a patent application, the claims (usually at the end of the document) are the most important from a legal perspective. US patent law gives the patent owner the right to prevent others from making, using, selling, offering for sale, or importing to the US, anything that is in the claims. If any other party infringes on this right, the patent owner is entitled to monetary damages and injunctive relief against what is in the claims. The former compensates the patent owner monetarily and the latter stop the other party from selling the infringing product.
When you work with a patent attorney, pay special attention to the claims, and make sure that the claims support your enforcement theories.
Focus on Function Rather Than Implementation
Suppose you are a physician that has created a unique shoe insert to treat plantar fasciitis, which is pain at the heel of the foot. You consult with a patent attorney to create a patent that addresses the description of this device and that it is an orthotic insert meant for shoes. Let’s say that another company creates an identical orthotic insert for shoes and patents the device, specifically noting that it eliminates plantar fasciitis foot pain. While you have patented the device’s implementation as an orthotic insert for shoes, you have not patented the solution that your device is made to solve. Therefore, this other company that has blatantly stolen your design is left scot-free from any patent infringement litigation because they’ve patented this design more broadly in solving a particular problem.
Focusing your patent strategy on the underlying functional benefit of the device rather than the implementation enables more wide-ranging and effective patent protection. Narrowing the patent protection to just implementation allows for a more succinct patent yes, but leaves room for competitors to create an identical product that mirrors the functionality of your product without infringing on the patent. Focusing on function casts a wider net of protection.
Following these steps can make sure that have a defined space in the market and can save significant effort and money down the line. A robust IP strategy can make sure there are no weak points in the entire medical device value chain. This attracts capital, strengthens relationships with vendors, and assures investors that the revenue model and supply chain has security. All of these aspects pay dividends over time.