All companies begin with an idea. The details of protecting intellectual property, however, can be daunting, especially if your idea is in the field of medical technology.
N. Scott Pierce and Alexander Adam, Hamilton, Brook, Smith & Reynolds PCStarting a medical device company requires a vast array of knowledge, including knowledge about almost every type of technology, an immense amount of regulatory requirements and intellectual property protection strategies.
So how can you establish a legal framework that fulfills the promise of an advance in medical technology while rewarding you for your contribution to society?
Medical devices and methods of treatment that employ them are protectable as intellectual property. The most advantageous type of intellectual property will depend on the exact nature of the technology, such as whether it is reverse-engineerable by competitors, as in some compositions or methods of manufacture. Perhaps protection of the medical technology is needed only for the form of expression of the idea, as in a medical instruction manual or kit. In any case, it is imperative before any action is taken by the individual or a group that at least initial steps are taken to protect their work.
Types of intellectual property
The types of intellectual property available include trademarks and service marks, copyrights, trade secrets, and patents. Each form of protection has its own advantages and limitations.
1. Trademarks and service marks
For example, trademarks are intended to be indicative of the source of a product or service, and generally take the form of brands or logos. Trademarks and service marks can be registered with the United States Patent and Trademark Office (Patent Office) and are usually indicated by the symbol “TM” or “SM” in superscript, or, if the mark is registered, “®”. A service mark is a trademark used in the United States to identify a service rather than a product.
Copyright is protection for works of authorship and visual arts, and can be protected with the United States Copyright Office. Generally, copyright protects an expression of an idea in a tangible form, rather than the idea itself. As employed in most medical technology-based startups, copyright protection will apply to publications and other written materials, such as internal manuals, product literature, and company announcements. It is important to note, however, that computer software, such as the programming of robotic components, is also subject to copyright protection, and such protection is often used as an alternative or in addition to patent protection.
3. Trade secrets
Trade secrets can include almost any type of information that is generated within a company that is not generally known to, and not readily ascertainable through proper means, by the public. Trade secrets can include technology that is generated by the company, employee know-how and customer lists, and can be maintained indefinitely, usually through the use of employment agreements and confidentiality agreements with third parties. Technology that is kept confidential, but can be reverse-engineered if disclosed, should be protected by patents before any public disclosure, such as during fundraising efforts or by the commercial launch of a product.
Patents are by far the most common means for protecting innovative medical technology. Most relevant to medical technology are “utility patents,” which protect the way an article is used; less relevant are patents for a design or a plant.
Generally limited to a statutory term of 20 years from the filing date at the Patent Office, issued patents provide a right to exclude competitors from making, using, selling, offering to sell or importation of any invention that is a process, machine, manufacture, composition of matter or improvement thereof.
6 things you need to know about patents
1. Provisional patents
A common form of initiating patent protection by medical startups is to file a “provisional” patent application. Filing a provisional patent application is a convenient option for startup companies that may have limited funds because the cost of filing can be very low, typically only a few hundred dollars.
A provisional application is often less expensive because the content of the patent application is less formal. Provisional patent applications are not examined by the Patent Office and automatically expire on the one-year anniversary of their filing. They also never mature into enforceable patents, and are maintained in secrecy by the Patent Office, unless they are relied upon by a subsequently-published “non-provisional application.” If at the end of the one-year anniversary the startup is serious about protecting their invention, then the startup would file a non-provisional patent application. Given the fact that the technology supporting many medical technology startups is in a very early stage, filing a provisional application first is a very low-risk option to secure a filing date that is available at minimal cost.
2. Filing early is important
Filing dates for provisional and non-provisional patent applications are important because, pursuant to the America Invents Act of 2011 (AIA), the United States transitioned from a system giving prior right to the first person to invent to a system prioritizing the first inventor to file a patent application. In other words, a person who independently arrives at the same invention as an earlier inventor will take precedence over that earlier inventor if the person is the first to file a patent application. Therefore, it is critical, upon conception of an invention by an individual or group contemplating forming a medical technology-based startup, to file a patent application, even as a provisional application, as soon as possible. Although a confidentiality agreement can protect the right to file a patent application, it is best to file any such application before speaking to a potential investor. Despite the often self-evident value of an invention, many “seed” or “angel” investors require that a patent application be filed as a prerequisite to discussing a new venture based on any emerging medical technology.
3. Wording of claims
Intellectual property of any nonprovisional patent application or patent is defined by the claims, which appear at the end of any published patent application or issued patent. Each of the claims includes a “preamble” and a “body,” wherein a combination of so-called “elements” of the body of the claim outline the exclusionary rights of the patentee. Any process, machine, manufacture or composition of matter that includes all of the elements of the claim is said to “infringe” the claim, and the patent owner has the right to exclude the public for the limited period of enforceability of the patent from making, using, selling, offering to sell, or importing the infringing subject matter. For example, a medical technology patent application may include a claim that reads as follows:
A physiological fluid sample holder, comprising:
a) a flexible component; and
b) a rigid exoskeleton that supports the flexible component.
The phrase “a physiological fluid sample holder” is in the preamble to the claimed invention, and the “flexible component” and the “rigid exoskeleton” are the elements of the body of the claim that, in combination, define the exclusionary right of the inventor. The wording of claims, therefore, is extremely important and it is strongly advised that medical technology start-ups seek the counsel of a patent agent or attorney who is registered to practice before the United States Patent and Trademark Office.
Inventorship is determined by the claims of a patent application, so that any individual who has contributed to the complete mental conception of the subject matter of any claim needs to be named as an inventor. Using the example above, if Thomas, an inventor, conceives of the combination of a flexible component and a rigid exoskeleton that supports the flexible component, he would be the sole inventor. If, however, Alva, another inventor, contributed some narrowing feature to the claim, such as a height-to-volume ratio of the flexible support that was added to that claim, Thomas and Alva would be co-inventors. Therefore, each claim of a patent or patent application can have one or more inventors. An assessment of inventorship should be completed before any patent application is filed to mitigate issues over patent rights. In addition, if, during the course of developing a product for commercial release, there is an improvement that is not described in a previously-filed patent application or patent, a new patent application can be filed on the improvement. Very often this is critical because it may be the improvement that is the most important or only intellectual property that ultimately can be protected.
Startup companies should be sure to have any employees assign their rights to the company when they become employees. If the patent issues, and Alva, the inventor, was not required to assign his rights to the company, that individual can independently license or assign his or her rights and collect proceeds from that license or assignment without accounting to the company or other inventors named on the patent. Even if the inventor had agreed to assign the rights under an employment agreement with the company, failure to actually assign those rights and have the assignment recorded in the Assignment Division of the Patent Office may enable the inventor to assign the rights to a third party. This may result in a breach of the employment contract, but leave intact an inventor’s actual assignment of rights to a third party. Preferably, the language of an employment agreement will specify that the employee “hereby assigns his or her rights” in any invention conceived while employed. Although an assignment to the company in any subsequent invention by that inventor should still be executed, such language in the employment agreement may avoid complications if the employee subsequently conceives of an invention and then assigns rights in that later invention to a third-party.
5. Multiple parties
Medical technology is often multidisciplinary, and startups based on medical technology frequently collaborate with outside parties, such as universities or other companies. It is for this reason that patent applications and patents may be jointly owned among multiple parties. Assignments of rights by inventors having obligations to assign their rights to different companies will cause the resulting patent application or patent to be jointly owned by both companies. A single inventor, such as a professor at a university, for example, may file a patent application on a device for diagnostic testing, and then use that filed patent application to attract interest in a project with an outside party, such as a corporation, to jointly develop a diagnostic test for a specific disease.
6. Associated agreements
Several different types of agreements are often associated with intellectual property of medical technology startup companies. Nondisclosure agreements can be important tools in protecting confidential information before inventions have been filed as patent applications. It is strongly recommended that, regardless of any confidentiality agreement, a patent application be filed before disclosing the invention to a third party; it is not uncommon to hear of medical device vendors filing patent applications following a meeting with inventors who discuss new technology with them. Another common type of agreement is a material transfer agreement, which often is associated with samples of proprietary subject matter sent to prospective customers to determine suitability. An experimental blood substitute would be one example, wherein a material transfer agreement should include a clause that requires assignment of rights in any improvement in the transferred material or use of material, such as a newly-developed treatment employing the blood substitute, to the supplying company.
Patents and patent applications can be licensed. Licenses can be exclusive or nonexclusive. An “exclusive” license generally means that there is only a single licensee. A “nonexclusive” license implies multiple, or an open-ended number of, possible licensees. Both types of licenses are very useful for medical technology startups, and further explanation of licenses would require a separate article. However, it should be noted that in any enforcement action against a potential infringer, all of the parties, including all licensees, must be part of the enforcement action. Otherwise, the infringer would be able to avoid infringement simply by taking a license from the non-joining party.
As takeaways from this brief overview for anyone contemplating establishing a medical technology startup company, the following should be kept foremost in mind:
- Consult legal counsel before you disclose your invention;
- Determine inventorship;
- Determine ownership;
- File a patent application before you disclose your invention publicly (or even confidentially);
- File new patent applications on any improvements.
Intellectual property protection is vital in any medical technology-based startup and it is relatively easy and inexpensive to establish a filing date in the Patent Office for an invention. Obtaining an early filing date is often critical in enabling an organization to attract the capital necessary to become established and proceed with its vision.
N. Scott Pierce is a principal and Alexander Adam is an associate at Hamilton, Brook, Smith & Reynolds PC (Boston). Pierce practices in the areas of biotechnology, chemistry, chemical engineering, electronics, medical devices and pharmaceuticals. Adam is devoted to helping startups advance their innovations, practicing in the fields of medical device, computer systems, electronics, imaging software, control systems, mechanical devices, telecommunications and clean energy.