Medical device partnership surge exacerbates patent negotia…


The convergence of technologies in smart medical devices has
led to inflated negotiation and freedom-to-operate (FTO)
challenges in the medical device industry, according to
in-house counsel.


Sources explain that they are increasingly looking to create
smart devices by partnering with technology developers and
incorporating artificial intelligence, cloud or
telecommunications solutions into their products.







Maaike van Velzen










“Getting to that end result is not so difficult
so long as all the partners agree on that. That
means developing a level of trust in exchange
of know-how and making inventions
together”


Maaike van Velzen, Philips



But the growing number of partnerships means medical devices
firms are faced with negotiating IP ownership, use and
protection provisions on an enlarged scale.


“We have always done these sorts of contracts but never
before at this volume,” says the senior IP counsel for a global
medical device company. “It used to be a matter of negotiating
one alliance per quarter and now it is more like one per
week.”


The surge of new players into the sector and the use of
unfamiliar technologies in medical devices is also expanding
the prior art landscape and making infringement more difficult
to detect for companies that do not necessarily have the right
technological expertise in house.


The medical device tech-partnership trend began around five
years ago, with notable collaborations such as
the one between Philips and Amazon
, who worked together to
unite medical device, application and electronic medical record
data in the cloud.


“Partnerships in the health continuum bring together an
ecosystem of players who can contribute to a final healthcare
solution for customers,” says Maaike van Velzen, head of IP
portfolio management at Philips. “We innovate and co-create
solutions with partners to improve health outcomes, patient
experience and workflow.”


One source adds that his company is looking to develop a
line of smart orthopaedic implants with various partners that
will communicate data around how the implant is coping, whether
it is experiencing unforeseen stresses and how a person is
responding to it from inside a patient.


Ownership diagnosis


According to the senior IP counsel at the global device
firm, IP ownership is a main cause of tension between medical
device companies and third-party tech companies in smart device
partnerships.


“Every negotiation is so fact specific,” he explains.
“Broadly, the goal is to negotiate the best terms and work out
some compromises.”











“We have always done these sorts of contracts but never
before at this volume. It used to be a matter of
negotiating one alliance per quarter and now it is more
like one per week”



He points out that some negotiations are just a matter of
setting out that each party in the partnership owns what it
creates and puts into a new invention, which is often the case
when the other business does something very different to
medical devices.


The trouble, he adds, is when the companies working together
have fairly similar business models and inventions are
developed jointly.


“In those cases both parties have to ask, who will own the
invention? Will it be jointly owned?” he says. “Does each party
have the right to commercially exploit the invention without
paying money to the other side?”


He adds that there is also the matter of whether one party
should pay royalties if it licenses the invention to a third
party or if its exploitation of the invention requires use of
third-party IP or builds on it.


The patent counsel for the medical devices branch of a life
sciences firm adds that, despite the increased number of
partnerships, the negotiations themselves are not any more
difficult than past ownership discussions. He says the key is
to ensure that IP ownership matters are worked out before both
companies spend thousands or millions on a project so that both
parties can get a good deal out of it.


“Other parties come into the mix with certain ideas and it
is important to have a meeting of the minds before proceeding
on a mutually beneficial project,” he says.


Van Velzen at Philips says that the best strategy for these
negotiations is to keep the end needs of the customer in mind
and use that as a starting point.


“Getting to that end result is not so difficult so long as
all the partners agree on that,” she says. “That means
developing a level of trust in exchange of know-how and making
inventions together. It is the corner stone of a good strategy
in patent portfolio management for healthcare businesses.”


Franz Wittwer, senior innovation manager at medical device
firm Biotronik, adds that successful negotiations are also
about teaming up with the right partner – one that has
a similar culture and shares a desire to innovate and improve
the end-user experience.


Protection analysis


Another challenge for medical device companies is working
with third parties to determine the best protection strategy
for the jointly-made new inventions on an increased scale.


The patent counsel for the medical devices branch of a life
sciences firm points out that some entities like to protect
inventions with trade secrets, other with patents and others
yet with a combination of the two. He adds that like IP
ownership, working out protection preferences should be done
ahead of time.







Franz Wittmer










“It is a question of time until the med-tech
industry has a major infringement challenge
because certain tech companies that are not the
industry’s usual competitors are
getting into the space”


Franz Wittwer, Biotronik



The senior IP counsel for a global medical device company
adds that protection analysis with partners should be a matter
of practicality as much as preference. His company, he says,
has not traditionally relied on trade secrets, but has started
using them more and more as it works with more software
developers.


Software, of course, is notoriously difficult to patent and
perhaps more difficult to enforce.


Companies must also work together to determine if an
invention is likely to be seen as obvious by a patent office.
The patent counsel at the medical devices branch points out
that a lot of tech going into medical devices now, such as
sensors, are already used in consumables and wearables.


“Many of the implants we’re creating are brand
new, but have been out for years and the combination of the
implant and these technologies could be seen by patent offices
as fairly obvious,” he says.


“Perhaps it is not obvious and the tech is more difficult to
create than meets the eye. But we should consider that some of
the tech may be better protected by trade secrets,
nonetheless.”


Pumping up FTO


The introduction of new tech players into the medical device
market also means medical device firms have to expand their
prior art searches to ensure that they have freedom to operate
for their smart innovations.


“It is a question of time until the med-tech industry has a
major infringement challenge because certain tech companies
that are not the industry’s usual competitors are
getting into the space,” says Wittwer at Biotronik. “The Apples
and Googles of this world are moving into the industry and it
may get crowded in regards to patents being filed.”


The senior IP counsel for a global medical device company
argues that these entrants should only affect companies that
operate more in the consumer space.


But he adds that as medical device companies incorporate
tech into their products or build new tech-based innovations,
they may need to consider whether they’re
infringing patents in other industries. Certain advancements on
the touch screen for an ultrasound machine, for example, could
already have been developed and protected by another company
for a driverless car. 


The senior IP counsel says that this fact will not alter his
company’s FTO strategy, however.


“The FTO process gets too complicated if we start looking
outside medical devices for infringement,” he says.  


“Could we be infringing on an Apple or Google patent?
Absolutely. But it would not be worth their time to come after
us even if they realised we were infringing and even though
we’re a big company.”


He explains that his company is diversified in terms of its
products. The company will only sell a few thousand systems a
year of a particular version of an ultrasound system, and the
damages that could be sought for infringement of a particular
component if that system would be quite small.


“It would not be worth their time if they’re selling
smartphones, for example, and selling millions of units a year
or at least hundreds of thousands,” he says.


He adds that this business model is both a blessing and
curse because it makes it difficult to go after competitors who
might be infringing on a particular component in eight
different types of ultrasound systems.


Technology is providing wonderful new opportunities for
medical device companies to enhance their products, improve the
end-user experience and generate revenues. But a lack of
expertise in these new technologies makes multiple partnerships
necessary. Unless medical device firms swallow up SME firms on
mass to bring the knowledge in-house, the number of
partnerships and associated IP challenges will keep
escalating.

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