Gregory Grissett, Principal and Chair, Intellectual Property Group, Offit Kurman P.A.08.17.21
The Monadnock region in southern New Hampshire (where I have the pleasure of living) is dominated by Mount Monadnock. Local lore holds that “Monadnock” means “stands above the rest.” While there are smaller ranges and hills in the immediate region, none of them really stand up to the 3,100 feet of Mount Monadnock that rises above the horizon. You simply cannot visit this area of our country without encountering Mount Monadnock.
What does a mountainous region in New Hampshire have to do with IP strategy? In my experience, those with robust IP strategies do, indeed, stand above the rest. Medical device companies that have a thoughtful IP strategy (and a patent-focused one at that) typically have higher valuations, higher revenue (if operating), and more robust product offerings compared to those that do not have a thoughtful IP strategy.
What does it take, however, to develop and execute an effective IP patent-focused strategy that stands above the rest? This is the first part of a two-part series that will cover how to create an IP strategy, and in particular, a patent strategy, that stands above the rest. This portion describes the components of a robust patent strategy in the medical device sector with an emphasis on maximizing patent protection value given in view of your revenue model. The second part will look at patent strategy from a different perspective—How does one mitigate risk related to third party patent rights in view of the commercial strategy?
Foundational Patent Laws Inform Patent Strategy
Foundational patent laws form the basis for developing a robust patent strategy. U.S. patent law establishes the broad right of a patent owner to prevent others from making, using, selling, offering for sale, or importing into the U.S., a product or service that is claimed in a valid patent.1 When another company performs any of these infringing acts without patent owner permission, the patent owner is entitled to monetary damages and injunctive relief (i.e. the ability to bar a third party from selling a product in the U.S. covered by a patent).2 This powerful exclusionary right is granted in exchange for a patent owner setting forth a written description of the invention that enables one of ordinary skill in the art to make and use the invention without undue experimentation.3 Valid patent claims must also be novel, non-obvious in view of the prior art, not purely abstract, or claim a natural law.4 Failure of a patent claim to comply with these patentability principles renders that claim invalid and ineffective to prohibit infringers from selling a competing product. These patent law principles can be, and often are, addressed through careful drafting and prosecuting patent applications. But for medical devices, patent counsel should go one step further and consider the commercial context in which the invention operates. The purpose of this series is not to look specifically at the patentability of an invention per se. Rather, here we consider what a commercially relevant patent strategy looks like in the medical device space.
In view of these patent laws, the business purpose for securing a patent is often to protect the innovation and technology that has been or will be developed. But before you can attempt to prevent competitors from copying your products and using your technology, the patent claims must cover that which is commercially relevant to the market in which you operate.
A jurist famously wrote, “The name of the game is the claim.”5 That is still true, and because an enabling, written description is required to obtain the patent claims, the patent description should also cover and describe the relevant features of the invention in a manner that apprehends the commercial setting in which the invention will be used, including its clinical importance. In other words, no one cares about a patent that is unduly narrow, can be easily avoided, and does not adequately cover or even describe the commercial activities and clinical indications that are important to your business.
Does Your Patent Strategy Cover Your Revenue Model?
The patent, and the patent claims in particular, should cover the revenue model. More specifically, the patent claim should encompass the products and services you plan to offer in exchange for revenue. For this to happen, patent counsel should understand exactly how your business plans will generate revenue. Is your revenue tied to a product or service or both? Are you offering software as an adjunct to your product? How will your product be manufactured and what specifically is being shipped from your loading dock to the surgical site? Where does your business fall within the medical innovation value chain? Is there anything about the surgical method that uses your medical device that might require participation of two or more entities, who may or may not be employed by the same entity? All of these questions are critically important to ensure patent claims actually cover how and in what circumstances your product or service will generate returns for your business and its owners and other stakeholders. Following are a few examples of how a patent claim can cover a revenue model and provide meaningful protection at various points along the value chain.
Figure 1 illustrates a typical value chain for medical devices designed for implantation during a surgical procedure. This value chain includes medical device components, assembly, product distribution, surgical use/procedure, and ancillary products and services. Ancillary products and services broadly encompass instruments, software, etc., that are additional products that facilitate a sale and/or may be needed in the actual procedure (e.g., sutures, guide wires, etc.). In this example, a medical device company may be a device developer, an assembler, and a distributor.
For the medical device developer that may design, assemble, and distribute the product, there are several layers of patent claim strategy to consider.
First, consider focusing the patent claims on what specific products will generate revenue. What the medical device developer ships to its customers is often crates of well-packaged and stable medical devices. In return, the medical device developer receives revenue against invoices for goods that are shipped to the surgical site. A patent claim should claim only the product that is specifically “in the package” and referenced by the invoices sent to customers. For instance, if the business sells bone plates, the claims should cover bone plates. Instruments used to implant the bone plates are important components of the surgical procedure, but if your revenue model is weighted toward revenue from bone plates vs. revenue from instruments, then the focus of claims should be bone plates instead of “bone plates and instruments.”
In Figure 1, if the patent claims cover the product as described previously, the medical device developer can prevent third parties from selling the device as claimed in the patent. If a competitor sells a device that is literally covered by the claim, your patent claim is well positioned to capture that competitor as a direct infringer under U.S. law, which is generally more desirable should you need to enforce the patent claims in federal court at a later time.6 Furthermore, a robust patent strategy that covers the product may be used as leverage to become the sole supplier to your customer for that particular product.
Second, consider patent protection for ancillary products and services. Ancillary products may be a very important component of your sales strategy. But ancillary products and services may not result in recurring revenue. For example, you might specify the use of sutures in a technique guide but do not actually sell any sutures. Another example may be a software system to aid inventory control that you may offer your customer as an adjunct to completing a sale of a medical device or instrument. The software is not going to generate recurring revenue, but did it help close the sale? Perhaps, and it could be important for that reason. Patent coverage for ancillary products and services should be considered in a patent strategy, and where possible, and if the cost-benefit is favorable, pursued.
Third, seek patent coverage to the surgical procedures. In other words, have your strategy go one step further and focus not only on the bone plate, but also on the procedure for implanting the bone plate. In this case, you are directly covering the clinical setting in which your device is being used. While such method claims have some drawbacks (e.g., surgical method claims often require two or more separate entities to infringe the claim and may have a more challenging proof requirement in patent litigation), method claims are still valuable for what they can protect—the actual procedure at the surgical site and clinical indications tied to your regulatory approvals.7
Fourth, extend protection backward into the value chain. So far, our hypothetical patent strategy covers your company’s product and surgical use. Consider securing another patent claim to the assembly of the medical device. At this point, you have secured protection for the core revenue generator (product), the clinical setting (method of use), and parts of the supply chain (assembly).
Finally, consider patent coverage for the device components. If successful, the patent strategy not only covers the product and the clinical setting, it also covers most of the supply chain.
This article is a general guideline for developing and implementing a robust patent strategy for medical devices. Circumstances may require a need to pivot and adjust, as is true in any business endeavor. But obtaining patents in the medical device sector that is disconnected from the commercial realities of the business, including its stage (seed vs. operational) adds risk and is not an effective use of resources. Just as you invest time, effort, and money into a commercial strategy that takes into account clinical need, regulatory pathway, marketing and revenue models, and capital needs, your IP strategy needs the attention commensurate with its importance to your business.
To this end, money invested in IP is an investment in assets that protect the top and bottom lines and attract capital. By focusing patent claims on the product and the clinical setting, you are focusing patent protection on where it matters most: those activities that have a direct result on your top line. Considering additional patent protection backwards into the value chain can help secure your supply chain and further cement your relationship with your vendors, helping control costs over the long run. Finally, investors will find assurance in a robust patent strategy that is tightly focused on the revenue model and supply chain security, thereby attracting capital. By focusing on exactly how you will generate revenue and securing patent claims to cover that activity while considering ways to protect the entire value chain, you are taking steps to implement a patent strategy that stands above the rest.
References/Notes
Greg Grissett is a principal and chair of the Intellectual Property Group at Offit Kurman P.A. He is focused on advising emerging and established medical technology businesses on patent strategy and implementation, with particular expertise in cardiology, orthopedic, and diagnostic technologies. Grissett’s practice includes global patent portfolio development, patent enforcement, and defense of patent claims. He can be reached at ggrissett@offitkurman.com.
What does a mountainous region in New Hampshire have to do with IP strategy? In my experience, those with robust IP strategies do, indeed, stand above the rest. Medical device companies that have a thoughtful IP strategy (and a patent-focused one at that) typically have higher valuations, higher revenue (if operating), and more robust product offerings compared to those that do not have a thoughtful IP strategy.
What does it take, however, to develop and execute an effective IP patent-focused strategy that stands above the rest? This is the first part of a two-part series that will cover how to create an IP strategy, and in particular, a patent strategy, that stands above the rest. This portion describes the components of a robust patent strategy in the medical device sector with an emphasis on maximizing patent protection value given in view of your revenue model. The second part will look at patent strategy from a different perspective—How does one mitigate risk related to third party patent rights in view of the commercial strategy?
Foundational Patent Laws Inform Patent Strategy
Foundational patent laws form the basis for developing a robust patent strategy. U.S. patent law establishes the broad right of a patent owner to prevent others from making, using, selling, offering for sale, or importing into the U.S., a product or service that is claimed in a valid patent.1 When another company performs any of these infringing acts without patent owner permission, the patent owner is entitled to monetary damages and injunctive relief (i.e. the ability to bar a third party from selling a product in the U.S. covered by a patent).2 This powerful exclusionary right is granted in exchange for a patent owner setting forth a written description of the invention that enables one of ordinary skill in the art to make and use the invention without undue experimentation.3 Valid patent claims must also be novel, non-obvious in view of the prior art, not purely abstract, or claim a natural law.4 Failure of a patent claim to comply with these patentability principles renders that claim invalid and ineffective to prohibit infringers from selling a competing product. These patent law principles can be, and often are, addressed through careful drafting and prosecuting patent applications. But for medical devices, patent counsel should go one step further and consider the commercial context in which the invention operates. The purpose of this series is not to look specifically at the patentability of an invention per se. Rather, here we consider what a commercially relevant patent strategy looks like in the medical device space.
In view of these patent laws, the business purpose for securing a patent is often to protect the innovation and technology that has been or will be developed. But before you can attempt to prevent competitors from copying your products and using your technology, the patent claims must cover that which is commercially relevant to the market in which you operate.
A jurist famously wrote, “The name of the game is the claim.”5 That is still true, and because an enabling, written description is required to obtain the patent claims, the patent description should also cover and describe the relevant features of the invention in a manner that apprehends the commercial setting in which the invention will be used, including its clinical importance. In other words, no one cares about a patent that is unduly narrow, can be easily avoided, and does not adequately cover or even describe the commercial activities and clinical indications that are important to your business.
Does Your Patent Strategy Cover Your Revenue Model?
The patent, and the patent claims in particular, should cover the revenue model. More specifically, the patent claim should encompass the products and services you plan to offer in exchange for revenue. For this to happen, patent counsel should understand exactly how your business plans will generate revenue. Is your revenue tied to a product or service or both? Are you offering software as an adjunct to your product? How will your product be manufactured and what specifically is being shipped from your loading dock to the surgical site? Where does your business fall within the medical innovation value chain? Is there anything about the surgical method that uses your medical device that might require participation of two or more entities, who may or may not be employed by the same entity? All of these questions are critically important to ensure patent claims actually cover how and in what circumstances your product or service will generate returns for your business and its owners and other stakeholders. Following are a few examples of how a patent claim can cover a revenue model and provide meaningful protection at various points along the value chain.
Figure 1 illustrates a typical value chain for medical devices designed for implantation during a surgical procedure. This value chain includes medical device components, assembly, product distribution, surgical use/procedure, and ancillary products and services. Ancillary products and services broadly encompass instruments, software, etc., that are additional products that facilitate a sale and/or may be needed in the actual procedure (e.g., sutures, guide wires, etc.). In this example, a medical device company may be a device developer, an assembler, and a distributor.
For the medical device developer that may design, assemble, and distribute the product, there are several layers of patent claim strategy to consider.
First, consider focusing the patent claims on what specific products will generate revenue. What the medical device developer ships to its customers is often crates of well-packaged and stable medical devices. In return, the medical device developer receives revenue against invoices for goods that are shipped to the surgical site. A patent claim should claim only the product that is specifically “in the package” and referenced by the invoices sent to customers. For instance, if the business sells bone plates, the claims should cover bone plates. Instruments used to implant the bone plates are important components of the surgical procedure, but if your revenue model is weighted toward revenue from bone plates vs. revenue from instruments, then the focus of claims should be bone plates instead of “bone plates and instruments.”
In Figure 1, if the patent claims cover the product as described previously, the medical device developer can prevent third parties from selling the device as claimed in the patent. If a competitor sells a device that is literally covered by the claim, your patent claim is well positioned to capture that competitor as a direct infringer under U.S. law, which is generally more desirable should you need to enforce the patent claims in federal court at a later time.6 Furthermore, a robust patent strategy that covers the product may be used as leverage to become the sole supplier to your customer for that particular product.
Second, consider patent protection for ancillary products and services. Ancillary products may be a very important component of your sales strategy. But ancillary products and services may not result in recurring revenue. For example, you might specify the use of sutures in a technique guide but do not actually sell any sutures. Another example may be a software system to aid inventory control that you may offer your customer as an adjunct to completing a sale of a medical device or instrument. The software is not going to generate recurring revenue, but did it help close the sale? Perhaps, and it could be important for that reason. Patent coverage for ancillary products and services should be considered in a patent strategy, and where possible, and if the cost-benefit is favorable, pursued.
Third, seek patent coverage to the surgical procedures. In other words, have your strategy go one step further and focus not only on the bone plate, but also on the procedure for implanting the bone plate. In this case, you are directly covering the clinical setting in which your device is being used. While such method claims have some drawbacks (e.g., surgical method claims often require two or more separate entities to infringe the claim and may have a more challenging proof requirement in patent litigation), method claims are still valuable for what they can protect—the actual procedure at the surgical site and clinical indications tied to your regulatory approvals.7
Fourth, extend protection backward into the value chain. So far, our hypothetical patent strategy covers your company’s product and surgical use. Consider securing another patent claim to the assembly of the medical device. At this point, you have secured protection for the core revenue generator (product), the clinical setting (method of use), and parts of the supply chain (assembly).
Finally, consider patent coverage for the device components. If successful, the patent strategy not only covers the product and the clinical setting, it also covers most of the supply chain.
This article is a general guideline for developing and implementing a robust patent strategy for medical devices. Circumstances may require a need to pivot and adjust, as is true in any business endeavor. But obtaining patents in the medical device sector that is disconnected from the commercial realities of the business, including its stage (seed vs. operational) adds risk and is not an effective use of resources. Just as you invest time, effort, and money into a commercial strategy that takes into account clinical need, regulatory pathway, marketing and revenue models, and capital needs, your IP strategy needs the attention commensurate with its importance to your business.
To this end, money invested in IP is an investment in assets that protect the top and bottom lines and attract capital. By focusing patent claims on the product and the clinical setting, you are focusing patent protection on where it matters most: those activities that have a direct result on your top line. Considering additional patent protection backwards into the value chain can help secure your supply chain and further cement your relationship with your vendors, helping control costs over the long run. Finally, investors will find assurance in a robust patent strategy that is tightly focused on the revenue model and supply chain security, thereby attracting capital. By focusing on exactly how you will generate revenue and securing patent claims to cover that activity while considering ways to protect the entire value chain, you are taking steps to implement a patent strategy that stands above the rest.
References/Notes
- 35 U.S.C. § 271
- 35 U.S.C. § 284
- 35 U.S.C. § 112
- 35 U.S.C. § 101, §102 and § 103
- Giles S. Rich, The Extent of the Protection and Interpretation of Claims-American Perspectives, 21 Int’l Rev. Indus. Prop. & Copyright L., 497, 499 (1990) (“To coin a phrase, the name of the game is the claim.”).
- Direct infringement is when a single entity makes, uses, sells, or imports into the U.S. a product literally covered by the claim.
- Indirect or joint patent infringement is a complex area of law that turns on the relationship between parties accused of infringement and in some cases requires proof of intent, which can be difficult to establish in court.
Greg Grissett is a principal and chair of the Intellectual Property Group at Offit Kurman P.A. He is focused on advising emerging and established medical technology businesses on patent strategy and implementation, with particular expertise in cardiology, orthopedic, and diagnostic technologies. Grissett’s practice includes global patent portfolio development, patent enforcement, and defense of patent claims. He can be reached at ggrissett@offitkurman.com.