MDDI_Medical Device & Diagnostic Industry

MDDI, June 2014

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MD + DI MEDICAL DEVICE AND DIAGNOSTIC INDUSTRY JUNE 2014 | 41 private-equity investment. Patents can also lead to collaborations, joint ventures, and licenses with strategic partners. Patents are equally important for later-stage companies that are generating revenues. Experts estimate that the average medi- cal device and drug patent can have a net present value of almost $200,000. Simply put, patents are a source of enterprise value that medical device companies cannot afford to ignore. In addition to their monetary value, medical device patents also hold great strategic value. A strategic patent portfolio can be used both offensively as a sword to strike out at competitors and defen- sively as a shield to avoid competitor attacks. Offensively, the sword prevents competitors from making, using, or selling the patented invention. Defensively, the shield serves as a bargaining chip against a competitor who threatens to sue for patent infringement. Recently, the medical device industry has become a target of patent trolls, also known as non-practicing entities (NPEs), a familiar foe in the information technology industry. The 2013 transfer of more than 500 patents from Medtronic to an NPE named Orthophoenix LLC demonstrates that NPEs are becoming active in the medtech sector. Since June 2013, Orthophoenix has filed at least eight patent infringement lawsuits against orthopedic companies, including orthopedic giant Stryker. The rise of Orthophoenix also shows a shift in the NPE business model, with NPEs filling their patent pipelines by purchasing or licensing patents from larger entities. Despite attempts to reign in the increasing number of NPE patent infringement lawsuits across the technology sector, the medical device industry can expect more NPE patent litigation in the coming years. Patent Strategy for Success Patent law is currently in the midst of the biggest reform in the past 60 years, with Congress, the executive branch, and the courts all changing the U.S. patent system. The America Invents Act, passed by Congress and signed into law by President Obama on September 16, 2011, is now fully phased in. With the switch from a first-to-invent system to a first-inventor-to-file system, the patent—and the rewards—will now truly go to the early bird. This major switch adds a further incentive for companies to speed their development cycle to beat competitors in the race to both the patent office and the market. In addition to the changes brought about by the America Invents Act, the U.S. Supreme Court is refining the definition of patent-eligible subject matter. On June 13, 2013, the U.S. Supreme Court ruled in Association for Molecular Pathology v. Myriad Genetics that isolated genes are objects of nature, and therefore are not patentable. The unanimous Myriad decision follows the U.S. Supreme Court's unanimous decision on March 20, 2012, limiting medical method claims in Mayo v. Prometheus. These Supreme Court decisions have had major impacts on medical device and diagnostic companies. First, medical device companies can now expand their research involving gene testing with less fear that another company will patent the gene itself. Second, the Supreme Court decisions clarify the definition of pat- ent-eligible subject matter that strategic companies can exploit to improve patent protection for their inventions. In light of the changing patent landscape, companies need strategic patent counsel to conduct a patent audit to assess the strengths and weaknesses of its current patent portfolio and redi- rect patent filing strategy to areas of white space to receive more valuable patents. The patent audit should also make sure the pat- ent portfolio is complete, with no holes competitors can design around. The audit should include a freedom-to-operate analysis of third-party patents to assess threats. Patents or patent applica- tions that have expired or have been abandoned should be revived, and unclear title to any of the patents and patent applications should be resolved. By ensuring that its patent portfolio is com- plete and up-to-date, a company enhances its strength and value in the medical device marketplace. Tactical medical device makers would be wise to use the growth in medical device patents, increasing value of medical device pat- ents, and changing patent legal landscape to review and assess their research and development programs and patenting goals. By working with strategic patent counsel, medical device makers can take advantage of the changing patent landscape to stake bigger claims in the medical device patent gold rush. David J. Dykeman is cochair of the global life sciences and medical technology group of international law firm Greenberg Traurig LLP. He is also a member of MD+DI's editorial advisory board. A regis- tered patent attorney, Dykeman has more than 17 years of experi- ence in patents, intellectual property, ad licensing. Contact him at dykemand@gtlaw.com. Michael A. Cohen works at Greenberg Traurig's Boston office and is a registered patent agent attending Northeastern University School of Law and the D'Amore-McKim School of Business. 2 Who's Winning the Patent Race? According to the USPTO, these 10 companies had the most medtech patents granted from 1993 through 2012: ■ Medtronic—3595 ■ Cardiac Pacemakers (now Guidant, part of Boston Scientific and Abbott Laboratories)—1990 ■ Boston Scientific—1837 ■ SCIMED Life Systems (merged with Boston Scientific)—1667 ■ Procter + Gamble Co.—1346 ■ Pacesetter Systems (now part of Medtronic and St. Jude Medical)—1328 ■ General Electric Co.—1273 ■ Kimberly-Clark Worldwide—1144 ■ Siemens—1121 ■ Advanced Cardiovascular Systems (now Abbott Cardiovascu- lar Systems, part of Abbott Laboratories)—1084 In today's challenging economic climate, a strategic patent portfolio is crucial to a company's growth and survival. ES452123_MD1406_041.pgs 06.06.2014 03:44 UBM black yellow magenta cyan

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