3M Seminars Technology Commercialization Seminar 2 Developing and Securing Intellectual Property Seminar Series Overview Steps in Technology Commercialization Step 1: (Seminar 1) Identifying opportunities Step 4: (Seminar 4) Developing a Successful Business model Step 2: (Seminar 2) Protecting The IP Step 3: (Seminar 3) Financing The Venture (Seminar 5) Technology Commercialization inside Corporations Seminar 3 Preview Financing the Venture: Incorporating your business Financing your business Speakers: Frank Vargas – attorney, Renaissance Law Group Panel of investors & Entrepreneurs Seminar 2 Outline Robert Atkinson, J.D. & Brad Pedersen, J.D. IP Categories Decision Drivers What are patents? Patentability vs Infringement IP Strategy Foreign vs Domestic IP Goals by Stage of company IP Do’s and Don’ts Discussion and Questions I.P. in Medical Device Industry “Aggressive litigation over medical device patents has increasingly become a corporate weapon in the battle to bring lucrative products to market and block competitors.” Source: “Patent Problems Pending”, Pioneer Press 1/12/03 Medical Device Patent Trends - 2002 1800 Medtronic Guidant St. Jude J&J BSC 1600 Cummulative Issued Patents 1400 1200 1000 800 600 400 200 0 1996 1997 1998 1999 2000 Year 2001 2002 2003 Major Medical Device Litigation 92-02 PARTIES YEAR ACTION AMOUNT Medical Instrument. v. Elekta 2002 Lawsuit $424,000,000+ Cordis/Johnson & Johnson v. Boston Scientific (Stent) 2000 Lawsuit (rev) $324,000,000 Cordis/Johnson & Johnson v. Medtronic (Stent) 2000 Lawsuit (rev) $270,000,000 Boston Scientific v. Medtronic 2002 Settlement $175,000,000 Boston Scientific v. Medtronic 2001 Arbitration $169,000,000 Guidant v. Medtronic 2002 Lawsuit $158,000,000 Guidant v. St. Jude Medical 2001 Lawsuit (rev) $140,000,000 3M v. Johnson & Johnson 1992 Lawsuit 107,000,000 Stryker CorPatent v. Intermedics Orthopedics 1995 Lawsuit $72,700,000 Schneider/BCSI v. Scimed (Yock Patent) 1995 Lawsuit $64,000,000 Eli Lilly v. SciMed (Bonzel Patent) 1993 License $48,000,000 AcroMed v. Sofamor Danek 1999 Lawsuit $47,900,000 Angeion v. Guidant (small size ICD) 1999 License $35,000,000 Source: Gregory Aharonian, Internet Patent News Service, September 2003, www.Patent ing-art.com/economic/awards.htm I.P. Categories PATENT Devices, Apparatuses, Machines, Systems, Kits Chemicals, Materials, Compositions of Matter TRADE SECRET All things listed under Patents, but kept secret instead of patented (shouldn’t be discoverable by reverse enginering) TRADEMARK Product Names Books, Articles, Brochures Company Names Poems, Music, Lyrics Product and Company Logos Movies, Dramatic Plays, Scripts Marketing Phrases Business Plans Electronic Parts, Circuits, Networks, Hardware, Software Customer Lists Vendor Lists Methods of Use, Methods of Manufacture, Methods of Doing Business Medical Methods (US Only) COPYRIGHT Anything else with commercial value if kept secret Photos, images Packaging Design (trade dress) Service Names (service mark) Paintings, sketches, sculptures Architectural Designs, Artistic Designs Software code, IC Chip Layout I.P. Comparison PATENT TRADE SECRET TRADEMARK COPYRIGHT Subject Matter Protected See List See List See List See List Right to Exclude Making, Using, Selling, Importing Unfairly Acquiring Using Similar Mark on Similar Product Copying (all or part), Making Derivatives, Performing, and Other Listed Acts. Scope of Protection Potentially Broad, Defined by the Claims Typically Narrow, Limited to the Secret Proportional to the Commercial Strength of the Mark Typically Narrow, Limited to the Work, Fair Use Exceptions Duration of Protection 20 Years from Priority Date of Patent Perpetual (until not secret) Perpetual (until not used or abandoned) Varies (usually 50+ years) Protection Vests Upon issuance of Patent Immediately Upon qualified use. (enhanced by registration) Upon fixation. (enhanced by registration) Cost Expensive Inexpensive (overhead) Moderately Expensive Inexpensive Legal Requirements New, Useful & NonObvious Commercial Value & Secret Source Indicating & Creative Original Work & Fixation (on tangible medium) Registration Required None Optional (registration advantages) Optional (registration advantages) Process for Protection and/or Registration File patent application, examination and amendment process (2-4+ yrs on average), patent issues. Maintain Secrecy Use in commerce, ™ notice recommended. Registration requires: File trademark application (actual or intent to use) with samples, examination and amendment process, trademark registered. Fixation (on tangible form), © notice recommended. Registration requires: File copyright application with specimens, formalities examined, copyright registered. Decision Drivers Determine what category it fits into Consider standard industry practices Weigh these factors: Cost of protection vs. Product margin Time to establish protection vs. Product life cycle Duration of protection vs. Product life cycle Scope of protection (e.g., claims) vs. Commercial value of what’s protected Examples – what type of protection? Pacemaker lead anchor design. Examples – what type of protection? Manufacturing method for pacemaker lead. Examples – what type of protection? Software for pacemaker Examples – what type of protection? Pacemaker name. Why Patent? Protect your technology Establish barriers to entry Obtain financing Provide an entity on which to establish value for your company Leverage against lawsuits against your company Facilitate higher acquisition value What does a patent do? Right to exclude others from Making Using Selling Importing The invention (as defined by the claims) For 20 years (from the filing date) In the United States Can sue a competitor for infringement Can assign or license in exchange for payment What does a patent NOT do? Government enforced monopoly on the invention (claims must be self-enforced) Protection from being sued for infringement (may still infringe other’s patent) Guaranteed (may be found invalid or not infringed) Capable of stopping competitive R&D (stops “commercial” activity only) What are the Parts of a Patent? Cover Page Bibliographic Data (note filing date) Abstract (does NOT define scope) Sample Drawing Drawings Specification Background Summary of Invention Detailed Description Claims (define scope) What are the Parts of a Patent? Cover Page Bibliographic Data (note filing date) Abstract (does NOT define scope) Sample drawing What are the Parts of a Patent? Drawings What are the Parts of a Patent? Specification Background Summary of Invention Detailed Description What are the Parts of a Patent? Claims (define scope) Patentability vs. Infringement USPN 5,123,456 to Green et al. USPN 6,123,456 to Yellow et al. Patentability – compare your claims to prior art Compare claims in your patent to prior art (e.g., prior patents & publications) Need one distinguishing feature in your claim Novel Non-obvious Described in specification Shown in drawings Patentability – compare your claims to prior art Prior art Your Claim A writing instrument, comprising: a hollow wooden shaft; a graphite core disposed in the shaft; and an integral eraser attached to an end of the shaft. USPN 5,123,456 to Green et al. USPN 4,123,456 to Red et al. Infringement – compare your product to other’s claim Compare your product to other’s claims To avoid infringement, at least one element of claim must be absent from your product May also try to invalidate claim Infringement – compare your product to other’s claim U.S. Patent No. 5,123,456 to Green et al. Your Product A writing instrument, comprising: a hollow wooden shaft; and a graphite core disposed in the shaft, with an end protruding from an end of the shaft. Claim Summary CLAIM compare “IT” Assume claim reads on “It” “It” Invalidates claim if before “It” Infringes claim if after General I.P. Strategy Patent Portfolio (build assets) Protect Core Technology Protect Product Development & Extensions Early and Comprehensive Filings Create Barriers to Entry Broad & Enforceable IP, 3-D Photocopier Protection Portfolio Mining, Continuation Practice, Picket Fencing Tactics, Feature Protection, Future Protection Freedom to Operate (limit liabilities) Establish Clear Path Competitive Surveillance, Opinion of Counsel, Key Licenses, Patent Bargaining Chips IP Assets Effect Acquisition/Investment Value Company Value “In the medical device business, if a company has a poor I.P. position, their value starts approaching zero very rapidly” Michael Berman I.P. Value IP Liabilities Effect Acquisition/Investment Value Assume: $100M Sales Yr. 5 10X Acquisition Value in Yr. 5 = $1B Present Value = Acquisition Value ÷ (1 + r) n n = Year = 5 r = discount factor or risk factor Strong Freedom to Operate Position r = 20% Present Value = $402M Weak Freedom to Operate Position r = 40% Present Value = $186M IP Liabilities Effect Acquisition/Investment Value The Good - Southbay Medical The Bad – Angeion Corporation Prostate Cancer Acquisition ICD Startup The Ugly - PharmaTarget Drug Pump Startup Example of I.P. in Medical Product Development Process ≤ 1 Year Initial Concepts Patent Appl. on Concepts Concept Development Add’l Patent Appl(s). & Foreign Filing Narrow Design Options Initial Infringement Search & Analysis Product Development Review / Update Filings & Analysis Design Freeze & Clinical Testing Oral Clearance Opinion FDA Submission Patent Appl. on Commercial Design Patent Appl. on Next Gen. Written Clearance Opinion FDA Approval & Launch Filing Time Line & Options 1 year Provisional Application 1 year 1 year Regular Application Foreign Application Prosecution 2 year avg. Foreign Application Restriction Requirement Issued Patent Continuation Application Same Disclosure New Claims C.I.P. Application New Disclosure New Claims Divisional Application Same Disclosure Claims not Elected Typical U.S. Patent Prosecution Process 3 months Prepare & File Patent Application Response or Amendment 14 + months Restriction Requirement File IDS Election Allowed Office Action Notice of Allowance Amendment After Final Rejected Final Office Action Allowed Issue Fee Pmt. Rejected Advisory Action Appealed Notice of Appeal & Appeal Brief File Continuation, Divisional or CIP No Appeal RCE & Amendment Allowed Issued Patent Rejected Office Action 2 + years Rejected Appeal Decision Allowed Domestic vs. Foreign Considerations To obtain patent rights in any given country, you must have a patent in that country. No such thing as an international or regional patent, (int’l and regional application process) Cost and Time Int’l consolidated appl. process (PCT) European consolidated appl. process (EPO) Budget $10K/country for filing (more for translations) Budget $20K/country for prosecution Allow 3 to 5 years for patent to issue Extensions and delays available Enforcement issues Other considerations Medical methods generally not patentable OUS Target large markets, manufacturing centers, and nations with good enforcement record First to File (OUS) vs. First to Invent (US) Foreign IP Strategy for Med Tech Gauge Foreign IP Filing to US/OUS Market Share When you file Foreign IP, file in i.e. 70/30 US/OUS market split means 70%+ of IP budget should be spent on US prosecution Large key market countries (e.g., UK, FR, DE, JP, CA, CH) Countries with competitor manufacturing facility (e.g., IR) Country with cross border enforcement (e.g., NE) File PCT to buy time for market to develop Claim medical device, not method Amend claims in foreign cases as US prosecution develops IP Goals for Different Stages Concept Stage Protect early concepts Research IP landscape to be able to address patentability and freedom to operate Keep good invention records (applies to all stages) IP Goals for Different Stages Development Stage Validate patent strategy with an attorney Develop patentability strategy Develop freedom to operate position Enhance portfolio with additional patent filings IP Goals for Different Stages Clinical Stage Revisit and refine IP strategies Plan for litigation (safe harbor during clinical stage) Establish internal systems (staff, forms, processes) Consider advanced strategies IP Goals for Different Stages Commercial Stage Consider written freedom to operate opinion The rules for FTO opinions will most likely be changing in the next few years, so keep an eye on patent reform for this Implement advanced strategies Continuation Practice Portfolio Mining Picket Fencing To Do List – Concept Stage Prepare detailed invention disclosure Conduct patentability and infringement searches File provisional patent application Develop Business Plan Develop patent strategy – claim commercial differentiators Develop freedom to operate strategy – distinguish from competitor’s claims or invalidate Use Confidential Disclosure Agreements (CDA) Recruit patent attorney if funds available Filing fee < $100 Simple (not formal application) Good for only one year Don’t disclose invention unless necessary File provisional first VCs and physicians may not sign CDA Establish funding within 9 months Significant cost to regularize and foreign file within 1 yr. Significant cost to establish or endorse patent strategy and freedom to operate strategy To Do List – Development Stage Recruit patent attorney (if not already) Review patent filings and fix if necessary Develop patent portfolio strategy Develop freedom to operate strategy Use confidentiality agreements Use confidentiality and invention assignment provisions in employee and consulting agreements File new patent applications on improvements To Do List – Clinical and Commercial Stages Re-visit and refine patent strategy File new patent applications on improvements Advanced initiatives Continuation Practice Portfolio Mining Picket Fencing Plan for litigation Re-visit and refine freedom to operate strategy, obtain oral opinion Competitive watch / surveillance Internal Management Assign staff (document tracking, docketing, patent searching, portfolio management, patent review board, etc.) Establish forms and processes (invention disclosure, CDA) Don’t List – Every Stage Garbage in = garbage out (don’t skimp on using a patent attorney for patent drafting) Don’t communicate or take notes about freedom to operate issues without presence of attorney (attorney-client privilege) Horror stories Biographies Robert E. Atkinson, J.D. is president and patent counsel for Prospex Medical. Bob is a registered patent attorney with significant experience as an entrepreneur (Prospex Medical I & II, SpinaLabs, Aetherworks I & II), as corporate patent counsel (Boston Scientific), as private patent counsel serving a variety of medical device start-ups, and as an engineer (SCIMED), all in the medical device industry. Prospex Medical is an incubator focused on innovating and incubating novel medical technologies. Brad D. Pedersen, J.D. a partner at Patterson, Thuente, Skaar & Christensen, P.A., received a Bachelor of Science in electrical engineering from South Dakota State University graduating in 1981 and a law degree cum laude from the University of Minnesota in 1986. He has also worked as an attorney for large law firms, Gibson, Dunn & Crutcher in Los Angeles and Dorsey & Whitney in Minneapolis, and was IP counsel for Angeion Corporation, a high-technology medical device company. Brad is experienced in developing patent portfolios and strategies for startup companies and patent portfolio he has developed have resulted in settlements and transactions worth more than $100 Million.