As an IP attorney serving numerous medical device companies over the past 20 years, I notice that investors often look for companies with a clear exit strategy, as it can provide them with a sense of security and a path to realizing a return on their investment. A well-defined exit strategy can demonstrate that a company has thought through how it will generate revenue and ultimately exit the market, which can make it more attractive to potential investors. For these reasons, I recommend that founders consider their exit strategy and then we as a patent specialist can help you build a valuable IP portfolio to maximize your exit as a unicorn!
Table of contents
- Strategic Options for a medical device company
- Why investors love medical device startups with an exit strategy
- IP Toolkits for your medical device exit strategy
- Utility Patents for Medical Devices
- Provisional Patents for Medical Devices
- Design Patents for Medical Devices
- Trade secrets
- Other action items for a smooth Exit Strategy
- Employee Contracts
- Supplier and contractor agreements
- Licensing Options
- Audit of existing intellectual property materials
Strategic Options for a medical device company
A company’s IP (Intellectual Property) strategy for a medical device can depend on its exit strategy. An exit strategy refers to the plans and actions that a company takes to prepare for the sale, merger or another form of exit from the market. The IP strategy for a medical device can vary depending on the company’s exit strategy and goals.
For example, if a company’s exit strategy is to sell the medical device to another company, it may choose to focus on obtaining patents for the device. Patents can make the medical device more valuable to potential buyers, as they provide exclusive rights to prevent others from making, using, and selling the device.
If a company’s exit strategy is to license the medical device to other companies, it may choose to focus on obtaining trade secrets for the device. Trade secrets can make the medical device more valuable to potential licensees, as they provide confidential information that can be used to differentiate the device from competitors.
If a company’s exit strategy is to manufacture and sell the medical device for an extended period, it may choose to focus on obtaining trademarks for the device. Trademarks can make the medical device more valuable by providing a way to identify and distinguish the device from competitors in the marketplace.
It’s worth noting that a company’s IP strategy doesn’t have to be limited to one approach. A company can use multiple forms of IP protection such as patents, trademarks, and trade secrets at the same time, depending on its goals and exit strategy. Additionally, a company’s IP strategy can change over time as its goals and exit strategy evolve.
Next, we discuss the various IP components in your IP tool kit to complement your exit strategy.
why investors love medical device startups with an exit strategy
Investors often look for companies with a clear exit strategy, as it can provide them with a sense of security and a path to realizing a return on their investment. A well-defined exit strategy can demonstrate that a company has thought through how it will generate revenue and ultimately exit the market, which can make it more attractive to potential investors.
An exit strategy can also provide investors with a sense of the potential value of their investment. For example, if a company’s exit strategy is to sell the medical device to another company, investors can estimate the potential value of the medical device based on the sales price. If a company’s exit strategy is to license the medical device to other companies, investors can estimate the potential value of the medical device based on the licensing fees.
Having a clear exit strategy can also help a company to attract strategic investors who are looking for a specific outcome such as a merger or acquisition. This can be especially true in the medical device industry where large pharmaceutical companies and medical device companies are constantly looking for new technologies and products to add to their portfolio.
It’s worth noting that an exit strategy is not only important for investors but it’s also important for the company. A well-defined exit strategy can help the company to focus on its goals and to make strategic decisions that will ultimately lead to its success.
Investors are often attracted to medical devices that have both FDA approval and patent status. Patents grant the company exclusive rights to the invention and prevent others from using it or selling it without permission. This can help companies recover development costs and FDA clearance. FDA approval also proves that the device meets the strict standards of safety and effectiveness set by the FDA and can legally be sold and marketed in the United States.
FDA approval can give a company an advantage in the marketplace because it provides a legal framework for marketing and selling its products. Potential investors have this assurance that the product is safe and has been properly vetted.
A patented, FDA-approved medical product can help a company stand apart in a competitive market. This can increase its chances for success and attract more investors.
FDA clearance allows the company to expand internationally and enter new markets. The device is already approved for use in the United States, where there are some of the strictest regulations in the world.
Medical devices that have received FDA and patent approvals are considered more attractive investments because they give you exclusive rights to the invention and legal framework to market it. They also provide a level of safety and security to use.
IP Toolkits for your medical device exit strategy
Utility Patents for Medical Devices
Utility patents cover an invention. Anyone who discovers a useful invention is eligible to receive a utility patent. Utility patents are often granted for new methods and mechanical inventions. They also cover new compositions of matter or processes.
Each year, the USPTO receives more than 500,000 patent applications. These applications are mostly nonprovisional utility patent applications. A patent examiner reviews these applications before being issued if they satisfy certain patentability requirements.
There are many types of patents for medical devices. A utility patent is the most common. It focuses on the device’s functionality.
Patents may be granted for medical device software. The software must be unique and not easily copied. Functionality is also a requirement. It must also meet FDA requirements for medical devices. It must, for example, be able to track data and perform more functions than just calculate. It will not be eligible to receive a patent if it doesn’t meet the FDA’s requirements.
When drafting a patent request for a software device, it is important to take into account the eligibility criteria for patentability. These criteria were set by the United States Patent and Trademark Office. Patent eligibility is only possible if the invention is novel, useful, and unobvious.
The USPTO published guidelines for mobile apps. To be eligible for a patent, an app must have some type of “inventive idea“. Apps must include a novel, non-obvious technology.
To draft a mobile patent application that has a high likelihood of being granted, it is important to clearly and precisely describe your invention. To help explain the invention’s operation, you should include technical details and drawings.
It is important to make sure that the claims in the application are clear and specific enough to distinguish the invention from prior art.
Before you start to draft your application, it is important to thoroughly search the prior art. This will help ensure that your invention truly is original and not already known.
The inventor must swear or make a declaration when filing a nonprovisional utility application. This declaration can be made using either PTO/AIA/01 or PTO/AIA/08.
A patent attorney can help you with the drafting of a mobile patent application that meets all patent eligibility criteria. It can be difficult to obtain a patent for a medical device. It can also be costly. It is recommended that you seek legal advice before considering patent protection.
Provisional Patents for Medical Devices
A provisional patent is a type that lasts one year for medical device software. This allows the inventor to evaluate the invention and decide if it is worth filing a full patent application.
If an invention is patentable, the inventor can sell the patent to a third party. The process can be complex. Before you begin the process, it is advisable to contact a patent attorney.
A provisional patent covering medical device software can also be called “patent pending” (or a “design patent”). Patents that protect the design of a device can also be used to protect its exterior design.
These medical devices include instruments and equipment for surgery, drug delivery systems, and patient monitoring devices. Software solutions are often used to develop these types of products. The software can be used for tracking health information as well as hospital management, staff allocation, and staff allocation.
A provisional patent is a good option for anyone who wants to patent medical device software. The first is that it’s cheaper. Because the United States Patent and Trademark Office, USPTO (USPTO), does not examine provisional applications, you will pay less for a Patent than for a complete non-provisional one.
A provisional patent also preserves rights while you decide whether to file a full patent request. This allows you to test your invention and determine its worth without having to pay for a patent.
Provisional patents can have negative side effects. They may not offer complete protection. You won’t get full patent protection if you aren’t clear on the scope of your invention. You won’t get a priority date if your invention is only partially disclosed.
Design Patents for Medical Devices
Understanding the patent landscape is essential for medical device manufacturers. This can assist them in improving their designs. It can also give insight into the competition in their chosen area.
Design patents are sought by most medical device companies. These patents cover both the design and graphical interfaces of the device. This protects a company against a competitor copying a design.
For medical devices, utility patents can also be granted. These patents are granted to inventors who have created a useful product or process. The invention must be original and not already known by the applicant.
A patent examination can be complicated and time-consuming. Hire an expert to speed up the process. You might be able to get a provisional patent if you don’t have the funds to hire an outside patent attorney. This will allow you to file your patent application within one year. After one year, the patent can be converted to a non-provisional.
To protect the visual elements of a medical device, a design patent can also be obtained. It is less frequently used than a utility patent.
Mobile medical devices have been popularized due to the COVID pandemic. These devices can be designed in a way that is attractive and makes them easy to use. These customizations can be used by companies to distinguish their products from others.
Medical device manufacturers have the ability to create innovative products. They must also protect their intellectual property. They must protect their intellectual property, no matter if it’s a utility or design patent.
The FDA is committed to international harmonization in medical device regulations. The Global Harmonization Task Force (GHTF) has been established by the FDA. It includes representatives from Canada, the European Union, and other observing nations.
Trademark protection is a way for companies to protect their brand, including their AI-based medical devices. A trademark is a distinctive word, phrase, logo, or symbol that is used to identify and distinguish a particular company’s goods or services from those of other companies.
In the case of AI-based medical devices, companies can use trademarks to protect the name of their device, the logo or symbol used to represent the device, and any slogans or catchphrases associated with the device.
To obtain trademark protection for an AI-based medical device, a company must first conduct a trademark search to ensure that the proposed trademark is not already in use by another company. Once a unique trademark is selected, the company can file an application with the United States Patent and Trademark Office (USPTO) to register the trademark.
It’s worth noting that obtaining a trademark is not always straightforward and it can take several months or years to be granted. The USPTO may refuse to register a trademark if it is too similar to existing trademarks, or if it is considered generic, descriptive, or misleading. Also, once a trademark is granted, the owner has to enforce it, by monitoring and taking action against any infringement.
Trade secret protection is a way for companies to protect their confidential information, including their AI training methods and training data. Trade secret protection allows companies to keep their information confidential, rather than disclosing it to the public through the patent process.
Trade secret protection can be used to protect the methods and techniques used to train an AI model, as well as the training data used to teach the model. This can include the algorithms, data sets, and parameters used to train the model, as well as any other information that the company considers to be a trade secret.
To protect trade secrets, companies should take steps to keep their information confidential. This can include implementing security measures such as access controls, encryption, and firewalls, as well as training employees and contractors on their obligations to maintain the confidentiality of the information.
It’s worth noting that trade secret protection is not perpetual, unlike patents. The protection lasts as long as the information is kept secret. Once the information is made public or is independently discovered, it can no longer be protected as a trade secret. Additionally, trade secret protection is only enforceable in civil court, if someone misappropriates the trade secret.
Copyright protection is a form of intellectual property protection that can be used for certain types of medical devices. Copyright protection applies to original works of authorship that are fixed in a tangible form of expression. This includes software, user manuals, training materials, and other types of documentation that are associated with the medical device.
To obtain copyright protection for a medical device, the following steps must be taken:
- Identify the original works of authorship associated with the medical device that is eligible for copyright protection, such as software, user manuals, training materials, and other types of documentation.
- Fix the works of authorship in a tangible form of expression, such as by saving them to a disk or printing them on paper.
- Register the works of authorship with the U.S. Copyright Office.
- Once registration is granted, a notice of copyright is placed on the work and the work will be protected under copyright laws.
It’s worth noting that, copyright protection does not cover the functional aspects of a medical device such as its design or the way it works, but it covers the instructions and the manual that come with the device, or the software that the device runs on. Additionally, the copyright in a work lasts for the life of the author plus 70 years, it’s a form of protection that can last long after the patent protection has expired.
other action items for a smooth Exit Strategy
Whether you are a new medical device company or a well-established organization, you must understand that your intellectual property (IP) strategy will depend on the way you intend to exit the business. If you decide to sell your company, you will need to have a plan for how you will use your IP assets to help you secure a favorable price.
Intellectual property (IP) is a key asset for any business. However, many companies don’t realize the extent of their IP risk. The value of IP can be diminished by employees, competitors, and others. Businesses need to be proactive about policing IP to avoid problems.
Employment contracts play a significant role in bolstering the protection of IP. A well-written contract will clearly describe how intellectual property is owned and the obligations of the parties.
When drafting an employment contract, the starting and ending dates of employment should be specified. Additionally, it should be clear if the employment contract is exclusive or not. If an employee is terminated before the end of the term of the contract, the employee should receive compensation. It’s best to include severance pay as part of the termination package.
Another consideration to consider when drafting an employment contract is the assignment of future rights. This includes the present assignment of future copyrights. Usually, this is not permitted in an employer/employee relationship.
Employees generate IP daily. They are interacting with financial information, client and customer identities, know-how, and proprietary processes. Those working in manufacturing plants will encounter pricing and procedure manuals.
A properly implemented IP strategy will identify material in an employee’s personal possession. It will also ensure that the company remains obligated to continue to use the material. An example of this would be a consultancy agreement.
In addition to protecting the company’s assets, an effective IP strategy should address the protection of IP from competing businesses. Some jurisdictions have specific rules on this issue. These laws may affect the scope of an employee’s covenant not to compete. For instance, a nationwide restriction may be reasonable in one case, but too broad in another.
Supplier and contractor agreements
The benefits of a supplier and contractor relationship can’t be ignored. For example, an experienced vendor can help a MedTech organization incorporate best practices into its processes and submit regulatory submissions on its behalf. Likewise, a robust quality control program can serve as a backup plan for unexpected production delays. In a pinch, a contract manufacturer may be all you need to get the job done.
The tl-dr is that a medical device company should take the time to identify and assess its suppliers proactively. This will save the company money in the long run, as well as minimize downtime on the product. It is also a good idea to get a handle on the types of products and services it produces so that it can better serve its customers. The right vendors can also be used to leverage a company’s cumulative skillset to its advantage.
The most important task is to select the best vendors for a given business need, and then tee up appropriate deals. Keeping track of these details will enable a MedTech organization to keep its clients happy, and subsequently, their tummies full of the latest in innovative healthcare technology. As with any neophyte, a MedTech firm must be aware of its competitors’ products and services, and how they compare to its own in order to gain an edge in the competitive market. So the next time you’re in the market for a new medical device or service provider, consider the pros and cons of a contract manufacturer before committing your hard-earned dough.
A confidentiality agreement is a legal document that requires the parties involved to keep their information confidential. It can be used to protect trade secrets and proprietary knowledge. These types of agreements also help prevent employees from using and disclosing sensitive information.
Confidentiality agreements can be mutual or unilateral. They are most common between an employer and an employee. However, they can also be made between a supplier and a third party. Depending on the situation, the parties can agree to assign or destroy each other’s information.
Generally, confidentiality obligations are intended to last as long as the information is kept confidential. This can be as long as a year, or even indefinitely.
The Receiving Party is usually an employee. This means that after the employment ends, the Receiving Party is obligated to keep the information secret. If the Receiving Party does not adhere to the confidentiality agreement, the Disclosing Party can file a claim against the Receiving Party.
Before signing a confidentiality agreement, the receiving party must make sure he understands the business obligations. For instance, he may not be able to use the information in the same industry. He should also ensure that he receives something in return for the promise not to disclose the information.
Confidentiality agreements can protect the information of companies, and individuals. They can be a good way to avoid bad behavior, especially in the case of employees who want to share their ideas with others.
Confidentiality agreements must be written to be legally effective. Moreover, they can be challenged in court. Those who want to challenge the confidentiality agreement bear the burden of proof.
If you’re planning to exit your medical device company, you need to think about your IP strategy. This is because it can affect your budgeting and resources. There are various options available to license your medical device IP. The best approach is one that fits your business objectives. You can consider both compulsory licensing and value-based purchases. But be sure to make your decision based on the long-term sustainability of your innovation.
Compulsory licensing is often used in the medical sector, especially during a major pandemic. It enables access to vaccines and other health technologies. However, it may also disincentivize private R&D investment.
In addition to compulsory licensing, there are several other strategies. You can also consider using your IP as collateral. This option opens up new avenues for financing for SMEs.
Alternatively, you can choose to use your IP as a bridging tool to acquire another company. This option allows you to maintain ownership of your medical device technology while acquiring the necessary assets for a successful exit.
Another option is to out-license your intellectual property. This can be done by providing open access to your patents. This can allow you to license your technology for individual countries and logistical areas. Also, you could license your technology for royalty or a combination of both.
Finally, you can opt for success-based milestones. These are sometimes called Success Fees. Typically, these are designed to help the startup survive the license. Many universities include these in their agreements. Some even allow the startup to defer 90% of milestones until they’ve acquired a partner.
When negotiating these milestones, it’s important to remember to focus on ways to ease the interpretation of the clause. For instance, some universities will allow the startup to add narrowly defined improvements to the license.
Audit of existing intellectual property materials
You should also perform regular IP audits. What is the best way to go about conducting an audit of your medical device inventories? A good starting point is to enlist the assistance of a qualified medical device specialist. Most hospitals have an internal quality control department with a dedicated medical device review exec. Using such a service as a launching pad will ensure a higher-than-average response rate and a better chance at avoiding the dreaded reems of reems of reems. For a more hands on approach, a hospital may also opt to conduct an external assessment of its med files using a third-party service. Fortunately for the hospital, it is an inexpensive endeavor with the results being an exemplary med file. This should be the benchmark for all medical device-related activities.
Now that you have the toolkits to execute your exit strategy, go and build your unicorn medical device company! We look forward to helping you.