Intellectual Property Management

T. Andrew Currier

Disclaimer: Do not use any material in this chapter as a substitute for professional legal and business advice. This chapter is merely for general information and reflects the views, opinions, and experience of the author. The concepts in this chapter are expressed without reference to legal statutes or legal decisions and are instead presented as practical everyday advice. The author and the institutions and organizations associated with the author cannot be held responsible for any actions taken on the basis of anything contained in this chapter. Consult with a qualified lawyer for advice and guidance for any decision affecting your legal rights.

Intellectual property has long been a cornerstone of medical care, and the importance of intellectual property and intangible assets in medicine is increasing. Pharmaceutical and medical device patents generate billions of dollars of revenue annually.

Alan Greenspan, former chairman of the U.S. Federal Reserve, said with respect to the value of intellectual property, “The economic product of the United States has become predominantly conceptual.”¹ It has been estimated that as much as 75% of the value of publicly traded companies in the United States comes from intangible assets, up from 40% in the early 1980s.¹ In the United States alone, technology licensing revenue accounts for an estimated $45 billion annually; worldwide, the rapidly growing figure is now around $100 billion,¹ a significant portion of which can be attributed to pharmaceutical and medical-related patents.

Physicians’ and surgeons’ work on the front lines of medical care has always offered them a unique opportunity to invent new treatments for their patients. Likewise, stunning technologic advances are occurring in computing, electronics, and materials, which in turn support remarkable advances in imaging technology. With improved imaging technology comes the opportunity to develop new interventional procedures and devices that utilize that technology. Thus, those using this textbook are particularly likely to fall into the category of inventors.

Taking an invention from conception to commercialization is a long, complicated, and expensive path. It implies no disrespect to say that inventors rarely possess the skills to successfully commercialize their inventions. Inventors can be justifiably compared to artists and, like artists, are often inadequately compensated for their efforts, even though they make substantial contributions to society and enrich those skilled at the commercialization of inventions.

Conversely, savvy inventors who use the patent system can reap enormous financial rewards from their inventions. As a rare though salient example, Dr. Gary K. Michelson conceived a number of spine surgery–related inventions and obtained patents for those inventions. On April 22, 2005, Medtronic Inc. paid $1.35 billion to settle a patent lawsuit ² brought by Dr. Michelson and acquire his patents.

This chapter provides a foundation in the fundamentals of intellectual property concepts. It covers the practical, basic steps to secure legal protection for inventions using the intellectual property law system. It takes into account that both inventors and business people who commercialize inventions deserve compensation for their efforts. Commercialization is a huge undertaking. At the same time, it recognizes that inventors are often at a disadvantage when negotiating their share.

How to Use This Chapter

Recognize that in your engagements with hospitals, universities, corporations, and other entities you are quite likely to be in the position of inventing new medical treatments, and such treatments may have significant commercial value. When considering the terms of your engagement, look carefully at the provisions that govern ownership of inventions and other intellectual property you create during your engagement. Use this chapter to familiarize yourself with the concepts of intellectual property law as you consider your compensation package associated with the engagement. Consider also whether your innovations could form the basis for a start-up company or sale to a large pharmaceutical or medical device manufacturing company.

In your everyday work, recognize that you may be unaware you are inventing medical treatments and devices with significant commercial value. Keep careful written notes of what you conceive, and realize you need to maintain those inventions in confidence and should act quickly to secure legal protection for them. Students and academics, be wary of the desire to rush to publish your inventions before considering whether to legally protect that invention—publishing is akin to giving away your invention for free.

Overview of Intellectual Property

As the name suggests, the intellectual property (IP) regime can afford legal protection and ownership over intangible creations of the mind. The term intellectual property does not refer to one type of legal right but is a broad umbrella term encompassing different types of legal rights. Because IP is a creature of law, IP protection is provided on a country-by-country basis in accordance with the laws and registration systems of each country.

The most common types of IP, which are found in virtually all countries of the world, are confidential information, patents, design patents, copyrights, and trademarks. Other types of recognized IP not all found in all countries include registration schemes for industrial design registrations, plant breed registrations, and integrated circuit topographies. This chapter will discuss only the first five, with particular focus on confidential information and patents.

Confidential Information and Confidentiality Agreements

An obvious way to prevent others from stealing your ideas is to simply keep your ideas secret. Don’t tell anyone. A large body of law has developed around trade secrets and confidential information. These laws are the primary and least expensive tools to protect ideas.

Confidential information laws vary among jurisdictions, from country to country, and even state to state or province to province. However, the laws generally follow certain common principles:

1. Assume entity A possesses information known only to A, and thus such information will qualify as confidential information.

2. Assume that entity A and entity B have a relationship whereby B understands that information imparted by A to B must be kept confidential by B.

3. On the basis of these assumptions, if A imparts the confidential information to B, then B will have a legal obligation to keep the confidential information secret.

4. If B violates that legal obligation and imparts the confidential information to C, then A will have a right to sue B and seek damages for losses suffered as a result of B’s actions.

The primary requirements are that the information actually be confidential and that the party receiving the information acknowledges its duty of confidence. The content of the information is largely irrelevant so long as it is otherwise confidential, and confidentiality laws can protect not only inventions and ideas but also other types of information, such as marketing strategies, business plans, research data, and customer lists.

Establishing that the relationship requires confidentiality can be achieved simply by noting the context in which the relationship arises. There are contexts, of course, in which a confidential relationship can be established without a written agreement. For example, a director or officer of a corporation has a fiduciary duty to the corporation and will be assumed to have a confidential relationship with the corporation. Likewise, a client communicating with her lawyer can assume the relationship is confidential. However, to avoid ambiguity, a confidential relationship is best achieved through a written agreement.

Employment agreements and consulting agreements usually have sections devoted to confidential information and thereby create a confidential relationship between the employer and employee. The agreement will oblige the employee or consultant to keep information that is learned during the engagement confidential. Such provisions generally cannot extend so far as preventing the employee or consultant from exercising his or her skills and training on behalf of subsequent employers, but they can properly cover information learned by the employee as a result of the employment relationship. This is a nuanced distinction, and advice from counsel is typically needed to clearly delineate the restricted use of confidential information from the valid use of skill and training.

Outside the employment context, the most common way to establish a confidential relationship is through a legal contract called a confidentiality agreement or nondisclosure agreement (NDA). As the name suggests, the contract will establish the confidential relationship between the parties and govern the terms of the transfer of information between the parties. Absent a patent, this is the best way for an inventor to protect his or her ideas. Furthermore, confidential information that is imparted without a confidentiality agreement will no longer be “confidential” and will therefore compromise the ability to secure a patent for any inventions within the confidential information. The confidentiality agreement is a simple cost-effective means to allow the inventor to share his or her ideas with others on a basis that makes clear that the information exchanged under the agreement belongs to the inventor and must be kept confidential. (See One-Way Confidentiality Agreement, Fig. e14-1.)

FIGURE e14-1 One-Way Confidentiality Agreement. This is a specimen. It is not a substitute for legal advice. Consult with legal counsel before signing any type of agreement, including a confidentiality agreement.

An individual inventor negotiating with a large company should ensure the confidentiality agreement is fair to both parties. A large company may prefer to use its own form of confidentiality agreement, which may be lengthy and have terms that are favorable to the company. The individual must know whether the agreement is a one-way or a two-way confidentiality agreement; a one-way agreement protects only one of the parties and so protects the flow of information in one direction only. Another concern is which law will govern the agreement. If one party is in New York and the other is in England, it is important to decide whether the law of New York or England will apply. Other pitfalls in the agreements may relate to whether the agreement excludes oral communications. For these and other reasons, the advice of counsel is always recommended during the review and execution of the confidentiality agreement.

In the event the agreement is breached, the only remedy is to pursue a court action for breach of contract. Thus, it is desirable to have a patent pending as backup in case of such a breach.

Confidentiality agreements are powerful tools that allow an inventor to explore potential business partners in a venture to commercialize an invention while reducing the risk the potential business partner will steal the invention as their own. Confidential information may be the best way to maintain control over intellectual property. If proper checks are employed, information can be kept confidential indefinitely while still allowing the invention to be commercialized. The formula for Coca-Cola is often cited as the most famous example of confidential information or a trade secret. By keeping the formula secret, Coca-Cola Ltd. keeps its competitors from ever making a true knock-off of Coke.

Frequently, however (and particularly in the case of medical devices), it is not possible to commercialize the invention while preserving confidentiality, for the very sale of the product that embodies the invention will render the information public and nonconfidential. For these and other reasons, most parties opt to eventually file for a patent for their invention.

Patents

Patents are often colloquially referred to as the “nuclear weapons” of intellectual property law. In the United States, patent infringement judgments in the tens and hundreds of millions of dollars are now common.

In the United States and other countries with economic roots in the English legal system (e.g., England, Canada, Australia, New Zealand), patents exist as a carve-out to the historic general prohibition against monopolies.³ The carve-out is believed necessary to encourage innovation. In the United States, it is written in the Constitution: “Section 8. The Congress shall have power…To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Patents and copyrights are close cousins, with patents protecting useful innovations and copyrights protecting artistic works. Of important note is that patents and copyrights are always time-limited monopolies—they cannot be indefinite.

At the heart of the matter, a patent is a bargain between the government and the inventor. Understanding this bargain can assist in understanding much about the way the patent system works. The inventor’s end of the bargain is to disclose the invention to the public. In return, the government grants a time-limited monopoly over the invention to reward the inventor for enriching public knowledge with the workings of the invention. The disclosure of the patent must serve the function of enabling the public to practice the invention, much in the same way the remaining chapters of this text enable radiologists to perform certain procedures. However, a patent must also put the public on notice as to what the inventor claims in the monopoly. A patent cannot be enforced without the inventor completely fulfilling his or her end of the bargain.

For these reasons, the reader will now appreciate that a patent is the antithesis of confidential information. The confidentiality of the invention is a condition-precedent to obtaining the patent. In essence, intellectual property protection for an invention under confidential information can be converted into patent protection as a result of the patent process.

Patent Application Process

Figure e14-2 shows a flow chart exemplifying the patent process, from conception to issuance or final rejection of the patent. Boxes 10 to 40 reflect the steps taken by the inventor; Boxes 50 to 70, 130, 140, 170, and 180 reflect the steps taken by the patent attorney. The remaining boxes reflect the steps taken by local and foreign patent offices.