Devices & Diagnostics

Patent trolls are coming for the life sciences industry. What’s next?

Patent trolls are encroaching into the life sciences. Formerly focused on the high-tech world, companies that buy up patents and then profit from them are now starting to find the biotech and medical device space more lucrative. The best advice so far? Ante up your budget for a good patent attorney. New legislation is being introduced, however, in […]

Patent trolls are encroaching into the life sciences.

Formerly focused on the high-tech world, companies that buy up patents and then profit from them are now starting to find the biotech and medical device space more lucrative.

The best advice so far? Ante up your budget for a good patent attorney.

New legislation is being introduced, however, in the Senate to crack down on patent trolling, but it’s far from universally appreciated: Stakeholders are concerned it may actually weaken companies’ existing patent rights.

Viewed by industry as extortionists, patent trolls are actually companies have no intention whatsoever of using a device’s underlying technology – and will aggressively file suit to acquire patents. These so called non-practicing entities, or NPEs, do this just so they can ultimately file claims of infringement if a company develops something similar.

A 2013 survey from Santa Clara Law School professor Colleen Chien found that 90 percent of venture capitalists in the technology sector had fielded a demand from a patent troll – but only 13 percent of life sciences companies had been hit with similar notices, MD+DI found.

But that’s changing: In 2009, there were just nine medical device patent infringement cases – but by 2014, there were 93, a report from law firm Steptoe & Johnson points out: 

 

Medtronic is being viewed in an “Et tu?” kind of way for potentially teaming up with patent trolls – it transferred 500 of its patents to an NPE called Orthophoenix LLC in 2013. That firm, in turn, quickly filed six patent infringement suits against other orthopedic companies in June 2013, a highly informative February article from MD+DI said.

But in this article, David Dykeman of Global Life Sciences & Medical Technology Group at Greenberg Traurig LLP, wrote:

By publishing its innovations, the life sciences industry creates prior art hurdles that make it harder to patent obvious inventions while at the same time making it easier to knock out improperly issued patents. Because the software industry generally does not publish, it struggles to invalidate patents that it claims should not have been issued in the first place. A key to controlling NPE litigation is addressing the conflicting patent needs of these two important industries.

A new bill was introduced March 3 to ward away patent abuse. The Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act of 2015. Given the value of patents when, say, venture capitalists make funding decisions – and that IP-intensive industries tend to be high-paying and employ millions – the Democrat-backed bill plans to:

  • Keep the cost of post-grant proceedings low at the U.S. Patent and Trademark Office
  • Crack down on abusive demand letters – allow the FTC to target companies that send out letters calling for licensing fees for patents even when they’re not using the technology themselves
  • Get rid of USPTO fee diversion so as to improve the timeliness and quality of patents
  • Study the impacts of patents on startups and small businesses

This act has been lauded by Mark Leahey, president and CEO of the Medical Device Manufacturers Association, as a “measured approach to address issues facing our nation’s patent system.” However, in a statement, he continues:

“While MDMA supports efforts to deal with patent litigation abuse, we must ensure that any legislation to address this problem does not have the unintended consequences of weakening one’s patent rights,” Leahey said. “The ‘STRONG Patents Act’ targets the concerns of patent holders to end abusive practices, while establishing balance in post-grant proceedings at the PTO and eliminating fee diversion.”

The recent Steptoe paper, titled “The Patent Trolls Are Coming… To Medtech,” outlines what it views the most egregiously trollish NPEs in the life sciences space. These include Acacia Research Corp., WiLan Inc., Intellectual Ventures Inc., IPNav, My Health Inc. and DE Partners Golden Rule LLC.

Steptoe has also put out a list of useful tips on how to avoid patent trolls – the least of which to solicit their own services for IP litigation protection.

  • Know the IP landscape out there – before entering a new space, figure out who owns what. Build a relationship between your R&D and legal counsel, and if any patents are shaky, consider acquiring or cross-licensing them.
  • Be an aggressive defendant – display confidence in your own IP and let the troll know it.
  • Get the patent office involved early, so it can be decided if this NPE has a valid claim at all. Also learn if the NPE actually owns the patent, or if it’s filed claims on this particular patent in the past – this can be great ammo, Steptoe says.