Blog Tag: Trade Secrets
Medical device innovations and IP: A strategy is everything.
Bringing a medical device to market relies on a broad understanding of IP, explain Sabing Lee and Kregg Koch of Knobbe Martens.
The original version of this article was published by Life Sciences IP Review. Click here to view that article.
The medical device industry is driven by innovation, where great ideas are developed into successful businesses and products to improve patient care and outcomes. As patent attorneys, we witness many different pathways to innovation and guide IP strategies for innovators of all types. From garage start-ups that become global industry leaders to incubators and university-funded research programs, innovation has no common starting point.
One certainty exists, though. A properly executed IP strategy, tailored to the medical device industry, is critical for protecting innovation, creating company value and ultimately supporting the commercialization of products that will benefit patients.
Sources of Medical Device Innovation
One common starting point for medical device innovation is the physician. Many new innovations start from individual practitioners, such as a surgeon or other specialist who works first-hand with the types of devices that he or she improves upon.
Whether orthopedic, cardiovascular, neurological, or other, physicians with first-hand experience in the causes of medical conditions, the outcomes from devices and treatments, and the implementation of the devices and treatments are often the best equipped to recognize a need for improvement and to foster innovation. This is the reason why a significant number of medical devices come from or are developed in consultation with physicians.
Medical device innovation is an iterative process, and a significant amount of engineering work is needed to translate an initial concept into a viable product. Some physicians are garage inventors themselves, building prototypes using household parts or buying and assembling components into something that can be tested in trials.
Frequently, physicians seek out partnerships with engineers who can assist in this process, and many important medical technologies have resulted from the physician-engineer collaboration. Engineers themselves are also often inspired by new medical ideas and will seek out the clinical perspectives of a physician to refine and improve upon these ideas.
Protecting IP is especially important to the solo inventor, who often starts with only an idea and needs to secure some degree of protection, typically with a provisional patent application, before disclosing the idea to others.
Solo inventors and early-stage companies should also take care in securing ownership rights to their inventions when seeking the help of others. Non-disclosure agreements, while helpful in maintaining confidentiality, do not typically include IP assignment clauses. Without an IP assignment agreement, the solo inventor runs the risk that one of their collaborators improves upon the invention and claims ownership of the improvement for themselves.
While many innovations are the result of spontaneous inspiration, incubators, who form another important group of innovators, follow a more structured process. Incubators are organizations, including university-sponsored entities (sometimes called biodesign programs), that usually comprise individuals having orthogonal skill sets and backgrounds that form a multi-disciplinary team.
Incubators often include physicians, engineers, scientists, and business professionals.
Medical Device Trade Secret Not Publicly Disclosed via Patenting, Displaying, and Selling Covered Product, 7th Cir. Affirms
Can certain specific medical device details remain company know-how or protected trade secrets even if patents are pursued on the medical device? Consider the Seventh Circuit’s commentary in its August 9, 2021 decision upholding a preliminary injunction in the Life Spine, Inc. v. Aegis Spine, Inc. case. The preliminary injunction prohibits Aegis from selling or marketing its competing AccelFix product (shown below, right) until the case is resolved on the merits.
In 2019, Life Spine sued Aegis, a former distributor of Life Spine’s ProLift® expandable spacers (shown below, left) used in spinal surgeries, for, among other things, misusing its trade secrets.
Aegis argued in appealing the preliminary injunction that the district court erred in concluding that information about the ProLift device could remain a protected trade secret after Life Spine patented, displayed, and sold the device to hospitals and surgeons. However, the Seventh Circuit held that “Aegis does not come close to showing that [the district court’s] finding was clear error.” The Seventh Circuit stated that Aegis had not proven that Life Spine’s patent materials disclose the “exact dimensions and measurements of every ProLift component.” In addition, the Seventh Circuit stated that “those who attend ProLift displays do not have unfettered access to the device” and that “the only purchasers of the ProLift are hospitals and surgeons, who purchase the device for use in scheduled surgeries.”
Regarding the patent materials, a figure of which is shown below, the Seventh Circuit noted that “Life Spine’s patent did not disclose the precise specifications of the ProLift” devices. The Seventh Circuit recognized that such dimensions could only be learned by someone who has access to the device and sophisticated measurement technology. As for public displays, the Seventh Circuit noted that Life Spine representatives supervise those who attend ProLift displays as they handle the devices.
Regarding sales of the ProLift device, the Seventh Circuit noted that Life Spine or its distributors ship the ProLift in sealed boxes and that the surgeries are overseen by Life Spine representatives or distributors. The Seventh Circuit further noted that “it seems doubtful that the hospitals or surgeons purchasing the device . . . would secretly unpackage the device [and] measure all its components with specialized measurement technology” and that it “seems even more unlikely that a device would be removed from a patient’s body and then reverse engineered.”
Following this decision, the case will return to the United States District Court for the Northern District of Illinois to continue on the merits.
Former Lutonix VP Pleads Guilty to Trade Secret Theft
On May 9, 2017, according to court records, Christopher Barry, former Vice President of R&D at Lutonix Inc., pled guilty to stealing Lutonix’s trade secrets in the form of several confidential electronic files. According to the Plea Agreement, the allegedly stolen files relate to Lutonix’s proprietary design and manufacture of drug coated balloons, in particular the Lutonix 035 DCB. The Plea Agreement stated that sales for the Lutonix 035 DCB, depicted below, exceeded $50 million in 2015.
The factual background provided in the Plea Agreement reports that, following his departure from Lutonix, Barry took a position as CEO of Urotronic, a medical device startup developing its own drug-coated balloon. According to the Plea Agreement, Barry disclosed the contents of the purportedly stolen files to others at Urotronic. However, according to news articles, following entry of Barry’s guilty plea, Urotronic denied that Barry had any involvement in the development of the Urotronic technology.
Intellectual Property Cases Dominate 2016 Verdict Awards
According to the annual Top 100 Verdicts report by ALM’s VerdictSearch, five jury verdicts for Intellectual Property cases cracked the top 10 with a sixth breaking into the top 25 verdicts of 2016. While the amounts do not account for judicial reductions, offsets or appeals, the report indicates that the more than $4.67 billion in total jury awards from the top 6 IP verdicts alone show that intellectual property cases dominated the Top 100 in terms of total dollars awarded.
The publication ranked Idenix‘s $2.54 billion royalty share of Gilead Sciences‘ profits from two blockbuster hepatitis C drugs as the #1 IP verdict and #3 overall on its list of “Top 100 Verdicts of 2016.” According to the report, Idenix successfully asserted that Gilead willfully infringed Idenix’s patents relating to an antiviral compound used in the treatment of hepatitis C, resulting what commentators have stated is the largest patent infringement verdict in U.S. history.
The second highest IP verdict in VerdictSearch’s 2016 list, $940 million (including $700 million in punitive damages), went to medical software company Epic Systems in what commentators have said is one of the largest trade-secrets verdicts on record. According to the report, Epic successfully asserted that Tata misappropriated information related to Epic’s health care software.
The #3 and #4 IP verdicts of 2016 according to VerdictSearch, $625 million and $302 million, respectively, went to technology patent-holder VirnetX for infringement of four of VirnetX’s internet security patents infringement by several Apple products, including iPhones and iPads.
Merck won the 5th largest IP verdict of the year according to VerdictSearch, a $200 million award against Gilead. The report noted that Gilead Sciences v. Merck & Co. involved infringement of different patents relating to the same drug compound as the Idenix case. The case was filed by Gilead as a declaratory judgment action, but Merck & Co. won on its counterclaim.
CardiAQ‘s $70 million win in CardiAQ Valve Technologies, Inc. v. Neovasc Inc. was listed in VerdictSearch as the #6 IP verdict and tied for #21 overall. As noted in a previous post here, according to the report, the jury found that Neovasc breached the non-disclosure agreement between the parties, misappropriated CardiAQ’s trade secrets, and breached its duty of honest performance to CardiAQ.
According to the report, the 11 IP verdicts in the top 100 totaled approximately $4.8 billion, more than a threefold increase from 2015, when the total was $1.43 billion.
CardiAQ Wins $70 Million in Trade Secrets Suit
A federal jury found in favor of CardiAQ in a lawsuit filed against former service provider, Neovasc. The jury found that Neovasc breached the non-disclosure agreement between the parties, misappropriated CardiAQ’s trade secrets, and breached its duty of honest performance to CardiAQ. The jury awarded $70 million in damages for trade secret misappropriation.
CardiAQ co-founder J. Brent Ratz said in a press release that the company worked for years to develop and create the CardiAQ transcatheter mitral valve, which provides an alternative to open heart surgery. Ratz stated that:
We are proud of this foundational work and grateful that the jury recognized these contributions to the developing field of transcatheter mitral valve replacement.
According to the press release, CardiAQ hired Neovasc in 2009 to provide services for its transcatheter mitral valve replacement (TMVR) program and Neovasc signed a non-disclosure agreement. While working for CardiAQ, Neovasc started its own TMVR program without notifying CardiAQ. After discovering a Neovasc patent publication in late 2011, CardiAQ initiated this litigation in 2014 regarding Neovasc’s transcatheter mitral valve technology, including the Tiara.
According to the press release, the jury also issued advisory findings that Neovasc engaged in unfair or deceptive practices and that CardiAQ’s founders, Ratz and Dr. Arshad Quadri, contributed to the conception of Neovasc’s U.S. Patent No. 8,579,964. The judge is expected to rule later on causes of action under Massachusetts Gen. Law Ch. 93A and patent inventorship.
Edwards Lifesciences Corporation, based in Irvine, Calif., acquired CardiAQ in 2015.
CardiAQ was represented in the litigation by Knobbe Martens LLP, including lead partners John B. Sganga, Jr. and Christy G. Lea.