Brain Computer Interface Developer Announces $33M Series A, Granted FDA “Breakthrough” Designation
Brain computer interface developer Paradromics on May 18, 2023, announced a $33 million Series A funding round as well as a “Breakthrough Device Designation” from the FDA.
The funding is reportedly for the company’s first-in-human clinical trial of the brain computer interface technology, named the Connexus® Direct Data Interface (DDI). The company states that “[t]he first application of the Connexus DDI is an assistive communication device that translates brain signals into speech and movement in real time, restoring social connection and enabling independent engagement with technology.”
The company reports that the funding round is being led by Prime Movers Lab, with the other investors including Westcott Investment Group, Dolby Family Ventures, and Green Sands Equity.
The FDA describes the Breakthrough Device Designation program as a “voluntary program for certain medical devices and device-led combination products that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions.” The program is intended “to provide patients and health care providers with timely access to these medical devices by speeding up their development, assessment, and review, while preserving the statutory standards for premarket approval, 510(k) clearance, and De Novo marketing authorization, consistent with the Agency’s mission to protect and promote public health.”
The company’s press release is available here, and more information on the Breakthrough Device Designation program from the FDA is available here.
DuPont to Acquire Spectrum Plastics Group
DuPont announced on May 2, 2023 its acquisition of Spectrum Plastics Group (“Spectrum”), a specialty plastics manufacturer, from the private equity firm AEA Investors for $1.75 billion.
Headquartered in Atlanta, GA, Spectrum was formed in 2017 via a merger of Pexco LLC and PPC Industries (including its Kelpac Medical subsidiary) as a portfolio company of the private equity firm Kohlberg & Company LLC. In 2018, AEA Investors’ Middle Market Private Equity team bought Spectrum from Kohlberg & Company, LLC. According to DuPont’s press release, Spectrum’s clients include 22 of the world’s 26 top medical device original equipment manufacturers (“OEM”). The industry served by these OEMs includes thriving medical sectors such as structural heart, electrophysiology, surgical robotics, and cardiovascular.
DuPont has a robust portfolio that already includes a medical device and biopharma consumables business and a healthcare packaging business, such as its Liveo™ silicone solutions business and Tyvek® Medical Packaging. Ed Breen, Executive Chairman and Chief Executive Officer of DuPont stated, when announcing the acquisition of Spectrum:
We have been focused on Spectrum for a long time and our team is extremely excited for this opportunity. Spectrum is a compelling strategic complement to our existing healthcare portfolio, which already includes businesses with best-in-class innovation, deep customer relationships and with strong growth and profitability. with this combination, we’ll be able to offer customers additional innovation and manufacturing capabilities with a broader and more integrated solution set.
According to DuPont’s press release, the deal is expected to close by Q3 2023 and DuPont plans to pay the purchase price from existing cash balances. DuPont expects the acquisition to bring a double-digit multiple on its 2023 forecast EBITDA and to be immediately accretive to its adjusted earnings per share.
Security Defense Systems Sues Athenahealth and ConnectiveRx
On April 26, 2023, Security Defense Systems, LLC sued Athenahealth, Inc. in the Western District of Texas. The lawsuit alleges that Athenahealth’s Epocrates application and epocrates.com website infringe U.S. Patent No. 8,155,887, titled “Computer Visualized Drug Interaction Information Retrieval,” which issued in 2012.
Athenahealth is a Delaware corporation. Security Defense Systems is based in Wyoming and is currently the sole and exclusive owner of the ’887 Patent, according to the complaint. The sole inventor of the ’887 Patent is Leigh M. Rothschild, who is also listed as the inventor for many other patents according to JUSTIA Patents. The docket for the Security Defense Systems v. Athenahealth case is available here.
The same patent was also asserted in two other district court cases. Six days prior to filing the case against Athenahealth, Security Defense Systems sued PSKW, LLC, d/b/a ConnectiveRx, for infringing the ’887 Patent in the District of New Jersey. The docket for the Security Defense Systems v. PSKW case is available here. In a case filed on June 4, 2020 in the District of Massachusetts, the ’887 Patent was asserted against Irody, Inc. by Drug Information Retrieval System, LLC (“DIRS”). DIRS voluntarily dismissed the Massachusetts complaint before Irody answered or filed motion for summary judgment. The docket for the Drug Information Retrieval System v. Irody case is available here.
AI & the FDA
The use of artificial intelligence (AI) in healthcare has been growing rapidly in recent years, and AI-enabled medical devices are playing a larger role in patient care. Such devices may use machine learning algorithms to analyze vast amounts of patient data and provide diagnoses as well as personalized treatment recommendations. In recent years, the FDA has approved various AI-enabled medical devices, some of which are discussed below.
IDx-DR is an AI-powered diagnostic system for detecting diabetic retinopathy (a complication of diabetes that can lead to blindness) through the analysis of retinal images. The system reportedly uses machine learning algorithms to analyze images and make a diagnosis, without the need for a specialist to interpret results. IDx-DR was the first FDA-approved autonomous AI diagnostic system for use in any field of medicine.
Viz.ai LVO Stroke Platform is an AI-powered platform for analyzing CT scans of the brain to identify large vessel occlusions that can indicate a potential stroke. The system reportedly uses machine learning algorithms to analyze CT scan images and alert healthcare providers when a potential stroke is detected and that rapid treatment may be required, allowing for improved patient outcomes. Viz.ai LVO is the first FDA-approved AI platform for stroke detection and triage.
ProFound AI for Digital Breast Tomosynthesis (DBT) is an AI-based software from iCAD, Inc. for analyzing tomosynthesis images to assist radiologists in detecting breast cancer. The system reportedly uses machine learning algorithms to analyze mammograms and identify potential areas of concern (e.g., malignant soft tissue densities and calcifications), providing radiologists with a second opinion and improving diagnostic accuracy. ProFound AI was the first 3D tomosynthesis software using artificial intelligence (AI) to be cleared by the FDA, and the software’s current third generation has also received FDA clearance.
Eko DUO is an AI-enabled stethoscope for analyzing heart sounds and detecting potential cardiac abnormalities. The Eko DUO stethoscope, when used with the Eko App, reportedly uses machine learning algorithms to identify specific heart sounds and detect cardiac abnormalities including atrial fibrillation (AFib), murmurs, tachycardia, and bradycardia. Eko DUO is the first FDA-approved AI-enabled stethoscope for use in a clinical setting.
Caption Guidance is an AI-based software from Caption Health that assists in the acquisition of cardiac ultrasound (echocardiogram) images. The software reportedly uses AI to assess the diagnostic quality of such images in real-time, which helps guide healthcare providers in capturing echocardiogram images that are of sufficient diagnostic quality. The FDA authorized the marketing of Caption Guidance in February 2020, making Caption Guidance the first FDA-authorized software for guiding users through cardiac ultrasound image acquisition.
Cranial Technologies Sues Ottobock for Infringement of Cranial Remodeling Patents
Cranial Technologies, Inc. sued Ottobock SE & Co. KGaA and Active Life LLC in the U.S. District Court for the Central District of California on March 29, 2023. The lawsuit alleges that Ottobock’s MyCRO Band and iFab system infringe U.S. Patent No. 7,242,798, titled “Automatic Selection of Cranial Remodeling Device Configuration,” which issued in 2007; and U.S. Patent No. 7,227,979, titled “Automatic Selection of Cranial Remodeling Device Trim Lines,” which issued in 2007. Below is an example figure from U.S. Patent No. 7,242,798:
.Cranial Technologies also alleges that Ottobock’s MyCRO Band and iFab system infringe U.S. Patent No. 10,603,203, titled “Custom Cranial Remodeling Devices Manufactured By Additive Manufacture,” which issued in 2020; U.S. Patent No. 10,846,925 titled “Method of Manufacture of Custom Cranial Remodeling Devices By Additive Manufacture,” which issued in 2020; and U.S. Patent No. 10,726,617, titled “Method of Manufacture of Custom Headwear by Additive Manufacturing,” which issued in 2020. Below is an example figure from U.S. Patent No. 10,603,203:
.Cranial Technologies is an Arizona corporation, Ottobock is a German corporation, and Active Life is a Delaware company. The lawsuit asserts that Ottobock sold the infringing products to Active Life, and that Active Life operates under Ottobock’s direction and control and for Ottobock’s direct benefit. Cranial Technologies has not previously filed any lawsuits against either Ottobock or Active Life. The case docket is available here.
FDA Issues Final Guidance on Transitioning from COVID-19 EUAs
The FDA recently announced release of final transition guidance documents for medical diagnostic devices targeting COVID-19. The transition guidance documents are intended to guide COVID-19 diagnostic device manufactures as their devices transition from Emergency Use Authorizations (EUAs). Just over three hundred EUAs were issued for diagnostic devices during the COVID-19 pandemic. In the announcement, the FDA characterized the issuance of EUAs as “proactive steps to help facilitate the availability of critical medical devices, including in vitro diagnostic tests.” Draft versions of the guidance documents were made available for public comment in December 2021.
The FDA’s announcement follows the recent White House announcement that the COVID-19 Public Health Emergency is set to expire on May 11, 2023. Though the initial public health emergency announcement authorized use of EUAs for various COVID-related products, the end of the public health emergency does not automatically terminate the pending EUAs. Instead, the Department of Health & Human Services (HHS) will publish notice of termination of each EUA declaration 180 days in advance. Notice will publish in the Federal Register.
The final transition guidance documents clarify recommendations for labeling, post-EUA disposal of diagnostic devices, and use of real-world evidence in FDA marketing submissions. Additionally, the transition guidance documents clarify the relationship between the transition period guidance and the previous COVID-19 guidance from the FDA (i.e., those found in List 1 of the Transition Plan, including guidance on digital pathology, imaging systems, non-invasive fetal and maternal monitoring, and other technologies).
Industry groups, for example AdvaMed and MITA, had previously expressed approval via public comment of the 180-day transition period proposed by the draft guidelines.
The FDA has encouraged device manufacturers that plan to seek marketing authorization to begin working on a marketing submission soon.
The FDA will be holding a webinar to answer questions about the transition on April 18, 2023.
NVIDIA Collaborates with Medtronic to Build AI Platform for Endoscopy Devices
NVIDIA announced in a press release a collaboration with Medtronic to integrate NVIDIA’s artificial intelligence (AI) technology into certain of Medtronic’s products. NVIDIA is a graphics processing unit (GPU) company, and Medtronic is a medical device company.
In particular, the press release states that Medtronic will integrate both NVIDIA’s Holoscan AI computing software platform for building medical devices and NVIDIA IGX, an edge AI hardware platform, into Medtronic’s GI GeniusTM Endoscopy Module. Holoscan is described in the press release as providing an infrastructure for scalable, software-defined, real-time processing of data at the edge.
“Artificial intelligence is a powerful tool that can increase the speed, efficiency and effectiveness of global health systems,” said Kimberly Powell, vice president of healthcare at NVIDIA. “We’re collaborating with Medtronic to accelerate AI innovation by enabling a software-defined business model, with the goal of improving clinical decision making, reducing medical variability and driving better patient outcomes.”
In NVIDIA’s technical blog titled “How Edge Computing is Transforming Healthcare, edge computing is described as being intended to overcome issues and drawbacks associated with bandwidth congestion, network reliability, latency, and other issues associated with remote data analysis by analyzing and developing treatment solutions on the data at the point of collection. As NVIDIA describes it, edge computing refers to computing that takes place at the point of collection – in this case, at the device, and is intended to provide faster, more reliable computing. NVIDIA also indicates that improvements with edge devices can lead to significant benefits in the healthcare industry, where it has been estimated that there are 10-15 edge devices connected to each hospital bed. NVIDIA states in this blog that it expects that the global market for connected medical devices will grow to $158 billion in 2022, up from $41 billion in 2017.
The reported developer and manufacturer of the GI GeniusTM Intelligent Endoscopy Module – Cosmo Pharmaceuticals NV – states in a press release that the GI GeniusTM Intelligent Endoscopy Module is an FDA cleared AI-assisted colonoscopy tool designed to help physicians detect lesions that can lead to colorectal cancer by improving diagnostic imaging used during colonoscopy procedures. Cosmo states that the GI GeniusTM Intelligent Endoscopy Module can help reduce the number of undetected precancerous lesions. According to this press release, Medtronic is the exclusive worldwide distributor of the GI GeniusTM Intelligent Endoscopy Module.
Medtronic states in its education and training materials that the GI GeniusTM Intelligent Endoscopy Module is designed to assist colonoscopy procedures in real-time by using visual markers to alert physicians of potential colorectal lesions. As stated by Medtronic in the education and training materials, the GI GeniusTM Intelligent Endoscopy Module may be useful for detecting small, flat lesions that may otherwise not be detected by the doctor.
NVIDIA announced in the press release that the first GI GeniusTM systems built with the NVIDIA technology will be available later in 2023.
FDA Seeks $7.2 Billion Budget for 2024
The FDA recently announced that it is seeking a budget of $7.2 Billion for 2024, part of which is intended for “Advancing Medical Product Availability.” The portion of the requested budget directed to advancing access to safe and effective medical products would be used toward various initiatives, three of which are highlighted in the FDA’s announcement.
First, the requested budget includes $23 million in additional funds to advance the goal of ending the opioid crisis. According to the announcement, funding related to ending the opioid crisis will be used to focus on “advancing the development, evaluation and market authorizations of related digital health medical devices.”
Second, the requested budget includes $11.6 million of additional funding for improving the FDA’s medical device supply chain and shortage programs. The announcement states this supply chain-related funding “will allow the FDA to expand efforts to work proactively with medical device companies, health care providers, device distributors, and patients to enhance resiliency in the supply chain of critical medical devices and prevent shortages of critical devices that most often impact vulnerable populations.”
Third, the requested budget includes $2.5 million to implement the ACT for ALS Act. The announcement states this funding will help the FDA “to foster development of treatments for ALS and other rare neurodegenerative diseases” in various ways, including by improving access to investigational therapies and medical devices.
Regarding the requested budget, FDA Commissioner Robert M. Califf, M.D. stated:
This year’s funding request builds on our accomplishments and lessons learned over the past year and adds new funding to continue modernizing the FDA and its capabilities for the future. We continue to deliver on a wide range of priorities and have strategically focused our request to ensure our program areas have the funding they need to operate with the highest success for the good of public health.
According to the announcement, the budget request also includes legislative proposals to support the agency’s authority, such as by requiring medical device manufacturers to report manufacturing interruptions or discontinuations regardless of whether such issues are related to a public health emergency.
Health Tracker Systems Alleges Garmin’s Smartwatch Infringes Patents
Health Tracker Systems LLC (“Health Tracker”) sued Garmin International, Inc. (“Garmin”) for patent infringement in the Central District of California on March 6, 2023. The lawsuit alleges that Garmin’s Forerunner 45/45S smartwatch infringes U.S. Patent No. 6,582,380, entitled “System and Method of Monitoring and Modifying Human Activity-Based Behavior,” which issued in 2003, and expired in June 2021.
Health Tracker is organized under Delaware law. Garmin is based in Kansas. No other claims are asserted in Health Tracker’s complaint.
The asserted patent mentions a user wearing an activity monitor that can vibrate when the user’s intensity of physical movement exceeds a threshold. The patent contemplates modifying the behavior of children with Attention Deficit Hyperactivity Disorder (ADHD), with Figure 1 (shown below), showing “a classroom with many students 110, some of whom have ADHD 115 and whose behavior is being modified.”
Since July 2022, Health Tracker has also sued six other companies, asserting those companies each sell smartwatches that infringe this same patent, including Fossil Group (over their Fossil Hybrid Smartwatch HR Collider), Samsung (over their Galaxy Fit 2 smartwatch), Michael Kors (over their Access Gen5E MKGO), and Lenovo (over their Moto 360 smartwatch). The Garmin case docket is available here.
Patent on Controlling Access to Drug Delisted from Orange Book
On February 24, 2023, in Jazz Pharms., Inc., v. Avadel CNS Pharms., LLC, the U.S. Court of Appeals for the Federal Circuit affirmed the United States District Court for the District of Delaware’s grant of an injunction directing Jazz Pharmaceuticals, Inc. (“Jazz”) to delist U.S. Patent 8,731,963 (“the ’963 patent”) from the Orange Book.
The ’963 patent is directed to Jazz’s single-pharmacy distribution system, which controls access to abuse-prone drugs prescribed to narcolepsy patients, such as Jazz’s narcolepsy drug—XYREM®. In 2014, Jazz listed the ’963 patent in the Orange Book as covering a method of using sodium gamma hydroxybutyrate (GHB), the active ingredient of XYREM®. After Avadel CNS Pharmaceuticals, Inc. (“Avadel”) submitted a New Drug Application (NDA) for GHB-based drug FT218, Jazz sued Avadel for infringement. Avadel counterclaimed seeking to delist the ’963 patent for failing to claim a drug or method of use.
Under 21 U.S.C. § 355(b), a patent may be listed in the Orange Book if the patent claims an approved drug or “claims a method of using such drug for which approval is sought or has been granted in the application.” Here, the Federal Circuit held that the ’963 patent is not a properly listable method-of-use patent, as the claims are directed to a “computer-implemented system.” Accordingly, the Federal Circuit affirmed the district court’s decision to delist the ’963 patent from the Orange Book.
Since 2020, combination products, such as pre-filled syringes, inhalers, and transdermal patches, have become more prevalent. Similar trends are anticipated for drug-delivery devices, which contain an approved drug and have a device primary mode of action. Section 3038 of the 21st Century Cures Act incorporated several provisions of the Hatch-Waxman Act into the clearance and approval process for drug-delivery devices. However, the Federal Circuit highlighted the differences between method claims, as requiring the performance of steps, and system or apparatus claims, as describing physical components of a whole. Thus, patentees of combination products and drug-delivery devices seeking Orange Book listing should consider both system and methods of use claims.
The Federal Circuit’s decision is available here.
Jury Verdict Against Boston Scientific for $42 Million For Infringement of Patent on Biodegradable Drug-Releasing Implant
On January 31st, 2023, a jury awarded $42 million to medical device company TissueGen in a patent infringement case against Boston Scientific for infringement of U.S. Patent No. 6,596,296, titled “Biodegradable Drug-Releasing Implant.” The ’296 patent relates to a drug releasing biodegradable fiber implant which allows for controlled delivery of therapeutic agents.
The verdict comes after a five-year long dispute between the parties. The Board of Regents of the University of Texas System and TissueGen sued Boston Scientific for infringement of the ’296 patent in November 2017. TissueGen received an exclusive license to the ’296 patent from the University of Texas in 2003.
TissueGen’s infringement case concerned Boston Scientific’s SYNERGY™ technology. Boston Scientific reportedly previously received FDA approval for its SYNERGY™ Bioabsorbable Polymer Drug-Eluting Stent System in 2015. The SYNERGY™ system is alleged to be absorbed shortly after drug elution is complete at three months to eliminate the long-term polymer exposure.
Source: Boston Scientific
In the first phase of the trial, the jury found that the patent at issue was valid and that Boston Scientific had infringed the patent. In the second phase of the trial, the jury further found that Boston Scientific’s infringement was willful and awarded the plaintiffs $42 million in lost royalties.
Dr. Kevin Nelson, the founder of TissueGen, had allegedly met the Boston Scientific executives in a symposium in 2009 where he told them about the patented technology. Dr. Nelson is a named inventor on the ’296 patent and is reported to have invented the technology while he was an employee of the University of Texas.
TissueGen is a medical device company that reportedly has a portfolio of patents on drug delivery technology. It was founded in 2000. Boston Scientific is a worldwide medical device company founded in 1979. Boston Scientific recently announced that it generated net sales of $3.242 billion during the fourth quarter of 2022.
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. Some incubators study the industry, look for unmet patient needs, and brainstorm ideas. Innovation is a primary focus. Accordingly, the filing of patents, often for a number of different ideas and alternatives, plays a significant role in building asset value.
Universities and other not-for-profit research institutions comprise another important group of innovators. Here, innovation may be driven by a professor or physician focused on a particular area of research.
With these types of entities, IP tends to be owned by the respective university or institution, and once it is found to have value, the IP is often licensed to a start-up company, which may sometimes be founded by the university professor.
This can provide the start-up company with access to advanced technology at an early stage and sometimes at a lower cost than it would have taken for the start-up company to have developed the technology itself.
There can be significant strings attached, however, including royalty obligations, non-exclusivity, not having complete control over the prosecution of the licensed patents, and not having total or partial ownership of improvements to the licensed technology. These and many other IP-related issues should be carefully reviewed and evaluated by the licensee to the technology.
Start-up medical device companies can be formed from any of the above sources. Once established, and as these companies become larger and more successful (eg, through investment or acquisition), the companies themselves may devote substantial resources to research and development and provide processes and incentives to employees to promote innovation.
Large, commercial medical device companies provide the largest share of new commercialized products and patents in the medical device market. These companies often employ a large R&D staff tasked with identifying unmet needs and developing innovative solutions, and typically have large IP budgets to build extensive patent portfolios.
Medical Device IP Strategies
Regardless of the source of innovation, IP protection provides a powerful mechanism for protecting innovative ideas and supporting the development of products that will ultimately benefit patients. Because medical devices often take years to develop and obtain regulatory approval, for the early-stage company that is making no revenue, a strong IP portfolio can be a valuable asset.
It prevents others from copying a company’s innovation, and demonstrates to investors the company’s ability to establish a future market. For commercial stage medical device companies, a strong IP portfolio is important to preserve market share, and to exclude and possibly enforce against competitors.
It goes without saying that a product’s success in the market will breed competition, and the level of competition will likely be commensurate with the pioneering product’s success. Equally apparent is the tension between IP budgets and other budgets (and funding generally) in the development stage, regardless of the source of innovation. Because of patent bars and the race to the patent office that exist in nearly every country, IP protection must be started early to be successful. But, as in any industry, there are no accurate predictors of a product’s success in the medical industry. This leads many to question when the right time is to invest in IP protection, and how much to invest.
For medical device innovations, it should be expected that the product design will change, often significantly and many times, between initial concept and final product. While it is always important to file early, and especially before there are disclosures to outside parties, some amount of testing, and brainstorming of possible alternatives, can lead to better, more robust initial patent filings that will remain relevant even if the design changes.
Innovators and companies should also expect to file additional patent applications as the designs change and significant improvements are made.
When deciding where to file, companies should seek to protect their core technology with patents in the major global markets. As an example, a company that is developing an improved implantable device may wish to put a greater focus on protecting the device in more countries, and file in fewer countries for ancillary components such as delivery accessories or alternative non-commercial medical applications or variations of the device.
Especially important in some countries, particularly the US, are “method of use” patents. Unlike most of the world, claims directed to methods of treatment are patentable in the US and can often achieve broader level protection than device-specific patent claims.
Method patents can also be easier to obtain through the US Patent Office. Proving infringement can be difficult, however, because a successful claim of infringement would require that the medical device manufacturer instructs the use of the device in the infringing manner. But as part of an overall medical device patent portfolio, patent filings should include detailed descriptions and claims for both the device and its method of use.
For medical devices, utility patents provide the primary means of patent protection globally. In addition to utility patents, design patent protection in the US and design registrations in other parts of the world may be worth considering. These can provide a more diverse scope of protection at minimal additional cost.
Design filings can be considered for the medical device itself, such as implantable devices, delivery devices, electronic components and medical equipment, as well as for other aspects such as graphical user interfaces and medical packaging.
While generating a valuable IP portfolio requires significant investment, the insurance and value that a strong and well-developed patent portfolio can provide far outweigh its cost. In the US, as an example, patent holders have achieved damage awards in the tens and hundreds of millions of dollars for infringement of medical device and medical process patents.
Injunctions against competitors are also possible, to prevent the sale and distribution of infringing products, though the granting of an injunction by a court is balanced against the public interest served by the medical product. Other benefits of IP protection include licensing revenue, thwarting competitive innovation, defensive strategies, increasing a company’s valuation, and more.
Cross-licensing and defensive strategies can provide a significant source of value to a patent holder. Companies may file patents that are peripheral to the company’s core technology or principal products but are still comprehensive in detail and provide alternative solutions to a problem to be solved.
Patents rich in detail and alternatives can be used to support claims that cover competitor design-arounds, for example. These patents may be obtained for leverage or defensive purposes in competitive or litigious fields. Even for a start-up company, these patents may provide value because of their possible future importance to a larger, acquiring company facing a threat from one of its competitors.
Not all medical device innovations result in commercial products. For some individuals, start-ups or other entities, when the commercialization of a product stalls or fails, selling the IP assets may be an attractive option that likely justifies its consideration.
Non-Practicing Entities and Trade Secrets
Possible buyers include commercial companies and competitors who may be infringing the IP rights or are looking to develop the technology for themselves. Another possible group of buyers are non-practicing entities (NPEs).
As is undoubtedly familiar to IP professionals, NPEs are companies that acquire patent and other IP rights, but do not sell any products or processes to the marketplace. For practicing entities, the increasing frequency of NPE litigation and assertion of rights emphasizes the importance of comprehensive IP clearance searches and analyses. It is an important reminder that patents do not need to be held by major competitors, practicing companies, or even well-funded or litigious parties, to pose a threat to commercial products and services now or in the future.
The bottom line is that the NPE market can present opportunities, or possible risks, to any innovator or practicing entity in the medical device market, and should not be overlooked.
In addition to patents, trade secrets can provide significant value to a company if they are properly protected. Manufacturing procedures and techniques, key formulas, future solutions or development plans, materials or ingredients, assays, vendor and supplier lists, customer lists, patient data, and other information not generally known or readily accessible outside of the pioneering entity can all form the basis of protectable and commercially valuable trade secrets.
But, like patents, trade secret information must be carefully and properly protected from the earliest stages to ensure its protection and value. Appropriate organization and safeguards adopted at the onset and throughout the lifetime of trade secrets are critical to maintaining their value.
Through constant innovation, the medical device industry is able to improve patient care by bringing new products and technologies to market. Developing a thoughtful and comprehensive IP strategy is a critical part of the process. A sound IP strategy enables innovating companies to reap the benefit of their investment, and enables advancements in an industry that benefits people around the globe.
Sabing Lee is a partner at Knobbe Martens. He can be contacted at: Sabing.Lee@knobbe.com
Kregg Koch is a partner at Knobbe Martens. He can be contacted at: Kregg.Koch@knobbe.com
Supreme Court to Weigh in on Fraud Standard under False Claims Act
In a move that may substantially increase healthtech companies’ exposure to monetary damages, the U.S. Supreme Court agreed to weigh in on the key standard for fraud lawsuits under the False Claims Act (“FCA”). On January 13, 2023, the Supreme Court granted petitions for writs of certiorari in two now-combined 7th Circuit Court whistleblower fraud lawsuits that address the fraud standard– Schutte v. Supervalu Inc. and Proctor v. Safeway.
The FCA imposes monetary damages on persons and companies that defraud the government by “knowingly” submitting to the government false claims for payment, or “knowingly” making false statements in support of such claims. Lawsuits under the FCA may be filed by the government or by a private party, such as a whistleblower.
In the underlying cases, the 7th Circuit held that a company can shield itself from fraud lawsuits if the company’s lawyers can show that the company’s conduct was consistent with an erroneous but “objectively reasonable” interpretation of the law, regardless of the company’s subjective beliefs. However, some judges and commentators have opined that “subjective bad faith” can establish the necessary intent.
The Supreme Court will now hopefully resolve this issue of whether and when a defendant’s contemporaneous subjective understanding or beliefs about the lawfulness of its conduct are relevant to whether it “knowingly” violated the FCA.
The total annual amount of recovery under the FCA is substantial and may likely to continue to increase, especially if the Supreme Court removes the “objectively reasonable” shield. According to the Department of Justice (“DOJ”) website, the DOJ obtained more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2021, which was the second largest annual total in history. Numbers for the 2022 fiscal year should be released shortly.
Of the $5.6 billion in recovery in the 2021 fiscal year, over $5 billion relates to matters that involved the health care industry. For example, as recently reported in a prior Knobbe Medical blog post, a medical device developer Advanced Bionics LLC stated that it will pay about $12 million to resolve allegations that it misled federal health care programs.
BioNTech to Ship Modular mRNA Vaccine Factory to Rwanda
Biopharmaceutical New Technologies (BioNTech), the global immunotherapy company based in Mainz, Germany, is scheduled to ship its BioNTainer modular mRNA vaccine factory to Rwanda. According to BioNTech’s press release, the modular factory consists of six ISO-sized shipping containers that will arrive in Rwanda sometime in early 2023. Reports indicate that the modular units were manufactured in Germany and will be filled and finished by local partners in Ghana and South Africa.
According to reports, this modular mRNA vaccine factory will allow for the bulk production of BioNTech’s COVID-19 vaccine in areas with limited technological resources. Each modular factory “is expected to produce 50 million COVID vaccine doses per year” that will be sold on a not-for-profit basis. BioNTech expects completion of this modular vaccine factory to proceed in parallel with construction of a “state-of-the-art manufacturing facility in Kigali, Rwanda,” which broke ground in June 2022. Additional BioNTainer factories may be shipped to Senegal and South Africa in the near future. BioNTech’s press release explains that these modular vaccine factories are intended to become part of a network to provide African nations with access to its COVID-19 vaccine.
In addition to its COVID-19 vaccine, BioNTech is reportedly “advancing mRNA-based vaccine candidates to address malaria and tuberculosis.” BioNTech initiated early-stage in-human studies for a malaria vaccine candidate in December 2022, and expects additional vaccine candidates to start in-human trials in “early 2023.”
Cochlear Implant Developer Agrees to Pay for Alleged False Claims to FDA
Cochlear implant developer Advanced Bionics LLC will pay about $12 million to resolve allegations that it misled federal health care programs, the United States Department of Justice (DOJ) announced. The allegations were in connection with information provided within pre-market approval (PMA) applications to the FDA for cochlear implant processors, as reported by a DOJ press release dated December 20, 2022.
A former Advanced Bionics engineer, David Nyberg, brought a lawsuit against Advanced Bionics under the False Claims Act. The lawsuit asserted that Advanced Bionics made false claims in their PMA submissions to the Food and Drug Administration (FDA) for Advanced Bionics’ Neptune and Naida cochlear implant processors. Advanced Bionics allegedly made false assertions in the PMA submissions stating that the processors complied with a recognized emissions standard when the processors, in fact, did not comply with the standards.
As a result of the agreement, Advanced Bionics will pay roughly $11.36 million to the United States with approximately $1.87 million of the amount being paid to Mr. Nyber. Advanced Bionics will also pay approximately $1.24 million to the participating Medicaid States pursuant to additional agreements.
BIOCORP Receives FDA 510(k) Clearance for Smart Injection Sensor
French medical device company BIOCORP announced in a press release that it received FDA 510(k) clearance for Mallya, a device that according to the company allows insulin pen injectors to capture and transmit injection data such as dose, date, and time of injection to a mobile app via Bluetooth.
According to the Mallya website, the device allows users to keep track of their doses as well as share dosage information with family members and medical professionals. BIOCORP offers three models of the Mallya, one for each type of disposable insulin pen. The device, shown below on a pen, comes in two pieces that clip on to the insulin pen and can be removed and reused with new pens.
Mallya first launched in France on April 13, 2021. Since then, it has expanded to several countries, including Japan, Nambia, Netherlands, Romania, South Africa, and Taiwan.
On the recent FDA clearance, Eric Dessertenne, CEO of BIOCORP, commented:
This approval is a major achievement for BIOCORP and all of our employees who have been heavily involved in this regulatory process. This approval marks a historic achievement for BIOCORP as it allows the commercial launch of our Mallya device in the United States and illustrates BIOCORP’s ability to meet the highest regulatory requirements.
Other companies have also expressed interest in integrating insulin technology with Mallya. In March, Diabeloop, a company focused on artificial intelligence-driven insulin systems, announced a partnership with BIOCORP to integrate Mallya into Diabeloop’s automated insulin pumps.
The full BIOCORP press release can be found here.
Developments in Patent Disputes Between Apple and AliveCor
Earlier this year, AliveCor, Inc., a medical device and AI company producing electrocardiogram (ECG) hardware and software for consumer mobile devices, succeeded in convincing an International Trade Commission (ITC) judge that Apple Inc. infringed multiple, valid claims of three AliveCor patents on ECG technology. By December 12, 2022, the full ITC is expected to issue a final decision in that investigation (337-TA-1266).
With the final ITC decision just days away, Apple filed suit against AliveCor, Inc. in the Northern District of California on December 2. Apple alleges that the ECG functionality of several AliveCor products, including KardiaMobile, KardiaMobile 6L (pictured below), KardioMobile Card, and the related Kardia App, infringe one or two Apple patents: U.S. Patent Nos. 10,076,257 and 10,866,619. Apple also alleges that AliveCor’s KardiaPro service and Kardia App, in conjunction with various Kardia devices, infringe one or two additional patents: U.S. Patent Nos. 10,270,898 (titled “Wellness Aggregator”) and 10,568,533 (titled “User Interfaces for Health Monitoring”).
Less than a week after Apple filed suit, a panel of Patent Trial and Appeal Board (PTAB) administrative judges found that the three AliveCor patents asserted in the ITC investigation were invalid. According to Law360, an AliveCor spokesperson explained AliveCor is “deeply disappointed and strongly disagrees with the decision by the PTAB and will appeal.” Regarding whether the PTAB’s findings should impact the ITC’s decision, the AliveCor’s spokesperson added:
The PTAB and ITC are two, separate independent bodies and will make their own separate independent decisions. We look forward to the separate final determination from the ITC expected December 12 and are cautiously optimistic.
J&J Acquires Abiomed for $16.6 Billion
Johnson & Johnson (“J&J”) announced on November 1, 2022, that it will acquire Abiomed for an upfront payment of $380.00 per share in cash, which equates to about $16.6 billion. The acquisition is expected to be completed in the first quarter of 2023. According to reports, after the acquisition, Abiomed “will operate as a standalone business within J&J within Johnson & Johnson MedTech, becoming one of the company’s dozen ‘priority platforms,’ defined by annual sales of at least $1 billion.”
Joaquin Duato, Chief Executive Officer of Johnson & Johnson, stated that “[t]he addition of Abiomed is an important step in the execution of our strategic priorities and our vision for the new Johnson & Johnson focused on Pharmaceutical and MedTech,” and he further stated the acquisition will continue to enhance J&J’s “position in MedTech by entering high-growth segments. The addition of Abiomed provides a strategic platform to advance breakthrough treatments in cardiovascular disease and helps more patients around the world while driving value for our shareholders.” The acquisition follows reports earlier this year that J&J intended to “get active on the medtech M&A front.”
Abiomed was founded in 1981 “for the purpose of developing the world’s first artificial heart. ” Abiomed currently makes the Impella heart pump, which is “a support system of percutaneous catheter-based technology offering hemodynamic support to the heart.” Abiomed also offers the Breathe OXY-1 System, which is a “cardiopulmonary support system with an integrated oxygen concentrator.” Last year, Abiomed acquired the start-up preCARDIA and its catheter technology. Recently, “Abiomed reported revenue of $266 million, up 7% and up 11% in constant currency year over year, the seventh consecutive quarter the company posted double-digit revenue growth in constant currency.”
The press release may be accessed here.
Report: Medical Device Market Expected to Grow Over Next Seven Years
An article from October 2022 states that the global medical device market is projected to jump by seven billion dollars in 2022 and leap to $223 billion over the next seven years, to reach a valuation of around $719 billion by 2029. A report by consulting firm Fortune Business Insights anticipates a 5.5% compound annual growth rate (CAGR) over this period.
The report identifies several factors contributing to the industry’s growth. These factors include a global rise in prevalence of chronic diseases, increased healthcare spending in developed and emerging countries, and a new emphasis on early detection and treatment by healthcare agencies. This is reported to be resulting in more and more patients undergoing diagnostic and surgical procedures.
According to AdvaMed, the U.S. occupies about 40% of the global medical device market. In segmenting the U.S. market share, Fortune Business Insights found that in-vitro diagnostics (IVD), cardiovascular devices and orthopedic devices are the largest segments. The report expects the IVD segment will grow at a higher CAGR due to the increased use of real-time diagnostics tests for the diagnosis of diabetes, cancer, and HIV/AIDS. The report also notes an uptick in the market for portable and wearable devices for treatment of chronic conditions due to a shift in preference among the elderly for home healthcare services following the COVID-19 pandemic.
The report also states the European market is anticipated to grow at an increased CAGR, due to the region’s increased spending on healthcare, well-established infrastructure, and increased adoption of advanced diagnostic devices. As with the U.S., Europe is reported to have seen a shift in focus to at-home medical care that suggests portable equipment will play a large role in their anticipated market growth.
Increased prevalence of cardiovascular disorders, diabetes, infectious disorders and dental diseases are all demand factors contributing to the forecasted growth in Asia Pacific, according to the report, causing more global medical device players to expand their presence in the region.
The three top-earning medical device companies globally in 2021 – Medtronic, Abbott, and Johnson & Johnson – are among those companies set to benefit highly from the industry’s predicted growth. However, the increasing demand for the medical device market as a whole guarantees that the future is looking bright for many companies in the space.
The report by Fortune Business Insights is available here.
FDA Grants Breakthrough Device Designation for EndoStim’s GERD Treatment
EndoStim announced on October 25th that the FDA granted a breakthrough device designation for the company’s implantable neurostimulation treatment for drug refractory gastroesophageal reflux disease (GERD).
EndoStim states that its EndoStim System is the first-in-class implantable neurostimulation treatment for GERD. While traditional surgery for the treatment of GERD requires wrapping the stomach around the lower esophagus to strengthen a patient’s lower esophageal sphincter muscle (LES), this system attempts to provide long-term reflux suppression by automatically delivering small electrical signals to the LES. EndoStim states the system accomplishes this through use of a neurostimulator and an implantable bipolar lead, and that the lead is placed within the patient through a minimally invasive laparoscopic procedure, and a physician then programs the neurostimulator using a wireless external programmer.
While the EndoStim System is not yet approved for sale in the U.S., multiple long-term studies, such as a University of Vienna study and a German study, on electrical implants aiding GERD using this system have been reported to have found a sustained improvement in GERD outcomes post-procedure. In discussing the announcement, EndoStim’s chief executive officer, Eric Goorno, stated:
We are pleased that the FDA has recognized the therapeutic potential of the EndoStim System as a new treatment in development for drug refractory GERD.… Our goal is to bring this new therapy to patients as quickly as possible. We look forward to working closely with the FDA to expedite the review of the EndoStim System.
The breakthrough device designation program is designed to provide patients and health care providers with timely access to medical devices for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions by speeding up their development, assessment, and review. The FDA recently updated its draft guidance for its breakthrough device designation program to focus on reducing health and healthcare disparities based on race, sec, ethnicity, and access to care.
This year it is reported that the FDA granted 120 breakthrough device designations through August 3, 2022. Since the program’s inception in 2015, the breakthrough device designation program is reported to have seen 54 devices receive marketing authorization.
Share