Medical device companies are in a race to benefit humanity — and impress potential investors or acquirers in the process. They must stand out enough to be noticed, but this can put their good ideas on the radar of potential copiers. They must convince the U.S. Food and Drug Administration (FDA) that their products are safe, while convincing buyers that their products are effective and different. How should medical device companies protect their intellectual property (IP) in this labyrinth? In this Q&A, Philip Nelson, a partner with Knobbe Martens, provides some insights for device companies facing these issues.
MDB: Does a medical device OEM have to choose between patent and trade secret protection for their medical device products?
Nelson: Not necessarily. The same technological advance, feature, or improvement (invention) typically cannot be protected by both a patent and a trade secret because U.S. law requires patent applicants to disclose their inventions in detail. The public benefits by learning about the invention, advancing the state of the art, and making it available for public use after the patent term expires.
However, many complex medical devices involve multiple aspects or underlying inventions. Often the R&D process resulting in a single device can warrant multiple patents. Similarly, there may be aspects of a medical device that can be protected by trade secrets. Candidates for trade secret protection are aspects that would be difficult to reverse-engineer from the product itself and that would not be disclosed in instructions-for-use or FDA filings. This might include software, algorithms, manufacturing methods, the ingredients of a coating, etc.
If a company wants to use both patents and trade secrets to protect a device, it may be challenging to provide sufficient detail in patent applications to satisfy the law’s disclosure requirements, while still maintaining the trade secret aspects as confidential. Recent changes to the law under the America Invents Act (AIA) regarding enforcement of the “best mode” requirement should be considered. Any strategy for dual protection should be preplanned and carefully executed.
MDB: Which is better: patent or trade secret protection?
Nelson: Patent protection is powerful because later independent invention is not a defense. Anyone who makes, uses, sells, or imports the patented invention infringes. By contrast, trade secret protection is really only enforceable against those with a contractual or fiduciary obligation to maintain the secret. If another company independently develops — or even duplicates a device or results from closely examining a public version of your company’s product — this is often considered fair under U.S. law. Trade secret law cannot stop straight-forward reverse engineering by a competitor, but patents can.
On the other hand, trade secret protection can be durable (if secrecy is enforced effectively), because it does not have a built-in expiration date like a patent’s 20-year term. Where reverse-engineering is unlikely, maintaining company trade secrets can be effective. Coca-Cola has famously maintained its formula as a trade secret for much longer than a patent term.
So, both avenues can be very useful, depending on the relevant subject matter and timing considerations.
MDB: How can a medical device company preserve trade secrets if government regulators (like FDA) require such extensive disclosure prior to approval?
Nelson: This can be challenging if the FDA requires disclosure of the very aspects of a medical device or method that are candidates for trade secret protection. Accordingly, it is probably best to file a patent application prior to disclosing to the FDA. If the FDA requires less than the expected disclosure, an earlier-filed provisional patent application can be abandoned to maintain secrecy.
I recommend discussing FDA filings with a patent attorney. Sometimes statements of similarity to other approved devices can be used against a patent applicant by a zealous opponent in litigation (or even by the U.S. patent office during the “prosecution” process that precedes issuance of a patent).
MDB: Why would device manufacturers ever go to the expense of patenting a medical device IP if trade secrets are an option?
Nelson: Trade secrets are not always an option, for the reasons discussed above. Typically, acquiring companies want to see that the target for acquisition owns patents. They prefer patents over trade secrets because patents are more tangibly defined assets. The process of obtaining patents can also clarify the validity of these assets (in view of the prior art). Trade secrets are potentially vulnerable to prior art in similar ways, but these vulnerabilities are neither explored nor resolved (prior to litigation) in the same way as patents, which must pass through an initial examination process by the U.S. patent office.
MDB: Can companies get patents on medical devices that incorporate software without giving away algorithms?
Nelson: Perhaps. It will be difficult to maintain the very same algorithms as trade secrets, while patenting them (or their results). However, other aspects of a medical device can still be patented. Recently it has become more difficult to patent devices that incorporate software due to recent legal and political developments.1,2
MDB: In jurisdictions (like California, for example) that limit non-competes, how can device makers prevent employees from walking out with key knowledge to compete with their company?
Nelson: First, consider filing patents on the key knowledge. Strong IP agreements should also be used, so that employees are obligated by contract not to convert company IP to their own use. It is also useful to prepare lists, databases, and repositories of company information so that this information does not reside solely in the minds of employees (or any company personnel, including executives). Although some states protect a former employee’s right to seek employment in a similar field, this does not mean that person can freely take information the company has tracked and attempted to preserve in confidence as a trade secret. Early documentation will typically help maintain company rights.
MDB: How does a device company protect technologies that involve a hardware component and cloud-based analytics?
Nelson: Both hardware and software (cloud-based or otherwise) can be protected with strategic patents. Especially consider patents on novel interface aspects. IP agreements should be used, as well as secure computing platforms with technical safeguards such as encryption. Copyrights should be considered for valuable code or other documentation. Of course, trademarks should be used to protect the product name. And if a product has an attractive design, consider filing for trade dress or design patent coverage as well.
During diligence, very few companies ever regret considering all the IP options very early on. The surgeon should consider all available tools before the surgery begins — especially where brain surgery is involved!
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Philip Nelson is a Partner with Knobbe Martens. He works out of the firm’s Orange County, CA, office. For more information, visit here .