Intellectual property lawsuits are on the rise in the U.S. In fact, the number of patent lawsuits filed in the country increased 58% from 1995 to 2005, according to the United States Federal Courts. Further, protecting IP is more challenging than ever as every single element of a product is vulnerable to competitors. The time to consider intellectual-property protection is not after developing a product; nor is it a one-time event. Proper IP protection must begin in the first stage of concept ideation and continue throughout product development, and with a built-in system of checks and balances.

Business case for protecting IP

Approaching a $220 billion industry, the global medical-device market is highly competitive with key players focused on creating the next breakthrough product that will revolutionize the industry. The medical-device market is ripe for continued growth that could top $265 billion by 2011.

For any new product, technology, manufacturing system or service, IP is a key to market leadership and can be the difference between commercial dominance and commercial failure. That is: if you don't patent every aspect of your innovations, your competitor will.

In addition to thwarting competitive threats, IP also has powerful revenue-generating advantages. A company can own the rights to a product and benefit from its sale to customers, or receive a return by licensing IP to other companies.

Effective IP protection is also important to start-up companies because it lets them attract venture capital. Potential investors will scrutinize the existing and prospective intellectual-property estate of a company prior to investing in it. Putting in place strong IP-protection practices assures investors that the company protects its assets to become an attractive investment option.

Lastly, developing medical products often result in discoveries that have profitable potential. A company's most valuable assets may not be the result of planned R&D efforts but accidental findings that occurred along the way. A company should institute an ongoing IP strategy to protect these unforeseen innovations.

Seven steps for effective IP protection

Medical-device executives should take at least seven steps for effective IP protection:

Step 1: Find the right patent lawyer

This is essential to successful IP protection and is the most critical step for medical-device executives. The right patent lawyer will work closely with a company's engineers as a “partner” during product development to be able to identify patentable opportunities that may go unnoticed by R&D.

For medical companies, patent lawyers educated in engineering and design will prove beneficial because they can analyze proposed innovations and understand the technology. For example, an engineer may present a patent lawyer with a discovery that is not patentable. Some patent lawyers would simply dismiss the project and move on, while a professional familiar with the industry might be able to direct the engineers to explore a variation of the proposed innovation that may, in fact, be patentable.

This type of collaboration is essential for both IP protection and successful product development. A patent lawyer's responsibility does not end after the patent is filed. Follow up with the patent office is required to ensure ongoing progress and patent completion. A good patent lawyer also will look into the future of the patent and critically examine if the patent is worth a long term investment or should be sold.

Step 2: Document, document, document

With IP protection, the proof is in the documentation. Every discovery with patent potential needs a reference number. Dating the discovery is also critical because if two companies seek to obtain a patent for the same discovery, the date will become the differentiating factor.

Step 3: Protect IP from the inside out

To protect IP, a company must start with its internal processes. Employees are often the weakest link in the IP protection chain. That's why an IP-protection effort that counts on firewalls and copyrights, but does not focus on employee awareness and training, will not adequately protect IP. Staff members must first be aware of what is protected so they can adequately safeguard it. Executives must communicate on an ongoing basis with all employees who oversee intellectual capital regarding changes or relevant issues.

When information is confidential, label it. When company data is proprietary, note it on every log-in screen. Such apparently trivial practices can make a difference when trying to prove in court that an employee stole information without authorization. Reiterating to employees that information is valuable provides support for a viable argument.

A company must not only protect digital information, but physical information as well. It is essential to lock areas where sensitive data is stored, including labs and archive rooms. In addition, keep detailed information on who has access to those rooms, use and change passwords often, and limit employee access to important databases.

It is important, however, that IP protection policies not stifle innovation. An open environment is ideal for the development of breakthrough products. The effectiveness of such an environment depends on whether adequate protection procedures are in place. To encourage cooperation, it may be beneficial to offer employees incentives such as royalties or ownership in stock.

Step 4: Conduct an intellectual market assessment

The assessment must be conducted once an innovation is patentable. It includes assessing what your company has in its IP portfolio, what competitors have, and what must be purchased from others.

Consider, for example, a medical-device engineering company that creates a medical device with potential to revolutionize the industry. After the device is finalized, the company works with its patent lawyer to protect the proprietary technology. Through the patent process, the company finds that a widget on the device uses an existing technology patented by a competitor. The widget is essential to the device's success. The company now must either purchase the rights to the widget, which can be costly, or redesign the medical device without the component, which can be time consuming.

Assessing IP needs early in the product design would alleviate this familiar yet avoidable predicament.

Step 5: Strengthen the IP

Once a company is confident the innovation is patentable and not owned by others, a patent application should be filed and prototype creation can begin. During this stage, a company will discover what parts of the innovation work, and what parts need revision. It is possible that patent-worthy discoveries may emerge.

At this point, it is critical to strengthen IP and abandon pieces that are no longer relevant. During the prototyping phase, revisit patent claims and reevaluate your portfolio. After such evaluation, a formal patent will be filed.

Step 6: Sell what you don't need

Once the prototypes are perfected, engineers will have a good idea of what IP they need to continue protecting, and what can be sold.

Selling IP that is no longer of value to the company has advantages. First, it reduces the financial burden associated with owning and maintaining IP, including legal and patent renewal fees. Second, selling off IP lets a company generate revenue on its discoveries. Some companies may choose to maintain IP and simply license the technology.

Step 7: Market products with confidence of secure protection

Engineers and patent lawyers must renew existing patents every few years. It is critical for a company to have provisions in place to periodically renew patents. User fees must be periodically paid for the patents to remain in effect.

Bottom line

Intellectual property must be protected at all stages of product development to maintain and sustain a leadership position in the medical-device industry. A constant and consistent process of checks and balances will ensure that every part of an innovation is protected and eliminate surprises.

Further, the commitment of medical-device companies to use this process continuously will facilitate development of the next breakthrough product.

The best advice when outsourcing abroad is to ask colleagues for recommendations or contact an industry resource, such as a trade organization, that may have a list of reputable offshore firms.

Foster-Miller is a technology product development company with capabilities for developing biomedical technology, advanced materials, robotic systems, sensors and electronics, thermal systems, and structural modeling.

Medical Device Advisors Inc. counsels medical-device manufacturers on technologies, markets, investment strategies, analysis, and IP-related matters.

INS AND OUTS OF OUTSOURCING

With even the most stringent security procedures in place to protect a company from its employees, companies run the risk of staff leaving with important trade secrets. One strategic option is to leverage outside partnerships that offer greater IP protection. Also note that trade secrets are sometimes better protected when in the hands of a third-party. These partners are not obvious targets for employee recruitment by competitors.

It is also a good idea for medical-device companies to only work with partners that agree to sign strict confidentiality agreements and release patent rights to the company during and after project completion. Non-disclosure agreements should be signed even before a contract is agreed upon to protect information disclosed during initial discussions, even if the talks do not result in a business relationship.

In this current era of overseas outsourcing, it is essential to understand IP protection laws in foreign countries. IP rights are territorial, which means that they are only protected where they are granted. IP must, therefore, be registered in both the country of development and the country where it will be marketed. Although registering in designated countries offers some degree of protection, in many countries, it is often not enough. Registering abroad and at home still does not guarantee the scope of protection a U.S. company will have. American IP laws do not protect an American company contracting development or manufacturing abroad. It is critical that companies work only with a trusted, proven foreign partner that has demonstrated stringent IP protection practices and can offer references from American companies they have worked with as vendors in past projects.