By: Katie Rubino
Over the past year, innovation in the digital health sector has exploded, spurred on by the challenges of the worldwide COVID-19 pandemic. The health device market is expected to reach an estimated $36 billion by 2023. Digital health technologies use computing platforms, connectivity, software, and sensors as medical devices, as companion diagnostics, and/or as an adjunct to other medical products such as small molecule drugs and biologics. Technology advances in this space are helping to reduce inefficiencies, improve access, reduce costs, increase healthcare quality, and make medicine more personalized for patients.
Initially, entrepreneurs and startups operating in the digital health space may seek out patent protection as a way to protect core innovations and prevent competitors from entering their space. This can be especially essential for devices that can be reversed engineered with ease upon entering the marketplace. Patents can also be used to secure fundraising efforts. Venture capital firms and investors typically benchmark a startup against competitors, and having some patent protection can show them that you present a serious investment opportunity for them by taking a forward-leaning intellectual property approach.
Patents also provide startups opportunities to partner with larger more established companies operating in this space. Late last November, AdventHealth, a health system based in Orlando, Florida, announced that it had partnered with biotech firm Berg to gain insights on patients that tested positive for COVID-19, to aid in reducing mortality rates from the disease. Tech giant Amazon has also announced a partnership with over thirty seven healthcare startups to build innovative, cost-effective ad secure solutions that improve operational and clinical effectiveness while improving patient outcomes for healthcare payers and providers.
Typically, a best practice is to protect innovations as early as possible, particularly where, as in the United States, we have a first-to-file patent system. The digital health space is becoming increasingly populated with patent filings, and earlier filings may enjoy the benefit of broader patent and claim scope particularly in niche industries. For innovations that are not fully prototyped or require subsequent engineering, provisional patent filings can come in handy. It is also imperative to monitor the public disclosure of innovations at trade conferences or in journal articles, just to name a few. Typically, these types of disclosures start a one-year time clock to file a patent in the United States and can act as an immediate bar to patent protection in other jurisdictions such as Europe.
Crafting an intellectual property strategy to align with a startup’s business objectives is crucial. Examining the patent landscape of a particular industry segment to identify and analyze patenting activity of other key players is crucial to understanding what white space exists and how a startup’s innovations can fill this void. Examining the patent landscape can also aid in identifying potential partners and collaborators for subsequent product development and joint ventures. Drafting patent applications with an eye towards monetization can add significant value to a business. A 2020 Bloomberg Law article reported that a patent portfolio with one issued patent, with or without patent applications, has a median price of $338,000. The same article also reported that for the 10-year period of 2008 to 2017 the median royalty rate was 5%.
Mergers and acquisitions in the digital health space have been active, with the top 20 deals in 2020 totaling $50 billion. In August 2020, Siemens acquired Varian Medical for $16.4 billion. Varian is a global specialist in the field of cancer care, and employs artificial intelligence and data analytics to generate solutions in radiation oncology. In February 2021 Philips completed the acquisition of BioTelemetry for an estimated enterprise value of $2.8 billion. BioTelemetry specializes in remote cardiac diagnostics and monitoring services and currently provides solutions to one million patients per year.
Another essential practice for startups and entrepreneurs to consider when formulating an IP strategy is diversification of intellectual property assets and consideration of other forms of protection in addition to patents. Trademarks can be useful to protect product branding and company logos. Documentation of trade secrets can also aid in protecting innovations that are not patent eligible or that may not yet be ripe for patenting.
The digital health sector is experiencing record growth, accelerated by the global COVID-19 pandemic. Startups and entrepreneurs continue to pursue intellectual property protection for their innovations as a means to fulfill business objectives.
Please join us on April 22nd for a virtual panel at MIT entitled “Digital Disruption: How Innovation is Revolutionizing the Healthcare Industry.” We have a diverse panel of digital health entrepreneurs who will be discussing how they aim to fix a fractured healthcare system, and what role intellectual property has played in their business. A link to register can be found here.