IP Strategy Seminar

by | Jun 1, 2017 | Companies, Education, Fogarty Innovation, Mentoring

Last month the Fogarty Institute held its second educational seminar, which focused on intellectual property (IP) strategy, a topic of critical importance to early-stage companies. A comprehensive IP strategy serves companies well in the long run by protecting core technology, blocking potential competitors and building value for both investors and potential acquirers.

The seminar was led by renowned experts in the field, several of whom are also IP mentors to our companies-in-residence. Karun D. Naga, president and CEO of Foundry SING1, set the stage for the lecture by highlighting the importance of developing an IP strategy for early-stage companies.

Mr. Naga then introduced a panel of three case studies to discuss the successful development and execution of IP strategy under different circumstances: A new and novel therapy with lots of “white space” (Ardian), an innovative technology entering a crowded field (Twelve), and a mixed scenario with elements of both (Nevro).

The case study panel included Denise Zarins, CTO of the Fogarty Institute; Paul Parker, firmwide chair of Perkins Coie’s medical device industry sector; Karun Naga; Jeff Grainger, non-executive chairman of Signum Surgical and independent advisor to early-stage medtech companies; and Peter Socarras, senior director of IP at Nevro Corp.

The seminar concluded with a panel discussion on IP due diligence from the perspective of an investor or acquirer. Panel members included Renee Ryan, VP of investments at J&J Development Corporation; Nena Bains, partner with Kilpatrick Townsend; Juan-Pablo Mas, partner at Action Potential Venture Capital; and Mike Carusi, general partner and team leader at Lightstone Ventures.

Highlights of the seminar are included below.

IP credo for startups

  • There is no one-size-fits-all approach: While IP is important, each company has different priorities, needs and budgets. Startups need to understand where IP fits within their corporate strategy and tailor their strategy to serve their business objectives.
  • Effort and resources should be driven by business need: Startups have limited resources – they need to establish how to allocate them and make responsible decisions. Entrepreneurs need to give IP the thought it deserves and determine how to best leverage it.
  • Calculated investments made early can pay off big in the future: Time and money invested in understanding how IP can impact one’s company and developing a strong strategy can create opportunities for potential fundraising, acquisition, or even revenue via out-licensing.
  • Be prepared…and prepare to be surprised: Entrepreneurs should commit to understanding the value of an IP strategy by reading references, journals and patents to learn which assets they can protect and patent. At the same time, startups must realize that change will be constant: Whether from business models, IP risk profiles, or company priorities, there are always going to be surprises.
  • Results are always better with cross-functional participation: For the best outcome, IP should be a business-wide process where everyone is involved.
  • Invest in people and relationships: IP is challenging and complex. It’s important to empower and invest in team members to learn, understand and be accountable for it.
  • It’s a competitive advantage to excel where others don’t: IP is a company’s way to distinguish itself from others: It should not be a “black box,” but should be approached the same way entrepreneurs address other critical aspects of building the company.

Look ahead to keep options open

When thinking about IP, it’s critical to keep options open. That means entrepreneurs should get creative and think of different ways to design or use a device, where the competition is and what potential fast followers might do. They should also anticipate where the market/s will go down the road, and how technology might change to meet future needs – and put it into their patent applications. Companies that put their “stakes in the ground” by filing IP each step of the way can afford to experiment with their core technology and still have options if their strategy changes.

Also, startups should always keep in mind what adds value to a potential acquirer or investor: Have they blocked out competition with IP? Acquiring companies need to evaluate the benefits of acquiring an early-stage company versus creating their own technology and IP.

Whether a company is developing a first-of-its-kind therapy or entering an already established (and potentially crowded) field, it’s worth investing in legal advice to help create and manage the IP portfolio. This can be an expensive process, but it provides a significant advantage when it comes to getting funded or acquired. A comprehensive strategy can also be used to introduce certain language and definitions into not only IP filings, but also regulatory submissions, labeling and marketing materials to make it very clear if someone entering the same market is infringing.

Entrepreneurs can also consider hiring more than one counsel, with one specifically for docketing and U.S. prosecution, one for OUS format and prosecution perspectives, one with specific domain knowledge, and/or one with litigation experience.

IP should be a priority, from the top down

To be effective, companies have to create an “IP culture” that comes straight from the top: Send a clear message that IP is important and everyone needs to be involved.

Elements of success include:

  • Leadership prioritization of IP: There needs to be a healthy balance between depth and breadth. Create options in anticipation of success and build in-house capability.
  • Attitude of partnering and relationship building: Develop a culture that underscores that outside counsel is an extension of the team. Also, seek to establish a relationship with the United States Patent and Trademark Office to educate the examiner on the technology.
  • Create a tremendous cross-functional collaboration: Ensure teams are working hand-in-hand every step of the way, heading toward the same goal and delivering the same message.

Anticipate questions from investors

Companies need to identify how to approach and answer questions from investors. It’s important to recognize where the issues and needs are and how to deploy the right people to address them.

Examples of questions posed by potential investors include:

  • Do you own your IP or does it belong to your previous employer or a collaborating physician?
  • How do you get a meaningful patent if your device is a therapy, not a technology?
  • Is the clinical literature that addresses your market prior art to your invention?
  • Is your device innovative enough and can you protect it with patents?
  • How quickly could other companies copy your device or therapy?
  • How do you appraise an already-crowded field to determine if there is enough room for your technology?
  • How do you create a risk profile tolerable to investors – even if you create a new device, could it be covered under competitors’ existing IP?
  • How do you create an effective barrier to entry for others looking to come in your market?

When investors meet with early-stage companies, they assess how much the team understands the science behind their device, the technology and market they are addressing, the company’s approach to IP, and whether its IP strategy mirrors the company vision. Also, if they are entering a crowded market, they want to determine how much homework they have done to understand the existing IP landscape. Last, but certainly not least, the investor assesses the team’s willingness and resolve to work through the risk and unknown ahead. If a company doesn’t come across as knowledgeable, competent and committed, they will lose value.

Entering an existing, crowded market

If a company is entering an already crowded market, it’s critical to understand the existing landscape, know the key players, learn from existing IP, determine what has been tried, notice common design themes and build on interesting ideas.

Counsel, engineers and the entire team need to work closely together to answer three critical questions:

  1. Can the company create a device without being sued?
  2. What can the company protect?
  3. Can the company prevent others from adopting its key differentiating features?

IP knowledge creates incredible value in crowded fields and helps guide product development. It is critical to stay abreast of and constantly monitor the direction of competitor’s developments via the patents they are filing and claim strategies. It’s also important to identify risks, create back-up plans and ensure every part of the device under development is covered by IP.

When a competitor’s patents cover technology that seems too similar to a proposed concept, a company can choose to take an entirely different approach, come up with an improved design, design a non-infringing alternative (“design-around”), or acquire a license to the competitor’s IP.

To survive in a crowded market, a company needs to develop differentiated technology and establish and protect its own turf. While this may be difficult for early-stage companies due to lack of funding, these are critical steps that can pay dividends for decades.

Lastly, a company needs to ensure the IP strategy is aligned with the company vision and its competitive advantage.

Key takeaways

The seminar provided food for thought on a number of issues critical to early-stage companies. Among the sagest advice shared throughout the presentations:

  • Clearly connect the unique features of your technology to the clinical value proposition; make it easy for all stakeholders (investors, acquirers, patent office, and others) to understand the “wow” factor.
  • Develop and use first-in-class evidence (for example, peer-reviewed journals) to substantiate your story on differentiation.
  • The IP strategy should follow the company’s story and be developed with the end game in mind.
  • Don’t walk into a crowded battlefield without some weapons.
  • IP, just like other facets of medtech innovation, is about people, just as much as it is about the technology.
  • You will never regret a second or dollar spent investing in your IP position.
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