Innovation is at the heart of the medical device industry. New products save thousands of lives and improve the quality of healthcare delivered to millions of people around the world.
This commercial activity is driven largely by patenting, because, without a promise of some exclusivity in new designs, the industry could not justify the necessary investment in R&D. In the words of Abraham Lincoln, the only US president to hold a patent, “Patents add the fuel of interest to the fire of genius”.
It is not just the inventor that benefits from medical device patents: the public also has a strong interest at play.
Although it is generally true that patented products cost more due to the lack of immediate competition, patent protection allows companies not only to devote more resources to innovation, but also to pay sufficient attention to the quality of the products they sell. Because mistakes in medical devices can have fatal consequences, the public indirectly benefits from patent-supported profit margins that enable rigorous assurance of quality and sterility.
Of course, there is also the advantage that patents eventually expire and enter the domain of public knowledge. In the meantime their cutting-edge disclosures serve to inspire other inventors to even more creative work. This ‘teaching’ effect of patents is a major reason why societies and governments are willing to endure the economic consequences of a limited-time monopoly.
For the medical device industry, patents are no guarantee of success. In the first place, business is global, constantly seeking new markets and economies of scale from distribution of common products. In that sense, companies would benefit from patent protection that was also global, eliminating the transactional friction of dealing with varying standards and procedures.
This basic inefficiency in the international patent system was recognised decades ago, and was one of the primary factors leading to the establishment of the Patent Cooperation Treaty (PCT) in 1970.
There is a need to recognise that the benefits of patenting are limited to an extent by variations from one country to another. For example, the current scope of patentable subject matter in the US is extremely broad, extending to anything under the sun made by man. However, other jurisdictions prohibit coverage for particular inventions on public policy grounds, making it impossible, for example, to secure patents on surgical techniques, life forms or software.
There are other reasons why patents do not provide a sure path to profits. Some people do not respect intellectual property laws, and copying (where the invention is reproduced under a different label) and counterfeiting (where the copy is passed off as the original) are rampant in this industry, where the cost of manufacture, unburdened by the cost and risk of R&D is extremely low and the profits accordingly extremely high. This kind of illegal activity is made easier by globalisation: open markets, robust transportation systems and easy movement of people, goods and capital.
From 2000 to 2007, the incidence of counterfeiting of medical devices increased tenfold, and now accounts for annual losses of more than $7 billion. The thieves’ chutzpah can be astonishing. In a recent incident reported by the World Health Organization, more than 2,000 kits containing stethoscopes and sphygmomanometers were seized during transportation from China to Greece.
Every aspect of the kits had been slavishly duplicated, including the devices, packaging, instructions and even the European standards marking.
Even in non-criminal cases where infringement may seem clear to the patent holder, enforcement (which also varies from country to country) is not easy. The outcome of litigation is notoriously difficult to predict, and remedies may be uncertain. The only reliable aspect of litigation may be its expense.
Although patents are not a panacea, they are a necessary part of doing business in this field. Most legitimate competitors, recognising the risk and cost of litigation, will take great pains to avoid charges of infringement. That is one of the social benefits of patents: forcing a competitor to stay off your intellectual turf requires them to engage in their own R&D, thus expanding the state of the art in the process. And securing financing and business partners is much easier when you can point to this increasingly valuable asset.
International patent process
The challenge remains: you need to build up your patent portfolio. It will never be perfect, but it offers real advantages. Business is (or will be) international. Patents have to be secured on a country-by-country basis – and they are expensive to obtain. Imagine you have developed an innovative prototype that you think will be very successful, and that you can get regulatory approval in the relevant markets, which comprise a dozen countries.
In going to each of those jurisdictions, you would be paying not just filing fees to 12 patent offices, but also paying 12 sets of lawyers and paying for the translation of your application into the languages that were used across those markets. Most of this investment would be required at the front end, before you knew whether your idea would stand up to the emerging competition.
This was the daunting prospect facing most device manufacturers in 1970 when the PCT was introduced. In the years since, 142 countries have joined to provide a system that makes this process easier, more cost-effective and more predictable.
This is how the PCT works. You prepare an international patent application complying with formal requirements that have already been agreed to as acceptable by all 142 member countries. The international application is then filed with a receiving office, either the national patent office where the applicant resides or WIPO, the Geneva-based agency of the United Nations, which is tasked with administering the PCT.
Often, patent applicants first file their application in their own country, and then file the international application within one year, to have the same effect. Once filed, the application is checked to make sure it complies with the formalities that are required under the treaty. If there is a problem, in most cases it can be corrected without affecting the international filing date. That date is important because it is the date the application had legal effect in all 142 countries.
At that point, a copy of the application is transferred to an International Searching Authority (ISA), which has been selected from among the available larger national or regional patent offices that are qualified to do a search of the published literature relevant to your claimed invention.
Within 16 months of your first-filed application, the ISA should come back with a Search Report and Written Opinion. This information will be extremely valuable because it identifies the closest prior art and analyses whether your invention appears to meet the patentability requirements of novelty and non-obviousness (inventive step).
At that point, you should still be two months away from the international publication of your application, so if based on the report you conclude that you do not have a good chance of getting a patent, you can still withdraw your application and try to keep your invention as a trade secret. Otherwise, at a point 18 months after your earliest filing date, WIPO will publish your application, thereby putting the world on notice that a patent might issue on this invention in the future.
After publication, you have another full year to decide what to do. One option is to get a deeper look at the patentability of your invention by asking for an International Preliminary Examination. This is typically done as an amended version of the application. Your application would then go back to one of those large national or regional patent offices, which would perform a thorough patentability analysis and render a Preliminary Report on Patentability. This should be delivered with two months remaining in the year-long period (or at 28 months from your first filing).
By the time that period comes to a close, then, you will have seen the original report and opinion, and perhaps the additional report; and you will have had the chance to see what other competitive developments are emerging in your intended markets. This will allow you to make an informed decision about whether to invest the additional resources in pursuing the issuance of an actual patent with any of the member countries, and if so which ones.
If you decide to go ahead, you will enter what is called the national phase, and your application will be considered by one or more national or regional offices that you have selected as important to protect the exclusivity of your innovation.
It is at that point that the different national standards of patentability will come into play, and you may have to amend your application in some jurisdictions to comply with those standards. However, and this is significant, every one of those jurisdictions must accept your international application as meeting the formal filing requirements, including applying the original filing date as if you had filed your national application at that time.
Moreover, the national phase process will benefit from the information provided in the International Search Report, Written Opinion and International Preliminary Examination.
The PCT process does not give you an ‘international patent’: at this point, such a thing does not exist because most countries insist on keeping their own right to determine what standards should apply to patenting, and whether any particular invention should qualify under that country’s laws. However, using the PCT to pursue foreign patents in the markets you care about can give you some important advantages.
Perhaps more important than anything else, you will have up to a further 18 months – compared with the process of just going ahead to file directly in each of the relevant countries – to consider whether you want to spend the money and effort to file and prosecute your application in the national phase, and if so in what countries you should proceed.
Why is this important? Firstly, you will have a better idea of what the outcome will be at the end of the process. Secondly, you will have had more experience working with the product that embodies your invention, and will be better able to judge whether it can be manufactured and sold at a profitable price point.
Thirdly, you will know more about the outcome of the regulatory process and where you will be permitted to sell the product.
Finally, you will have seen a lot of developments in the market, and will be able to make a smarter decision on whether your new product (or line of products) carries a competitive advantage sufficient to justify the additional investment.
In addition, during the time that your application is pending in the international phase, you will have the opportunity to amend it, in light of the information contained in the search report or preliminary report on patentability. This can make your claims much stronger.
Also, once your international application has been published, your competitors will know what might be facing them, and they will be more likely to avoid introducing products that might infringe your still-pending claims.
You can enhance the advertising of your own products by noting that they are the subject of a pending application, and you may be in a position to secure financing or establish business relationships based on your pending application, including licensing rights under it.
It is possible to use licensing as a way to raise funds to help pay for prosecution of patents in more countries, thereby securing broader protection for your invention.
Many PCT users have noted the advertising effect of the international publication of their applications: once published, those users receive proposals from potential licensees about the technologies embodied in particular applications.
The right path
The medical device industry is challenging, particularly in the international arena, where manufacturers are subject to a wide array regulations and other constraints. The potential for significant profits makes the business highly competitive and puts a premium on research that produces innovative products.
The best way to protect that sort of investment and maximise returns in international markets is to seek patent protection. The smartest way to do that is through the PCT system, which gives you the most options as well as the time to make the right decisions.