A growing focus on data analysis means medical device makers are leading an IP protection shift away from patents to trade secrets, a legal expert has said.
“A lot of innovation in the medtech industry is now focused on what’s being done with data and signals from devices,” Scott Simmonds, IP attorney at law firm Barnes & Thornburg told Medical Device Network.
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“This reality, coupled with changes at the United States Patent and Trademark Office (USPTO) that have made it more difficult to patent algorithms or processes related to data processing, means companies think it makes more sense to focus less on the patent protection side, and more on their proprietary ways of approaching data and signals to protect those and keep them as trade secrets.”
In July 2024, the USPTO moved to make patenting AI algorithms more rigid and less abstract. For instance, patent claims that an algorithm serves to “optimise performance” are now routinely rejected by the agency, with a greater burden of proof required to demonstrate an algorithm’s novel function for those seeking a patent.
The shift also comes down to the pace of innovation, Simmonds says. By the time a company can establish a patent and get it enforced to protect data and signal processing, the next innovation will likely already have come along. In essence, the patent system itself may be moving slower than the rate of technological advancement.
With this dynamic playing out, Simmonds said he is now advising clients to put into their IP tracking systems ways of clarifying that they consider one of their internal processes to be a trade secret. Trade secrets are common in the medtech industry, being cheaper and having no time limit. However, they rely on confidentiality, and do not make the company immune to independent discovery.
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By GlobalDataMethods a company can employ to protect its technology include developing encryption to prevent it from being reverse engineered, and to accompany the sale of a product with an explicit licence to the software and operating aspects of the device.
“This delineates that a buyer is paying for, getting a license, and an agreement with purchasing the equipment, requiring them to reduce the access, maintain controls, and to not reverse engineer,” Simmonds explained.
Simmond’s prevailing view is that with technological developments in medtech, companies should also think carefully about determining within employee agreements what is a trade secret from as early a point as possible.
“It’s important to have good, solid agreements with employees and contractors to make it clear what they’re not to share,” he said.
While traditional non-disclosure agreements (NDAs) have a time limit, Simmonds highlights that he likes to make NDAs a little tighter, to clarify that something that gets trade secret protection under the law is tied up for as long as it remains a trade secret.
Big medtech player’s such as Johnson and Johnson (J&J) Medtech include a raft of tighter obligations within their NDAs. These include reverse engineering dictates as Simmond’s mentioned, along with other obligations such as not recording internal conversations or taking screenshots of internal documents, with the NDA setting out “in perpetuity” terms upon its signing, unless terminated earlier in accordance with this agreement.
Simmond’s advises that startup’s cover a similarly in depth range of provisions around what information cannot be disclosed, in order to retain company secrets.
He concluded: “This is a process that has to be institutionalised. A lot of people don’t think about these things enough. They think about it as confidential information, without realising what constitutes a trade secret for them under the law.”
