New directions in medical devices create challenges in IP Protection

A major new trend in medical devices was commented on repeatedly at the AusMedTech conference earlier this week. This is a consequence of the convergence, and increasing sophistication, of several key technologies.

In this class of device, a relatively simple sensor is disposed on a patient. This may be implanted or worn, and typically senses a particular parameter. The sensor communicates wirelessly to another device, which then sends the data via the internet to a remote server, or the cloud, for processing. The data is then processed, often in a very sophisticated way, and reports or provides indications to patients and/or their physicians. Device systems addressing conditions as diverse as epilepsy, hypertension, congestive heart failure and incontinence were discussed at the conference.

This is a very powerful new technical methodology, which also creates a new business model. As well as the supply and fitting of the sensor device, an additional source of revenue comes from the on-going processing, reporting and management of the devices and the processing. From the device manufacturer’s perspective, there are risks that, for example, the user or their physician could contract with an alternative provider for the processing and reporting work. There are thus multiple risks to the revenue base of the business – not just supply, fitting and servicing of the device, but also the on-going processing and report service.

In some cases, it may be possible to bundle the on-going services as free, or paid up front, particularly when the life of the product is relatively short. If the device is intended to be worn occasionally, for example in a blood pressure monitoring situation, then the business could proceed mainly as a fee for service operation. However, these options are difficult for an implanted device, or one intended to be operated by an intermediary on multiple patients. To some extent, and in some situations, careful software licensing may be able to reduce the risks.

In terms of patent protection, the challenge is how to control the service aspect. One issue is territory – if the processing is happening in the cloud, then to the extent it is localised in any territory, that may not be a territory where the patent is effective. Generally, where a method is claimed, if key steps are not taken in the jurisdiction, then the patent is not infringed. Even if method steps are spread across multiple jurisdictions where there are patents, because only part of the method is performed in one place, there may be no infringement. For example, the pre-processing of the data may occur on a patient owned device; the data is initially processed in a second country, the report compiled and generated in a third country, and the report sent back to the physician in the first country. Depending upon the system, it may not even be possible with any certainty to define the territory where the steps are undertaken.

This kind of issue is inherent in cloud computing. Very careful attention to matching the scope and framing of the patent, in a full understanding of the business model and risks in that model, is critical to obtaining effective protection. It is critical for such businesses to undertake a careful analysis of their patent portfolio with a view to minimising the opportunities for opportunistic infringement.

by Peter Franke

Who owns Intellectual Property? Don't follow the money!

“I paid them to do the work, so I own the intellectual property. Don’t I?”

Well, um, probably not.

The fundamental that must be remembered with intellectual property of any kind – ownership naturally rests with the creator, whether that is the designer, author, inventor etc. Paying someone to do a job, where doing that job results in the creation of intellectual property, does not in itself transfer ownership of the intellectual property.

Intellectual property ownership can only be transferred by an explicit contract – one that identifies the IP and to whom it is to be assigned. We suspect that there is a wealth of valuable IP whose ownership still actually rests in the hands of contracted researchers, designers, authors and the like because their contract did not make any clear arrangement for the transfer of IP created in the course of their work to the contracting organisation.

The only ‘exception’ to this rule (or so it is often said) has been the case of the employee inventor/designer/author. However, it would be a mistake to assume that ANY intellectual property produced by ANY employee is actually owned by the employer.

The line of decisions by Australian courts seems to be steadily narrowing the circumstances in which an employer will automatically own the IP output of an employee’s work.

As ever, the answer to the question of IP ownership depends on the unique circumstances of each situation, but to illustrate some general principles, here is a list of circumstances that are likely to mean the employee actually owns the IP in the output of their work:

• If the employee is not expected to create IP as part of their regular role, e.g. if they are part of the sales team, even though they may work with R&D personnel, or even if they are a researcher at a university;
• If the employee creates something new at work, that they were not ‘directed’ to create, even though they are in a role that usually involves the creation such new things;
• If the employee operates as a highly skilled specialist in their role, such that they do not operate under close supervision.

So, in what circumstances will an employer own the IP? Something like this:

• Where the employee is employed to create IP, such as a member of an R&D team, design team or software development team, but where the employee has a more functionary role – not acting as an independent specialist without technical supervision – and is working on a project that forms a part of the employer’s development plan, and is not a ‘skunk work’ with a business application.

Failing that, an employer, or user of contract IP generators, who does not institute a program of obtaining IP assignments is letting ‘its’ business IP walk out the door.


by Adam Hyland

Integrated Patent Examination of Australian and New Zealand Patents

The Prime Ministers of both Australia and New Zealand announced the creation of an initiative to integrate examination of Australian and New Zealand patent applications within a three year period. The initiative is part of a larger framework of bi-lateral measures to simplify or harmonise trade relations between the two countries.

The integrated patent examination initiative announced is still at a high level and details of exactly how the initiative will be brought into practice is something the respective patent offices (IP Australia and IPONZ) will be focusing upon over the immediate future.

The initiative is directed to the scenario where patent applications for the same invention are filed in both Australia and New Zealand. The current practice is that the Australian application is examined by IP Australia and the New Zealand application is quite separately examined by IPONZ. The initiative is designed to replace the separate examination of the applications with an integrated approach so that both applications will be examined by a single examiner at either IP Australia or IPONZ.

It must be stressed that the initiative is not aimed at a harmonisation of patent law between the two countries. There are a number of issues which distinguish the Australian and New Zealand patent legislations. In fact, more distinctions may come when the proposed draft New Zealand patent legislation comes into effect.

Consequently, the integrated examination will inevitably result in the applications being examined separately under their own separate laws, albeit by the same person. The practical hurdle that needs to be addressed in order to implement the initiative will be to train the Australian and New Zealand patent examiners to confidently and competently be able to apply the laws of another country.

To the extent that there are certain overlaps in the patent legislation of Australia and New Zealand, given examination will be conducted by a single examiner, the initiative may well reduce duplication of work and provide a consistent expression of opinion. However, will these perceived benefits be negated or outweighed by the practical difficulties of the examiner applying the non-overlapping or distinguishing aspects of the two patent laws?

by Simon Ellis

How can we afford to enforce our patents?

This question is often raised by clients with limited resources to fight an infringement action.

Most patents are never litigated - estimates range from 3 to 5% of patents ever become part of a serious dispute, and that is over the full 20 year life of a patent. For most technologies, serious disputes are most likely to arise 6 to 10 years after filing. This is a long time after the initial product development, reflecting the stage when a product is successful, and hence most likely to be copied by a competitor.

However the statistics hide a number of cases where either there is no dispute because the patentee cannot afforest the fight, or where a dispute begins but is settled on unfavourable terms because the patentee could not afford to take the dispute to trial.

The risk for a small or early stage entity is that early in the lifecycle of the product, or even before commercialisation, infringement will occur. This is often the point at which cash reserves are lowest, and where a company can least afford to spend money, time and management resources on litigation. These risks are highest where a product is quickly on the market, such as software, and lowest where long regulatory hurdles prevent rapid infringement, for example pharmaceuticals.

One tool for risk management is to take out insurance to fund the potential costs of some or all of litigation over a company’s patent portfolio. This type of insurance has recently become available on the Australian market, supported by a specialist underwriter. The insurance covers the cost of litigation to enforce patents, up to a certain limit. To support a claim, there must be a reasonable prospect of success. The insurer recovers their costs, where possible, from the fees and damages recovered from the judgement or settlement. The cost of cover is assessed on a case by case basis, and of course has to be taken out before any infringement occurs. Cover can be for Australia only, or international in scope.

We have recently attended a presentation about cover, and the premiums are within a range which may be affordable for small and start up entities. The existence of such cover could, in itself, assist in resolving disputes, by making it clear that ‘even though we are a small entity, we have insurance and our insurer has accepted the claim’. This is a valuable tool when confronting a large, well funded competitor, who may hope to prevail by sheer size and expense.

Other forms of cover can assist with other costs, such as infringement challenges to a product. Insurance coverage could also be reassuring to investors at an IPO, providing them with confidence that an IP position can be defended. If any of our readers are interested, we are able to provide contact details for providers of IP insurance in Australia.

by Peter Franke