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IP Portfolio Management Strategies for Medical Device Manufacturers

Management of a company’s intellectual property (IP) is all about two things: controlling the innovation produced by the Research and Development (R&D) staff and transforming these ideas in valuable assets, and coordinating the R&D innovation output with the sales and marketing strategy of the company. A company’s IP is unique in that it functions not only as an asset by protecting a product’s market position and price, but also as insurance against competitive legal action and market penetration. The IP can also assist in developing strategic alliances or attracting a possible merger/acquisition candidate. Achieving efficient and comprehensive portfolio management can only occur if the business and R&D sides are integrated during the IP development and implementation stages. More specifically, a strategic approach to IP portfolio management must span from the time an idea is conceived in the lab to when the product is released into the marketplace. Accomplishing this task can only occur if procedures and processes are put in place and followed by all of the medical device manufacturer’s departments.

In order to manage a portfolio of intangible assets, like IP, the person in charge needs to know what should be included in the collection. IP portfolios are inclusive of all four types of IP. Patents are typically the most prominent and valuable category of IP because of their limited 20-year monopoly status that enables the inventor or owner to exclude others from making, selling or suing the claimed invention. Trademarks are the next most prominent type of IP for a company. This asset covers a company’s name, its slogans, product names and colors. For certain situations, trademarks may also extend to a company’s domain names. Copyrights would also be included in an IP portfolio. These assets would include written materials (brochures, teaching manuals, surgical techniques), video productions, images and graphic designs. Finally, trade secrets round out what would be included in the portfolio. Trade secrets protect information that is critical to the success of the company and would be beneficial to a competitor operating in the same market as the company. Essentially, a trade secret is information that is more valuable if it remains a secret than if it was in the public domain.

When a company is developing a comprehensive management strategy for its IP, it needs to ask several questions.

Who is in charge of managing the portfolio?
The first question is obvious: who will be in charge? A medical device company needs to be careful that they don’t fall into the trap of only putting a technical person in charge. Many are of the opinion that it is a mistake to leave IP decisions in the hands of engineers and patent attorneys, because these people are too technologically focused to the detriment of the commercial benefit of the technology. When this occurs, the portfolio ends up being too heavily weighted on flashy technology ideas that have little use to the company. The appropriate person or persons should be cross-pollinated among the technology, science and business sides. Further, the company must provide that person with enough clout within the organization to be able to implement and enforce the procedures and processes necessary to manage the IP portfolio.

What is the value of your IP?
The next question to be addressed is, what are my patents, trademarks, copyrights and trade secrets worth? The answer can be very complicated, because the valuation process for each of these types is quite involved and sometimes very subjective. Typically, for patents, are two types of evaluation: quantitative and qualitative. The quantitative evaluation provides an estimated monetary value to the patent, while a qualitative evaluation identifies its strengths and weaknesses. When a quantitative evaluation is performed, one of the following methods is usually used.

The first is the cost method, which looks at the associated costs necessary to develop and patent a similar invention. Unfortunately, there is no direct correlation between the cost of invention development and future revenue from the patent. This method is usually used for accounting purposes.

The second method is the market method, which values patents by comparing market prices that have been garnered in a recent comparable IP transaction. This is a fairly straightforward process, but is only useful in an active market and when similar patents are being exchanged between the two parties. Access to actual pricing may also be difficult to achieve, because these transactions tend to be confidential.

The third, called the income method, measures potential income that can be derived from the patent. This is a rather simple process that requires calculating the present value of the patent based exclusively on anticipated income. The drawback to the income method is the reliance upon subjective market and consumer assumptions.