Image from Flickr user Matthew Wynn.

Co-founder of Sun Microsystems Bill Joy famously said: “No matter who you are, most of the smartest people work for someone else.” That statement has since gone on to be dubbed “Joy’s Law.”

So, assuming that declaration is true, it makes sense to look elsewhere to find genius—not matter where that else may be. There are many proponents backing this notion in, for instance, the software development industry, where programmers from around the world often contribute to a single product.

“But the concept of open innovation had not really hit the life sciences or medtech industries until recently,” says Peter von Dyck, chairman and CEO of E-Zassi. “Now, open innovation is a big deal, and everyone wants to embrace it as a better way to find new products,” he says. “Obviously, no one company, no matter how big it is, can innovate everything in their area of expertise. So it really makes sense to look outside.”

Many medical device companies—especially large ones—have embraced this thinking and have acknowledged the need to either attract outside ideas or actively seek them out. Internal product development can be risky and costly.

Peter von Dyck

Despite cuts made to many companies’ R&D budgets during the recession, there is, of course, still a lot of groundbreaking research of interest to medical device companies. “We have the NIH funding tons of research in the United States and a lot of other foreign countries are doing the same,” von Dyck explains. “You have universities and hospitals and doctors around the world innovating constantly. And so there is a lot of innovation flow that can offset medtech companies’ R&D costs,” he adds. “Companies should find ideas that are synergistic with their portfolio and areas of focus.”

In many cases, it is much more economical to introduce new product ideas that have been developed to a certain degree of maturity by other parties. “This way, you can get going much faster and can defer a lot of costs.”

NDAs Impact on Medtech R&D

For medical device companies that largely rely on developing new product ideas in house, non-disclosure agreements (NDAs) are fairly straightforward. “In this case, you don’t have an issue because your intellectual property is coming from your employees, von Dyck says. “That’s already captured and you already own it by virtue of their employment agreements.”

But if a company is obtaining new product ideas from the outside—that is, if the firm is embracing an open innovation methodology—disclosure and over-disclosure are especially important. “They are a big deal for both parties—the one that has the idea and the one who wants the idea. The U.S. patent system is now based on the fact that, when you have a new idea, now you have to be the first to file a patent on that idea,” von Dyck says. “And you cannot disclose it to any outside party without a non-disclosure agreement. If you do, you could lose your ability to gain patent protection on that idea ever again.”

For that reason, disclosure and over-disclosure are a big concern for the medtech innovator in particular and for parties that employ innovators such as research hospitals and small companies. NDAs are a big deal for larger firms as well because, as an established entity, they attract lots of outside ideas. “Larger companies are usually pursued by people with ideas. Now if that larger company looks at ideas and looks at confidential matter, they could have legal exposure,” von Dyck says. “And if they sign a non-disclosure agreement in order to look at the outside idea, it could limit their freedom to operate. That means if they sign, say, 10, 20, or 30 non-disclosure agreements in an area they focus on, let’s say respiratory, they are going to limiting their freedom to operate in those areas where they agreed not to compete or not to share information, et cetera,” he explains. “So this disclosure issue is a big deal for both parties—the innovator and for the company looking to secure the next big idea.” 

—Brian Buntz

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