IP Is Hip: What Makes Patents So Hot?

Medical Device & Diagnostic Industry Magazine | MDDI Article Index

Originally published September 1996

Reading through a raft of quarterly earnings reports from medical device companies recently, I noticed a curious trend: seemingly every report mentioned patent litigation expenses. Some even cited patent suits as the key events of the year, as in this somewhat dire statement by one company president: "Although there can be no assurances, we anticipate a successful conclusion of the patent litigation before the end of the year. To the extent that the goal of this litigation was to intimidate competition by imposing enormous costs, it has only been partially successful. We have indeed incurred heavy expense in the course of defending this action. We have not, however, been intimidated."

Now, while MD&DI has certainly covered patent issues frequently in the past, I must confess that they have not been prominent on my editorial radar screen. So, spurred on by this evidence, I resorted to my favorite research tool, the Internet. There I discovered that patents--and the larger area of intellectual property (IP to the hip)--are indeed a hot topic.

As a July 1 article in the Washington Post put it, "the boom in such technological fields as biotech, computers, and medicine, and the rise of ideas and inventions as major assets in the global economy, have made intellectual property one of today's hottest legal specialties." With companies spending billions on innovative products, the article adds, they don't hesitate to spend large amounts defending patents.

For the medical device industry, patent law is becoming as important as regulatory affairs. But because this industry is defined largely by its innovations, many of which build on previous innovations, patents can be both a boon and a burden. While companies profit from patent protection on their own products, they can also be threatened by other companies that may or may not have a good case for patent infringement. Frankly, I'm not sure whether this situation is good or bad. Opposing arguments that current patent law protects competition or hurts it can both sound convincing.

Naturally, no trend this hot or complicated could escape the attention of Capitol Hill. At least five major pieces of legislation have come and gone before the 104th Congress. The bills involved would have effected a variety of significant changes to patent law, from forcing patent applications to be published 18 months after filing (currently they are not made public until the patent is issued), to changing from the current first-to-file system to a first-to-invent system. The House reportedly agreed on July 22 that no action would be taken on any of these bills in 1996. But the issue will certainly resurface early in the next session.

The complexities of the questions involved prohibit much discussion here. But their importance to the medical device industry is underlined by the testimony before Congress last fall of Raymond Damadian, president and chairman of Fonar, an MRI pioneer: "This web of patent legislation is a carefully orchestrated design to render the U.S. patent useless, and destroy whatever potential it may have left to initiate competitive new business enterprises and new employment for the people of America."

Many in the device industry may well disagree with Damadian's opposition to the patent legislation. But many more, I suspect, may not even be paying the issue much attention. My own few hours of research have made it clear to me, however, that intellectual property law is becoming a critical area for the industry. If you're a bit hazy on the issue, I strongly recommend a quick refresher course, either on the Internet or in a library. Whether because of litigation or changes in legislation, an understanding of patent law can indeed mean the difference between success and failure for a company and all its employees.

John Bethune