BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

When one thinks of important medical device innovators, large multinational companies such as Abbott, Boston Scientific, GE Healthcare, Johnson & Johnson, Medtronic, and Siemens all come to mind. But identifying the regional sources of the innovations that drive these companies' growth can be a complicated matter.

Many of the medtech industry's largest companies play significant roles in developing and supporting centers of innovation, both within the United States and abroad. But universities, incubators, government agencies, and start-up companies also play measurable roles in defining the innovation capacity of a particular region. And then there is the matter of innovation quality—whether some locations are superior in terms of generating influential new technologies.

Interesting information about the regional sources of medical device innovation has been developed for this article by the Patent Board (Chicago), a leading patent advisory firm. Patent activity is one of the best formal measures of innovation. Using its proprietary data, tools, analytics, and technology, the Patent Board has studied recent medtech patents in order to identify the key domestic centers of medical device innovation as well as the degree of global participation in generating U.S. patents.

Although the market for medical devices is growing internationally, domestic invention continues to not only thrive but dominate global market share. Of the top 25 global public medical device companies ranked by product revenue, 16 are U.S. based and account for 72% of global profits.¹

While domestic medical device patenting is slowing down overall, the United States remains the largest innovator of medical device technologies, and U.S. companies both large and small are still aggressively seeking to develop and protect intellectual property. Non-American participation in U.S. device innovation is also strong; specifically, the proportion of foreign inventors named on U.S. medical device patents has been consistent over the past six years.

This article presents an analysis based primarily on selected patent data from 2007 U.S.-issued inventions in the medical device industry as defined by the Patent Board's industry mapping and corporate unification tools. Inventor addresses given in patents served as a proxy for innovation location. Rather than relying on a count of unique patents as the basis for determining regional innovation productivity, the analysis approached the issue from the perspective of inventor contributions—that is, total numbers of inventors within a given city or core-based statistical area (CBSA) whose names appear among all patents issued during a given time period.

Domestic Hot Spots: Patent Quantity

Perhaps not surprisingly, Minneapolis–St. Paul–Bloomington, MN (including neighboring Wisconsin), turns out to be the top CBSA for patent authorship in 2007 within the medical device category. Both Medtronic Inc. (Minneapolis), the most productive medical device company for 2007 in terms of patent activity, and Boston Scientific Corp. (Natick, MA) have a large regional presence in Minnesota. (Boston Scientific has branches in Maple Grove, Plymouth, and St. Paul.) St. Jude Medical and 3M (both in St. Paul, MN) also have a significant presence in this region. This combination of corporate medical device powerhouses seats this area of the country comfortably in the number one spot for both issued patents and published applications, indicating that there is a significant brain trust in the region (see Table I).

As Table I shows, four of the top 10 CBSAs are in California. Leading patent creators with operations in these areas include St. Jude Medical, Abbott Laboratories (Abbott Park, IL), and Cymer Inc. (San Diego).

The future of the Minneapolis–St. Paul region is extremely promising not only because of the companies situated there, but also because the University of Minnesota (Minneapolis), which ranks ninth for enterprise patent volume in this area, is taking more-assertive measures to pursue university-based spin-offs through its office of technology commercialization. According to Doug Johnson and Dick Sommerstad from the University of Minnesota office of business development, contributions from past spin-offs have been quantified. Those enterprises accounted for as much as $33 billion between 1980 and 1999 and produced upwards of 280,000 jobs during that period.² The impact of future spin-offs will likely exceed these numbers now that commercialization of the university's technology developments has been prioritized.

While it might have been expected that the home of Medtronic tops the list of regions with high inventor participation in U.S. medical device patent generation, it could be surprising that four of the top 10 CBSAs are in California. Los Angeles–Long Beach–Santa Ana is ranked second, San Francisco–Oakland–Fremont third, San Jose–Sunnyvale–Santa Clara fourth, and San Diego–Carlsbad–San Marcos seventh. Leading patent creators with operations in these areas include St. Jude Medical, Abbott Laboratories (Abbott Park, IL), and Cymer Inc. (San Diego).

The San Diego–Carlsbad–San Marcos area stands out in that 48% of its U.S.-issued patents for 2007 belong to smaller patenting organizations rather than what the Patent Board calls unified companies (those with a minimum of 45 U.S.-issued patents over the preceding 60 months, typically well established large corporations). This may indicate that the area is a potential hotbed of newly emerging companies within the medical device industry. Nationally, only 31% of medical device patents belong to smaller patenting companies. This number has remained constant at around 30% from 2002 through 2007.

Those four California CBSAs are in the top 10 also for patent applications, another measure of inventor productivity. Therefore, it appears that they will continue to be centers for medical device innovation in the near future. It also explains, in part, why California is the U.S. state most productive of new medical device technology in terms of patents issued for 2007. Minnesota, Massachusetts, New York, and Florida round out the top five for that metric. The five most innovation-productive states in terms of patent applications published within the past year are the same except that Ohio replaces Florida, likely because of the presence there of Hill-Rom Holdings Inc. (Batesville, IN) and Johnson & Johnson (J&J; New Brunswick, NJ).

So far, this article has primarily mentioned corporations as the top patenting organizations within the CBSAs discussed. That is because, while noncorporate entities such as universities, government agencies, and nonprofit research institutes do hold significant patents, the numbers are far below those of their corporate counterparts. Universities account for approximately 3% of U.S. medical device patents issued in 2007, while government and nonprofit research institutes represent approximately 0.5%.

It is interesting that the top CBSAs are home to major medical device–patenting universities and research institutes. The University of Minnesota, the 10-campus University of California system (headquartered in Oakland, CA), Stanford University (Palo Alto, CA), and the Alfred E. Mann Foundation (Santa Clarita, CA), as well as Harvard University (Cambridge, MA) and Boston University, are prominent institutions located within the top-ranked CBSAs. The sixth-ranked New York–Northern New Jersey–Long Island CBSA contains no fewer than 10 universities, including the State University of New York, Columbia University (New York City), and Cornell University (Ithaca, NY). Among the CBSAs in Table I, this region is the second most productive of innovation in terms of inventor contributions from universities and research institutes, behind only the Los Angeles–Long Beach–Santa Ana, CA, area. Along with corporate industry players, the presence of these organizations and the spin-offs they help to create undoubtedly contribute to the ferment of innovation within these top-ranked regions.

Domestic Hot Spots: Patent Quality

The Patent Board tracks and analyzes the innovation quality, movement, and industry impact of patent assets, using a number of indicators. Two indicators that speak to the overall assessment of patent quality are current impact and science linkage.

Current Impact. The current impact indicator measures the broader significance of a company's patent portfolio by examining the impact its patents have across the industry in a given year (see Table II). The current impact score indicates the extent to which a company's patents serve as a foundation for industry patents and technologies developed subsequently.

By this measure, Boulder, CO, replaces Minneapolis–St. Paul–Bloomington, MN, as the top-ranked CBSA, with Boulder's recent medical device patents having the most significant impact on 2007-issued patents. Minneapolis came in seventh place as measured by documented influence of patent portfolios held by companies in each region.

The major industry player in the Boulder area is Covidien Ltd., which is formally headquartered in Hamilton, Bermuda. Covidien accounts for the majority of the region's high-quality patents. Its most fertile technology (in the sense of inspiring other patented work) pertains to electrosurgical apparatus and devices that seal blood vessels, among other applications. Covidien is also a major presence in fifth-ranked San Francisco-Oakland-Fremont, CA, as well.

Industry newcomer Otologics LLC (Boulder, CO), a manufacturer of fully implantable hearing devices, has recently picked up the pace in patenting and may be a factor in terms of future patent quality for this Colorado CBSA.

The Santa Cruz–Watsonville, CA, area is ranked second overall for patent quality. Major corporate contributors to this ranking include Abbott Laboratories and St. Jude Medical. Interestingly, Abbott's most influential endovascular technology developed in this region once belonged to former competitor Guidant Corp. By acquiring Guidant's endovascular business, Abbott was able not only to diversify its portfolio but also to incorporate some very strong, high-quality technology.

Abbott's acquisition strategies and procurement of strong technologies also contribute to the high ranking of the Austin–Round Rock, TX, region, which is in the top 10 for two patent quality indicators. The Austin-centered CBSA ranks eighth overall for patent quality (current impact) and fifth for science linkage (explained in the next section). Abbott Spine (Austin, TX), formerly Spinal Concepts Inc., was acquired by Abbott in 2003 and has several of the region's highest-quality patents. Abbott Diabetes Care (Alameda, CA) also holds highly influential patents that were developed in this region, thanks to its 2004 acquisition of Therasense. The Therasense portfolio brought high-quality technologies for blood glucose self-monitoring systems into the Abbott portfolio. The Abbott Diabetes Care patents, which are more numerous than those that belong to Abbott Spine, have exhibited a high degree of influence among recently issued patents, but also show extremely strong science linkage.

The Minneapolis–St. Paul–Bloomington, MN, CBSA region, the patent quantity leader, ranks seventh for patent quality in the analysis for 2007. Two of Boston Scientific's subsidiaries—Cardiac Pacemakers (St. Paul, MN) and SciMed Life Systems (Maple Grove, MN)—and Medtronic all have high-quality patents that boost this region's rating. A younger company, Acorn Cardiovascular (St. Paul, MN), with technologies for cardiac support devices, is also generating high-quality patents in this region. Acorn's patented work is highly influential among direct competitors in this field.

Science Linkage. Science linkage is an indicator of the degree to which the patents generated in a particular region represent technological innovation building off of objective, peer-reviewed scientific research. A higher score indicates that the company's technology is more seminal or closer to the cutting-edge than those of its competitors. Allentown–Bethlehem–Easton, PA (with neighboring New Jersey), ranks as the top CBSA under this quality metric. J&J's subsidiary Cordis Endovascular (Warren, NJ), which develops products to treat various circulatory diseases, accounts for many of the inventions from this region most closely aligned with new science.

Newly emerging medical device companies such as Glucolight Corp. (Bethlehem, PA) also have strong technologies rooted in scientific research. Glucolight's optical coherence tomography provides a more sophisticated means of continuous and noninvasive blood glucose monitoring that may be crucial for successfully managing intensive-care patients.

The second-strongest CBSA for science linkage is the Washington–Arlington–Alexandria, DC–VA–MD area. Here, government agencies appear among the top patenting organizations, as the U.S. Department of Health and Human Services, U.S. Navy, and U.S. Army are among the most prolific patent generators in this region. They possess patents reflecting a strong basis in scientific research. Among academic institutions in the region, Johns Hopkins University (Baltimore) contributes most prominently to the area's high science linkage rating, being the second most prolific patenting organization in the CBSA.

In addition to mainstays such as Medtronic, emerging companies such as NeuroVista Corp. (Seattle) are also performing well by this indicator. NeuroVista, which is pioneering implantable neurotechnologies for the management and treatment of epilepsy, has three of the five patents top-rated for science linkage.

U.S. Patents, Global Authorship

Regional patent productivity can be examined from the perspective of major cities as well as CBSAs. Using inventor addresses as a proxy for corporate locale results in the top city listed on U.S. medical device patents being in fact not a U.S. city at all. Although the number of patent authors living in U.S. cities exceeds that of foreign-resident inventors, Tokyo is actually the inventor city that is most prolific in terms of authors named on 2007 U.S. medical device patents. San Jose and San Diego follow in second and third place. Tokyo would place eighth among CBSAs if it were included in that ranking.

The majority of 2007 U.S.-issued patents naming Tokyo-resident inventors belong to Japanese-based companies such as Topcon Corp., Olympus Corp., Hoya Corp., and Hitachi Ltd., as might be expected. However, the company that has the greatest number of Tokyo medical device inventors is U.S.-based General Electric (GE; Fairfield, CT). A multinational conglomerate such as GE or Hitachi can harness global resources to enhance innovation.

An issue for consideration suggested by Tokyo's top-city standing is whether U.S. medical device patents are increasingly being authored by foreign inventors and organizations. This does not appear to be the case. If it is so, then the phenomenon is taking place slowly. In 2007, the percentage of U.S.-issued medical device patents naming exclusively foreign inventors was 31.5%. While that represents a significant portion of the industry's patents, the number has risen only 1% since 2002. Incidentally, 3.9% of U.S. medical device patents issued in 2007 list U.S. and foreign inventors working collaboratively.

After Japan, Germany and France are contributing most significantly to the work resulting in U.S. medical device patents (see Table III). Their inventor contributions to U.S. patents issued from 2002 through 2007—that is, the portion of inventors named on the patents who resided in those countries—were 9%, 6%, and 2%, respectively.

The situation is a little different at the top of the list of countries whose inventors published patent applications during the period of this study. Israel replaces France as the third-highest-contributing country. Israel has become a global life sciences and medical device industry hotbed. The country is home to approximately 900 established life sciences companies, and at least 50 or 60 new ones are formed each year. According to Invest in Israel, more than one-third of Israeli life sciences start-ups already generate revenues.³

Conclusion

Most innovation activity in the medical device industry continues to take place within the United States. As evidenced by domestic patent productivity, that technological creativity is distributed throughout the nation. While some regions, such as the Minneapolis–St. Paul–Blooming­ton, MN/WI and Los Angeles–San Francisco–San Jose areas are more productive overall, others, such as Boulder, CO, and Allentown–Bethlehem–Easton, PA/NJ, rank high in measures of patent quality.

Centers of innovation tend to be anchored by strong universities and research institutions, which are not only patenting in their own right but also collaborating with companies. The Association of University Technology Managers has noted that the number of new spin-offs from academic institutions rose from 494 in 2001 to 628 in 2005, a 27% increase. The 10-year increase through that date was 181%. Many of these innovating enterprises operate in the biomedical field.^4,5

Other nonprofit research institutions have also been active. For instance, the Cleveland Clinic Foundation (Cleveland), through its technology commercialization arm CCF Innovations, has spun off approximately two dozen companies since 2001. Products based on CCF Innovations' intellectual property have generated nearly $400 million in sales and will undoubtedly continue to stimulate Northeastern Ohio's economy for years to come.

One CCF Innovations spin-off is Zin Medical (Cleveland) established in 2006 and jointly owned by Zin Technologies Inc. and the Cleveland Clinic. It has developed a wireless biometric monitoring device for use in aerospace, military, and civilian terrestrial settings. Zin Medical exemplifies the industry advancement potential of regional collaborative efforts, which will surely be a factor in driving future research and patenting activities in the nation's innovation centers.

References

Paris Kucharski is an advisory services associate, and Scott Oldach is president, at the Patent Board (Chicago).

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