EDITORIAL ADVISORY BOARD

In the heavily regulated and increasingly competitive medical device world, executives must be vigilant to avoid running afoul of regulations governing the industry and laws protecting the intellectual property (IP) portfolios of competitors. Careful adherence to codes of conduct and professional help in navigating legal issues can help medtech companies avoid costly regulatory investigations and even-more-costly court battles.

Getting expert advice on governance and legal matters is as important for MX as it is for the magazine's readers. Throughout 2006, MX is announcing members of its new editorial advisory board. In this issue, MX is pleased to present the newly appointed members of the advisory councils for corporate governance and legal affairs.

Corporate Governance

John W. Brown is nonexecutive chairman of the board for Stryker Corp. (Kalamazoo, MI), a position he has held since January 1, 2005. Prior to that, he served as the company's chief executive officer.

When shaping and implementing good governance policies, Brown believes that the fundamental rules still apply. "Don't lie, don't steal, don't cheat," he says. "Those are pretty good standards for company boards and company leaders. They will go a long way in helping executives abide by all laws and regulations concerning business leader conduct."

Brown says that corporate boards today are much more cautious and conservative than they were in years past. "Both corporate boards and management are focusing on clear and frequent reports to the investment community and an avoidance of risk-taking due to litigation fears," he says.

Brown is a director of InHealth: The Institute for Health Technology Studies (Washington, DC) and the American Business Conference (Washington, DC), a coalition of CEOs of midsize, high-growth companies. He is also a director of St. Jude Medical (St. Paul, MN) and Gen-Probe Inc. (San Diego).

Brown is a graduate of Auburn University with a BS in chemical engineering.

Mary Cade is vice president and senior counsel for Medtronic Inc. (Minneapolis).

Cade joined Medtronic in February 1996 as a member of the legal department's litigation team. In 1997, she moved to Medtronic's international headquarters in Tolochenaz, Switzerland, where she served as European counsel, managing the legal team that provides services to the company's businesses in Europe, the Middle East, and Africa.

In 1999, she returned to Medtronic's headquarters in Minneapolis where, in her present position, she developed and now manages a shared-services legal team that provides counsel and training in regulatory areas that are core to Medtronic's businesses. These include FDA and healthcare laws and regulations. She also drafted and coordinated implementation of the Medtronic code of conduct and, along with her team, provides legal support to Medtronic's corporate compliance program.

Before joining Medtronic, Cade spent 10 years as a civil litigator in private practice in Minneapolis. She spent her first five years of practice at the Minnesota state public defender's office, where she represented defendants in criminal matters.

Kevin McAnaney is an attorney and a nationally recognized expert on healthcare fraud and abuse. He served as the chief of the industry guidance branch of the Office of Counsel to the Inspector General from its creation in 1997 until May 2003.

"There has been a tremendous amount of effort by the medical device industry to make regulatory compliance a top priority," McAnaney says. "Device companies are designating corporate compliance officers and giving them direct access to the board. Companies are revisiting their compliance policies and educating their employees. Although many medical device companies were late to the healthcare regulatory compliance party, they are catching up quickly."

According to McAnaney, top members of management set the tone for their entire company. "If management is not perceived as committed to compliance, the rank and file act accordingly," he says. "Public and meaningful support for compliance by management is the most important contribution top management can make."

McAnaney is a graduate of the University of North Carolina at Chapel Hill and the Columbia University School of Law. He is an adjunct professor of law at the University of Maryland Law School, a member of the board of directors of the American Health Lawyers Association, and a frequent speaker on healthcare fraud issues.

Kristine A. Rapp is vice president of ethics and compliance for Hospira Inc. (Lake Forest, IL). Before joining Hospira, Rapp served as associate general counsel and chief regulatory counsel for Baxter International Inc. (Deerfield, IL).

According to Rapp, the shift to a culture of compliance within a medtech company must start with "the tone at the top." She adds, "If the CEO and the senior leadership team make compliance a priority, there will be an added level of assurance that the company's culture will be one of compliance. Second, the code of conduct should be a visible, practical tool, almost like a mantra that employees at all levels of the company understand, use, and apply in their work. Reinforcing the messages in the code by visible reminders and by real-life examples communicated to employees helps.

"Third, the policies and procedures of the company must be straightforward, understandable by the average employee, and easy to locate and follow," she adds. "Fourth, making the tough decisions and, when appropriate, communicating those tough decisions sends a message to employees that this culture is based on integrity and compliance."

Rapp was the chairman of the Food and Drug Law Institute in 2003 and served on its board between 1998 and 2005. She received a BA from the University of Michigan, a JD from Northwestern University School of Law, and an MBA from the University of Chicago Graduate School of Business.

Legal Affairs

Mark D. Barrish is a partner at Townsend and Townsend and Crew LLP (Palo Alto, CA), where he is the practice group leader of the mechanical and medical device practice group.

"The single most common issue that has been driving my medical device clients to seek IP counsel is orphan patent publications," Barrish says. "Experienced medical device executives and engineers often understand and know how to deal with actual competitors and their issued patents. Orphan patent publications are those that are not related to any real product or continuing product development activity—they may have been filed by solo inventors, existing companies that were considering entering a field, or entrepreneurs that were seeking funding. These published patent applications are not yet patents and may not have been filed with patent troll intentions, but can produce considerably uncertainty.

"The two countervailing risks caused by failing to adequately analyze orphan patents are that a company will either be unnecessarily driven away from a promising market or technology for fear of a patent that has not even issued, or that the company will simply hope for the best and fail to take advantage of opportunities to reduce or even eliminate patent infringement liability risks," he adds.

Barrish received a BS in mechanical engineering from the University of California, Santa Barbara, and a JD from the University of California Hastings College of the Law.

Genese Kay Dopson is special counsel at Sedgwick, Detert, Moran & Arnold LLP (San Francisco). She focuses her practice on the representation of clients in the medical device and pharmaceutical industries.

Dopson has served as lead defense counsel in numerous jury trials, and her representations include her role as national coordinating counsel for Vital Pharma Inc. in multistate medical device litigation.

Dopson was honored as Medmarc Insurance Company's Defense Attorney of the Year for 2005. She is a member of the California State Bar Association, Defense Research Institute, and Association of Defense Counsel. Prior to becoming an attorney, Dopson practiced as a registered nurse in an acute hospital setting.

Dopson obtained a BS in nursing from Mt. St. Mary's College and a JD degree from Loyola Law School. She has practiced as a litigation and trial attorney since 1982.

Arthur S. Hsieh, PhD, is patent counsel at Kyphon Inc. (Sunnyvale, CA). Prior to joining Kyphon, he practiced at Morrison & Foerster LLP (Palo Alto, CA) and served as outside counsel to various medical device companies.

"One of the most difficult and common legal issues that faces medical technology companies is the need to understand the company's exposure to potential patent litigation for operating in a particular technology area," Hsieh says. "Typically this legal analysis is characterized as a freedom-to-operate analysis during the venture capital fi-nancing phase. In addition, this type of risk analysis is often necessary prior to the introduction of a new product into the market."

Hsieh says that understanding the patent landscape and defining a viable path for technology and product development can be a daunting task. "However, failure to invest in the analysis of the patent landscape can lead to the company facing unexpected lawsuits, which can result in the demise of a complete product line," he says. "For an emerging company, a threat of patent lawsuit alone may prevent the company from raising further funding.

"The objective of a freedom-to-operate analysis is not to eliminate the risk of patent litigation, but to understand the risk profile related to a specific venture, such that senior management can manage the company's risk exposure effectively," he adds. "Working closely with an experienced patent attorney early on in a technology and product development cycle can allow the company to maneuver around major IP hurdles and minimize the likelihood that the company will face an unexpected lawsuit after millions have been invested in the development of a product."

Hsieh received a BS in electrical engineering and molecular biology from the University of Wisconsin-Madison, and a PhD in biomedical engineering from the University of Southern California. He received his JD from Boston University.

Brooks R. Magratten is an attorney with the law firm of Vetter & White (Providence, RI). According to Magratten, class-action lawsuits are one of the most common reasons medical technology companies find themselves in need of legal counsel. "This phenomenon is not unique to medical device companies; it is a threat to a wide range of industries," he says. "New medical device companies may be particularly vulnerable to a class-action attack because they produce products that, if defective, can be harmful, and they may lack the experience and resources to withstand prolonged class-action litigation.

"Class-action litigation can be bet-the-company litigation," he adds. "Even large, more-experienced companies have floundered after plaintiffs' class-action lawyers have caught the scent of blood in the water."

Magratten says the recent Class Action Fairness Act (CAFA) has strengthened the ability of defendants to remove purported class actions to federal court and otherwise level the playing field. "Because of CAFA and courts clamping down on class certifications, class-action litigation may be considered less of a bonanza for plaintiffs' lawyers," he says.

Magratten attended Hamilton College and the Dickinson School of Law, and obtained an MBA from Bryant College, where he has also served as an adjunct faculty member, teaching courses on business law and ethics.

Timothy J. Malloy is a founding partner and shareholder at McAndrews, Held & Malloy (Chicago). In the medical device realm, Malloy obtained a $166 million damage award on behalf of Guidant Corp., an award that was listed in the top 10 IP damage awards of all time by Intellectual Property Today.

According to Malloy, there are two primary legal questions that confront medtech companies when dealing with new technology. "The first—which is asked by all companies, small and large—is, 'Am I free to sell the new technology without fear of injunctive relief or massive damages resulting from patent infringement?'" he says. "The second question—more often asked by smaller medtech companies and start-ups—is, 'Is my technology exclusive to me?' In other words, do I have solid patent protection for the new technology?

"Failure to ask and resolve those two questions can lead to a world of trouble," he adds. "While the Federal Circuit has backed off the requirement that an accused defendant produce a legal opinion justifying its conduct, it is still prudent to seek competent advice before launch of a product. As for those seeking exclusivity, companies have a one-year window, which begins counting down from first publication or sale of the device, in which to file a patent application. To delay may be to lose any chance of exclusivity and thus sharply diminish a company's worth in the marketplace."

Malloy holds BSEE and JD degrees from the University of Notre Dame.

Barbara A. Wrigley is a partner in the intellectual property practice of Oppenheimer Wolff & Donnelly LLP (Minneapolis). She is cochair of the firm's medical technology practice group, and client and industry group managing partner.

"The need for counsel that arises most frequently is clearance opinions regarding the infringement or noninfringement of third-party rights by a new product under development, going to market, or already commercialized," Wrigley says. "The medical device industry is a high-stakes, multi-billion-dollar industry. Therefore, a product that has the potential to capture significant market share will catch the attention of most big competitors, which will then scour their patent portfolios looking for instances of potential infringement."

Wrigley says the cost of patent litigation can be between $500,000 and $4 million per party, depending on the product at stake and the loss of executive and management time in managing the litigation. "Further is the risk of an injunction barring the sale of the infringing device altogether, and treble damages for willful infringement," she says. "And, in some cases, the defendant will be liable for the plaintiff's attorneys' fees. So for a medtech business that ignores advice of counsel, the stakes are quite high relative to the cost of making modifications to a product."

Wrigley received a BS from Villanova University and an MBA from the College of St. Thomas. She earned a JD from William Mitchell College of Law (St. Paul, MN).

MX looks forward to the contributions of these editorial advisers. In the November/December issue, MX will present its advisory board members in the areas of sales and logistics, marketing and advertising, and corporate communications. To nominate medtech industry experts in these or other fields, please contact MX editor in chief Steve Halasey at 310/445-4274 or via e-mail at steve.halasey@ cancom.com.

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