The digital health market is expected to grow beyond $379 billion by 2024, with a 27.7 percent compounded annual growth rate over the coming years. This activity is fueled by increasing demand for remote monitoring services, favorable government initiatives and funding, and the proliferation of mobile intelligent devices. An article by Rock Health noted that in 2018, “investors poured nearly $8.1B into the sector, surpassing 2017’s record-setting total of $5.7B by a whopping 42%.”
Amidst this growth, digital health startups are seeking to make the most of their funding and protect the innovations that drive their product. To do so, they must protect their intellectual property from being copied or duplicated by others in the market. Patents offer the strongest form of protection for innovations and can lead directly lead to increased investment. For digital health startups that eventually go public, valuation can reach $1.1 million per software patent application filed.
An issued patent in the United States gives the patent owner a 20-year monopoly right to stop others from making, using or selling the patented invention. A digital health company with a patent on a software feature—for example, a unique approach to dynamically generate a questionnaire based on user information for a remote health consult—has the right to stop competitors from making, selling or using software that includes that feature. Digital health companies, particularly pre-IPO, should develop a patenting strategy to assess how best to protect the innovations that drive their business and increase the company’s monetary value and longevity. If you have ever said one of the following phrases, your company likely will benefit from a discussion with patent counsel on how to protect your inventions:
- We’re the first ones to ever do this.
- None of our competition does this.
- This feature drives a lot of business to our company.
- This feature was really hard to implement, but we found a way to do it.
The Patent Process
To obtain a patent in the United States, a company submits a patent application to the US Patent and Trademark Office (USPTO). Patent applications are usually lengthy documents prepared by specialized patent attorneys with appropriate technical degrees relating to the invented technology. The patent application describes the invention in detail and is accompanied by drawings and legal documents identifying the inventor(s) and the owner of the invention and the patent application.
The process to prepare and submit a patent application typically takes between four and eight weeks from the date that the inventors describe their idea to the company’s patent counsel. After the application is filed, it takes an average of two to three years for examination and, hopefully, issuance of an enforceable patent.
Patent applicants in the digital health space do not need to try to identify existing patents related to the technology they seek to patent themselves, for several reasons:
- It is the responsibility of the USPTO, not the applicant, to perform a search for related patents.
- The cost of such a search typically exceeds the cost of preparing and filing the application itself.
- The wide variance in how different inventors may describe the same technology makes it difficult to formulate effective search terms and therefore unlikely that the applicant would find any relevant patents.
- A search may put the applicant on notice of potentially problematic patents (for treble damages during any potential future unfavorable patent infringement outcome) and patents unrelated to the technology the applicant wishes to pursue for patent protection.
If the USPTO agrees, after examination, that the patent application claims technology that is eligible for patenting and is “new” in view of existing technologies, it will issue an enforceable patent. The “newness” determination involves an analysis of whether the claimed technology is both novel and not obvious in view of combinations of relevant existing technology that the USPTO identifies and asserts against the patent applicant. It usually takes three to six rounds of negotiation (office actions and responses to office actions) between the USPTO and the applicant’s patent counsel over the course of two to three years before a patent is issued.
A patent owner’s monopoly right to stop others from making, using or selling its invention typically has four categories of benefits:
- The company can use the patent defensively to discourage a competitor from asserting its patents against the company, and to facilitate negotiations if the competitor does assert its patents. In this instance, the company’s patents should relate to the competitor as much as the competitor’s patents relate to the company.
- A patent can be used offensively to stop a competitor from ripping off a company’s technology once it is public, or to force the competitor to pay licensing fees to use that technology.
- A patent can be used to attract investment and funding by venture capital firms when the company is private and growing, and can increase the value of the company should it go public. For example, a 2012 study by Diego Useche found that a software company raises on average an extra $1.1 million in the United States for each additional patent application prior to an IPO.
- A patent can bolster the company’s reputation as an innovator in its field, which helps attract talent to the company.
From attracting investors, protecting innovations and building a competitive edge, a robust patent strategy can benefit digital health companies at every stage of the development process. For more information on McDermott’s Digital Health experience, click here.