STIFLING INNOVATION: DATA COLLECTING PATENTS IN THE MEDICAL DEVICE INDUSTRY.

• Author: Russell, Margaret A.

1. Introduction

   For many companies, intellectual property ("IP") is their most important asset. This is especially true in the medical device industry. (1) As the population ages, medical devices have become increasingly popular. (2) Many of these devices collect huge amounts of data concerning the patient for use by doctors to personalize treatments. (3) However, this information is also collected by corporations that hold and use the data for research and development of patentable devices, a fact most patients are ignorant of. (4) Through a carefully curated and manipulated intellectual property portfolio, a corporation can overtake a market, like the medical device industry. (5) This market domination results in a decrease in innovation; and imposes higher prices on consumers, often for less effective devices. (6)

   The curation of strategic IP portfolios can be used to create market monopolies, where a limited number of large corporations are the only entities developing and selling certain medical devices. (7) A well-curated portfolio exerts protection over a range of different intellectual property assets. (8) Patents are one of the most important assets of a well-curated portfolio, as they create limited monopolies that permit the owner exclusive rights to the invention by disclosing technical information. (9) Similarly, trade secrets protect business information that a corporation secretly uses to obtain an economic edge over competitors. (10) Medical devices that generate data are often patented in such a way that the data generated in relation to the purpose of the patent is disclosed to the United States Patent and Trademark Office ("USPTO"). The data generated is held as a trade secret and utilized by the corporation for any number of projects. Companies in the medical device industry often construct an IP portfolio, which includes patents and trade secrets in conjunction, to create a market monopoly. This results in an industry where a few corporations are able to drive up the price of their devices, stifle innovation, and prevent smaller entities from entering the market. As a result, less medical devices enter the market, with those that do being more expensive and less innovative. Further, data collecting patents can be used to collect large amounts of data, which can be held as a trade secret and used to further stifle innovation, causing more expensive and less effective products in the medical device industry.

2. History

   IP law protects the products of human intellect by permitting multiple people to use the same invention without diminishing that invention's value. (11) Out of the various IP assets, two important forms--patents and trade secrets--play crucial roles in protecting information and letting the owner exclude others from use. (12) A patent gives the owner the right to control the use of the innovative product or process. (13) Similarly, a trade secret protects products or information that derive economic value from not being known or accessible to those who could gain value from its use. (14) Patents and trade secrets are often considered economic substitutes to each other, because they are often capable of protecting the same information (e.g. methods of production, new ingredients). (15) When used together as complements, trade secrets and patents can give the holder unfettered control over an industry, especially when it comes to data generating patents. (16)

   1. A Brief Description of Patents and Trade Secrets

      1. An Overview of Trade Secret Law

         A trade secret is defined as any piece of information that is used in business to give the holder the opportunity to obtain an advantage over competitors, who do not know and cannot use that information. (17) Trade secrets differ from other forms of secret business information, such as contract provisions and business proceedings, because they relate to a process or device that is in use in the operation of the business. (18) Often contract law can be used to protect against the dissemination of secret information; but where contract law fails, trade secret law steps in. (19)

         Many states have adopted the Uniform Trade Secrets Act ("UTSA"), as a way of uniformly regulating trade secrets. (20) The USTA outlines factors courts often use to determine if a piece of information qualifies as a trade secret. (21) These factors include, but are not limited to: (1) efforts to maintain secrecy; (2) value of the information to the holder and their competitors; and (3) ease at which the information can be reverse engineered. (22) There are no restrictions on what qualifies as a trade secret. (23)

         Generally, there are three elements that need to be proven in a trade secret claim: (1) the information was a trade secret; (2) the holder took reasonable efforts under the circumstances to protect that secret; and (3) the information was misappropriated. (24) Misappropriation is defined by the UTSA as including unauthorized acquisition, use, and disclosure. (25) Third-party use of the trade secret will not be deemed illegal if the information has been acquired by lawful measures such as reverse engineering, independent discovery, or inadvertent disclosure. (26) Interestingly, the UTSA does not require the trade secret to be used by the owner's business in order to be entitled to protection. (27) Although trade secrets are often created by similar means to patentable inventions, they are protected in a different way. (28)

         Unlike patents the value of a trade secret does not come from novelty, but instead from its secrecy. (29)

      2. An Overview of Patent Law

         As stated in the U.S. Constitution, the purpose of a patent is to "promote the progress of science and the useful arts" by giving inventors exclusive rights to their inventions. (30) Therefore, Congress has the ability to grant limited monopolies to patent holders by allowing them exclusive economic rights to their claimed invention for a limited amount of time. (31) After the patent expires, the invention becomes a part of the public domain and the public can use the technology to invent better, more efficient, and cost effective inventions. (32) By granting a limited monopoly, the patent system creates an economic incentive that also encourages the dissemination of knowledge for the benefit and use of the general public. (33)

         i. How to Obtain a Patent

         To obtain a patent in the U.S., the inventor must file an application with the USPTO describing the invention through claims, technical specifications, and best mode enablement. (34) This application is then reviewed by a patent examiner ("examiner") from the USPTO. (35) The examiner looks to see if the patent meets the requirements outlined by Congress, such as ensuring the claimed invention: constitutes patent-eligible subject matter, has not previously been patented, and has met the various specifications. (36) if a requirement is not met, the examiner will send an office action--a rejection for not meeting the requirements of the USPTO or the relevant patent laws. (37) The applicant will then work with the examiner to respond appropriately, such that the examiner is satisfied and allows the patent to issue. (38) once issued, the applicant will have exclusive rights over the invention for a set amount of time. (39)

         ii. Patent Subj ect Matter Eligibility

         In order to obtain a patent, the invention must be subject matter eligible. (40) Determining subject matter eligibility involves a two part inquiry: first, the patent must fall into one of the four statutory categories; and second, the claimed invention must be directed towards eligible subject matter or amount to significantly more than any judicial exception it encompasses. (41) To have subject matter eligibility, the invention must first fall into one of the four following statutory categories: process, machine, manufacture, or composition of matter. (42) Machine, manufacture, and composition of matter define the type of tangible "things" that Congress felt was appropriate to patent. (43) Process, as defined by the Supreme Court, "is an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing." (44) This kind of patent is most often used to protect business methods, which involves the patenting of a new way of conducting business. (45) Business methods can be challenging to patent and are often rejected by the USPTO as having nonpatent-eligible subject matter. (46) Specifically, the USPTO often rejects business method patents under the as directed towards patent ineligible subject matter, specifically the "judicial exception" of abstract ideas. (47) over the years, there have been a number of different articles of legislation and Supreme Court cases regulating patent activity, including what is considered to be patentable subject matter. (48)

         To determine if the claimed invention is patentable, the examiner considers if it falls within the categories outlined in [section] 101 of chapter 35 of the United States Code and is not direct towards a judicial exception. (49) It has long been held that Congress intended patentable subject matter to "include anything under the sun made by man." (50) However, this broad purpose has since been refined by various cases such as Alice v. CLS ('Alice'), wherein the Supreme Court outlined three categories of subject matter that would not qualify for patents called judicial exceptions: laws of nature, abstract ideas, and natural phenomenon. (51) The patent application will be rejected as being directed towards a judicial exception, unless the claimed invention as a whole has additional aspects that amount to "significantly more than the exception" at issue. (52) The Court reasoned these exceptions "are basic tools of scientific and technological work" and monopolizing these tools would deter innovation. (53) As a result, to determine if the claimed invention satisfies the criteria for subject matter...