Medical Device Link.

Originally Published MX January/February 2005

FINANCE

The strategic construction of an IP portfolio is the cornerstone of business success for a technologically innovative company operating in a competitive market. If a medical device company doesn't want to spend the money to do it right, it would do well to consider some of the ramifications of doing it wrong before setting a course.

In 1990, Eastman Kodak Co. was ordered to pay Polaroid Corp. approximately $873 million (after appeal) for infringing Polaroid's patents. In addition, Eastman Kodak had to take all of its product off the market and give refunds to all of its customers. The final tab ran to about $3 billion. This example shows that it is definitely not worth doing it wrong.

Or consider Schick-Wilkinson Sword, which is trying to carve a space for itself out of a $7.5-billion annual market with a four-blade razor. The shaving market is covered by nearly 1000 patents on razor technology. That's a lot of picket fences. Sure enough, Schick did run afoul of Gillette Co., which had quite deliberately secured 62 patents on the three-bladed Mach3. The litigation involving the competitors, which began in 2003 and is likely to drag on for years, will determine whether Gillette retains its 70%-plus market share, which was precisely the strategic intent of its IP portfolio, or whether Schick can carve out a larger space for itself, the strategic aim of its IP portfolio.

Either way, each company will have spent many millions of dollars and years of management time to pursue a business strategy that may be reversed by the courts. But the winner stands to get, or hold on to, a considerable piece of a $7.5-billion annual market each year for as long as 20 years. Each company has carefully crafted an IP strategy designed to serve its marketplace strategy and give it the best chance of success.

These figures are peanuts by comparison with some medical technology markets. The costs of IP development and protection are certainly high, but so are the rewards. Rewards and costs will vary depending on the business, but the strategic analysis is a matter for the inventor and the IP attorney to work through. A change in any variable in the strategy will likely change the equation.

Copyright ©2005 MX