By Thomas Prock, Chartered (UK), German and European Patent Attorney at Marks & Clerk
EIT Health, supported by the European Institute of Innovation and Technology (EIT), has recently set aside £4M for ‘wildcard’ healthtech ideas. The declared aim of this initiative is to attract bright minds, enabling them to develop already existing ideas in the fields of smart health AI or in fighting antibiotic resistance. The funding opportunity explicitly aims to support projects with a commercial outlook. Both of the target fields relate to urgent needs in the healthcare field and successful commercial solutions stand to be of considerable value, both to inventors and investors.
The competition aims to support teams of at most three. Small companies suffer from well-known constraints on time, business support and funding. In these circumstances it can be difficult to convince investors that a company’s plans are likely to succeed in the marketplace and that, as a consequence, investments are not only low-risk but will also provide attractive returns.
Inspiring investor confidence
One critical means by which small companies can inspire investor confidence is by demonstrating that business opportunities and risks are sufficiently understood. This is important even if, due to financial and other restraints, a business has yet to act on these opportunities and risks. One widely appreciated tool for providing companies with a competitive edge, and thereby de-risking business and investment, is the strategic use of Intellectual Property (IP) protection.
An effective IP portfolio covering such ground-breaking innovations as those being encouraged by EIT Health can confer many advantages on an emerging business. Fundamentally of course, robust IP prevents effective competition by third parties in the marketplace. More than this however, and especially in instances where the invention being covered is truly a ‘wildcard’ and breaking new ground, opportunities may exist to develop independent income revenue streams based on IP (possibly even covering a non-competing product or service offering) and/or enable licencing to otherwise inaccessible markets.
Conversely, however, competitor IP may be an obstacle to a company’s ability to conduct their business. Ideally investors’ questions on the various aspects of effective IP protection are answered by examples of how IP related opportunities have already been captured and IP related threats have been defused. Failure to provide at least an indication that such opportunities and threats have been fully considered, and that a plan for implementation is in place, is likely to diminish investor confidence in the company.
The prevalence of IP protection
An effective IP strategy is critical for companies of all sizes, even if parts of this strategy can only be implemented at some future time. Pre-investment companies need to demonstrate an understanding of the opportunities offered by their own IP and prioritise the aspects of IP that need to be protected first (e.g. if the business is one that makes strong use of its brand, adequate trademark protection is paramount whereas strong and broad patent protection is critical for a company seeking to commercialise a key technological innovation). Furthermore, in the absence of protection being in place, pre-investment companies must ensure that adequate safeguards, in particular secrecy provisions, are in place and will be maintained.
One advantage small companies have is that most of their knowledge and skill is retained in the memories of the founders. This means corporate knowledge is easily accessible and, at least on the face of it, there is little need for time consuming paperwork and/or policies. It is exactly this absence of documentation and clear red lines however that poses an early internal danger to companies as they start to grow. Undocumented corporate knowledge can become an obstacle in executing strategies and leavers taking this knowledge with them without having it passed on to their successors are not unheard of. IP ownership is equally most easily formalised (and, if necessary, transferred from inventors to the company in question) while the parties in question are on good terms. Examples of companies that have moved from a trusted relationship to one where a disillusioned party seeks to extract value from the company on the basis of unresolved IP issues are well-known. Such concerns should be resolved as early as possible (doing so can be very inexpensive), be that through simple assignments of right or in employment contracts. Of paramount importance is also that company secrets are clearly defined so that company representatives know which information can be shared with prospective investors or customers and which information must be kept secret. Only in this manner can secret know-how be secured within the company, preventing disclosure of the information that would compromise future patent rights.
The development and execution of a company’s IP strategy is vital, when business circumstances allow. Conflict with third party IP rights that may prevent a company from trading are best discovered early in a company’s life, when it is still possible to re-design products to avoid the IP right concerned without too much effort. Even if designing around an existing IP right is not possible, the negotiation of a licencing arrangement is more likely to be successful and cheaper at an early stage, rather than later and in a potentially conflicting situation.
The importance of regular review
As companies mature, so should the portfolio of registered rights they hold. Determining the scope of protection provided by this portfolio relies heavily on an understanding of the competitive situation of a company. It is, for example, easy to try and cover a large number of countries with a particular patent application. Doing so is, however, costly and the benefits of protecting marginal markets, or indeed markets the company has little prospect of accessing, are likely to be small. It is equally advisable to consider whether the legal scope of protection offered by a particular patent family is relevant to the business, be that because it covers their own product or because it prevents a known competitor from entering the market. The latter consideration looks straightforward at first glance. However, business contexts can change quickly and a company’s IP strategy should change with it if it is to remain fit for purpose. The ability to form an IP strategy and to change it as appropriate relies heavily on the continuing availability of business information. In the presence of such information an experienced patent attorney should be able to provide the tools required for shaping (and continuously re-shaping) an IP strategy that is fit for the company’s needs and, critically, presents an attractive proposition to potential investors.