Industry sources estimate that more than $4 billion worth of deals in digital health have been signed globally this year so far, as pharmaceutical manufacturers look for “beyond the pill” solutions to medical problems, health care providers seek more efficient means to monitor their patients’ wellbeing, and technology companies aim to commercialize their products and services in a burgeoning field.
As these entities pursue third-party partners to help leverage their assets and improve patient care, the success or failure of many of these deals often hinges on the agreements and covenants that protect the intellectual property of parties involved.
In a previous post, we discussed the elements of an effective IP protection plan, which is a critical component in monetizing an IP asset. Now we explore the points inventors and developers should consider when pursuing partners to maximize the potential of their IP product.
In some respects, deals in the digital health space raise the same issues that a party might encounter elsewhere in the life sciences arena, or even in technology deals outside of the life sciences sector. As the parties allocate and license rights to their background technology and newly-developed technology, each technology owner will seek to:
- maintain and expand its existing IP rights (whether protected by patent, trademark, copyright, or trade secret) covering its technology assets;
- be advised of, and acquire ownership of, newly-developed IP that is relevant to its technology, and limit the risk that a partner will own blocking or competing IP;
- acquire necessary access and license rights to the partner’s IP to allow it to conduct its activities in connection with the transaction, and potentially in connection with its business generally;
- limit the rights granted to a partner to those necessary for the conduct of the partner’s activities in connection with the transaction;
- ensure that it retains appropriate levels of control over the prosecution, maintenance, and enforcement of its IP; and
- ensure that its confidential information is protected and not misused.
On top of these issues, however, digital health transactions present their own unique set of challenges in protecting IP, most notably the management of patient data rights.
Aside from possibly limited copyright protection for the manner in which data is presented, patient data is not subject to protection via traditional forms of IP – patents, copyrights and trademarks. Whereas the patent system provides exclusive rights (and the corresponding ability to charge a royalty) to inventors as an incentive for them to disclose their inventions, no such system exists with respect to mere data. Neither the collector or generator of patient data nor, in general, the patient himself or herself, “owns” the data in the way we think of owning other IP assets, and therefore no simple means exists for the holder of patient data to be compensated for access to and use of the data.
Absent traditional IP protection, entities take measures to restrict access to and use of patient data in their possession, and charge third parties for access and limited use of such data. For example, a hospital system can contract with a pharmaceutical drug manufacturer to provide the firm exclusive rights to use its patients’ phenotype data for research and development purposes. Similarly, entities with access to large quantities of de-identified patient information can charge drug companies for access to databases.
Because parties do not hold exclusive rights to the data and therefore cannot simply “license” limited rights to the data, careful drafting is crucial in these data access agreements. Parties can accomplish the conveyance of rights through covenants in which they specify exactly how the grantor and grantee may and may not use the asset. Each side should consider the manner and duration for which each partner – including affiliates, consultants, and collaborators – will need to access and use the data, and draft covenants around those activities as well. Remedies for breach should be spelled out in the contract, including, where appropriate, injunctive relief and the availability of consequential damages.
Ahead of meeting with potential partners, technology owners should consider how much information to share. Whether or not an inventor has filed a patent application may set the tone for discussions. If a patent has been filed already for a product, the inventor’s asset is likely to be afforded a level of protection, so there is less risk associated with providing details about a product. If not, the technology owner should tread carefully. It should request the other entity to sign a non-disclosure agreement (NDA) to protect confidential data made available during discussions. When potential partners are not willing to sign an NDA, correspondence should remain high-level.
At the end of the day, only so much can be accomplished through contracts. Entities should seek partnering firms with whom they feel a sense of trust. Partners should bring expertise to the table, should demonstrate a respect for IP regulations and other laws and have a good reputation in third-party business dealings.
There is no one formula for success in digital health, especially as the sector transforms at a rapid pace with new technology and increasingly deals are struck between vastly different industries. But an established IP strategy, well-drafted agreements, and strong relationships will go a long way in helping companies achieve their goals.
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