22 Dec Part 1 – How Health Tech Startups Can Protect Intellectual Property Rights

NOLAHIThis blog series is part of the campaign to promote the New Orleans Health Innovators Challenge (NOLAHI), which will culminate with a pitch competition at New Orleans Entrepreneur Week (NOEW) in March 2018.

Parker N. Smith & David C. Rieveschl of Stone Pigman Walther Wittmann L.L.C. explain how intellectual property is an important issue for health technology startup companies.

The Health Tech sector is growing at an extraordinary pace, with over $4.5 billion in venture capital invested this year alone.  This growth is expected to continue as demographic shifts, evolving patient expectations, labor costs increases and a growing prevalence of chronic diseases drive the need for innovation.  Businesses, from IBM Watson Health to local startups, are looking to meet this need through the application of emerging technologies, such as artificial intelligence, Big Data analytics, Internet of Things applications, point-of-care diagnostics and telehealth, to name a few.  These businesses are not only set to improve their bottom lines but, also, are benefiting patients with improved healthcare delivery, consumption and payment solutions.

As businesses seek to make their mark on the Health Tech sector, they should consider the myriad legal issues that may come into play.  This blog series briefly addresses some of those issues to help businesses interested in digital health to begin to identify and address key legal risk factors.

In this installment of Top Legal Considerations for HealthTech Digital Solutions, the focus is on intellectual property issues.

Intellectual Property Generally

Intellectual Property (IP) is a general term for creations of the mind that may be subject to legal protections.  IP includes such diverse intangibles as data, literary works, inventions, and symbols used in commerce.  In the U.S., IP is protected in a few main ways, namely as: (1) trade secrets, (2) copyrights, (3) patents, and (4) trademarks (or similar marks).  Because these forms of IP rights involve different legal regimes, companies should have an understanding of how each can be used to achieve its strategic goals.

IP can be vital to modern businesses, especially in the Health Tech space.  For example, a digital health mobile app may involve a trademarked icon symbol, copyrightable software downloaded by end users, patentable IoT devices used in conjunction with the app, and end user data compilations that constitute trade secrets.  Despite this importance, however, maximizing the value of IP involves legal challenges that surround securing, maintaining, protecting and monetizing IP rights.  These challenges vary depending on the IP right being considered.

Trade Secrets

One form of IP that is important for—and often overlooked by—Health Tech companies is information that qualifies as trade secrets.  While specific requirements vary by jurisdiction, a trade secret is basically confidential information that has commercial value and is subject to reasonable efforts to maintain its secrecy.

In the Health Tech space, trade secrets may include, among other things, a company’s algorithms, data compilations, research, financial information, sales information, and inventions (whether or not patentable).  Such assets require careful management to ensure their protected status under the law is not compromised.

Trade secrets are largely protected by state law, but the Economic Espionage Act and Defend Trade Secrets Act also provide some federal protection.  If information qualifies as a trade secret, the trade secret owner can usually bring claims for misappropriation of the trade secret and seek injunctive relief, monetary damages, and even attorneys’ fees in some cases.

Importantly, some information treated as confidential may not rise to the level of a trade secret.  For this reason, Health Tech companies should take a proactive approach to identifying and safeguarding all confidential information (including trade secrets).  As part of this strategy, and in addition to any security measures, companies should seek contractual protections by entering into confidentiality agreements with partners, employees, contractors, and the like.


Copyrights and patents will be covered in the next installment.