Managing IP In The MedTech Sphere

The MedTech industry is heating up, with deals increasing in frequency and value. With this in mind, we’re sharing some of our insights about intellectual property (IP) in MedTech. Given that intellectual property is a valuable asset for MedTech companies, robust IP practices are essential.   

IP Protections Help To Maximize Valuation & Secure Favorable Deal Terms  

With the host of hurdles that come with growing a MedTech company, a strong IP portfolio can be a decisive factor when it comes to investment or an exit. A strong IP portfolio demonstrates corporate attentiveness toward legal issues, mitigates risks, and provides assurance that its IP is valid and enforceable. Beyond the legal benefits, it also signals innovation, market differentiation, and can be a competitive advantage. The outlay for the legal counsel and IP-related fees can more than pay for itself when it comes to attracting investment or acquirers.    

How Investors and Acquirers Evaluate Your IP 

An investor or acquirer wants to know what IP you have, how strong it is, how it relates to your technology, and whether others’ IP can prevent you from succeeding in your business. As they consider an investment or acquisition, they will begin to investigate what they can find out publicly about your IP and about your company. As their interest increases, and especially if a transaction is on the table, they will make more formal inquiries into the state of your IP and the competitive IP landscape. All of this research falls into the general category of IP due diligence (“DD”). Knowing that investors or acquirers will have these sorts of questions about your IP, you can take steps in advance to ensure that your company’s IP position is favorably received.   

Key Steps to Prepare for IP Due Diligence  

Establish Corporate Ownership of IP 

This foundational step ensures that the corporate entity owns intellectual property – not the founders or the inventors. It requires meticulous documentation so that all IP is properly assigned to the company, both presently and in the future. Since the precision and recordation of these ownership documents is so important and so technical, it’s recommended that you get assistance from legal counsel for this step. 

Ask yourself: Have you confirmed corporate ownership of all your critical IP assets? Does your company have agreements in place to ensure that it will own critical IP that’s developed in the future?  

Document Your Company’s IP and How You Protect It

Your company likely has several different types of IP, and each type is protected differently. You’ll need a list of assets in each category (patents, trademarks, copyrights, trade secrets) and you’ll need to keep track of how you’re protecting them. Also be aware of any agreements that affect a particular IP asset, for example, licenses, non-disclosure agreements, actual assignments, and agreements to assign. Collecting all this information can be done at one time via a comprehensive IP audit, or it can be updated periodically as it changes over time. In either case, the investor/acquirer will ask for this information during DD, and you want to be sure that it’s available and accurate. 

Ask yourself: Do you know what IP your company has, and do you have mechanisms in place to protect it adequately?  

Understand the Connection Between Your IP and Your Company’s Business

The diligencers will certainly ask about this. If you have a patent, for example, how does it relate to what the company is commercializing? If you have a trade secret, you won’t want to disclose it per se during DD, but you’ll be able to inform the diligencers that certain key features of your technology or business practices are protected as company trade secrets.  

Ask yourself: Can you demonstrate the strengths and competitive advantage of your IP, presenting a clear value proposition for how it protects your proprietary technologies?    

Identify Actual and Potential IP Risks Early

An actual or threatened lawsuit is a clear-cut IP risk. But often young companies don’t encounter lawsuits at early stages of their development. Therefore, it’s wise to become familiar with the IP landscape that pertains to your technology and your business, so that you can be aware of potential IP risks that could interfere with your commercial plans. If your company has issued patents, you should be aware of their remaining lifespan so that you can demonstrate their longer-term value. A proactive approach allows you to identify internal and external risks at an early stage so that you can take steps to minimize them. 

Ask yourself: Do you need to become more familiar with the third-party landscape and more attuned to lifecycle limitations in your company’s portfolio?  

Preparing for IP Due Diligence: A Wealth of Benefits 

Preparing for IP Due Diligence ahead of time will allow you to navigate the process successfully during investment or acquisition transactions. But you don’t need to wait until IP DD is imminent to prepare for it. Certain questions asked during DD are important ones for you to address on a regular basis to ensure the overall health of your company’s IP portfolio.  

• Does my company own its IP?   

• Is its IP properly protected?  

• How does the IP relate to the company’s technology and business proposition?  

• Are there third-party IP risks that we should be aware of?  

Answering these sorts of questions allows the company to keep its IP portfolio aligned with its business needs and allows risks to be identified and managed proactively.   

Action Items for Business Leaders  

• Be Sure Your IP Affairs Are in Order: Understand what’s in your IP portfolio, and have the asset ownership documented 

• Conduct Regular IP Assessments: Conduct IP surveillance regularly to identify gaps in your protection and potential external risks.  

• Develop a Business-focused IP Strategy: Align your IP strategy with your overall business objectives, ensuring it supports your long-term vision and growth trajectory.  

• Invest in Expert Advice: Seek counsel from experienced IP attorneys to ensure that the company’s IP strategy can stand up to scrutiny during M&A.  

CGL offers a suite of services to companies in the MedTech space. Reach out for assistance with your company’s IP.   

• Intellectual Property