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Is Medical Device Patent Trolling on the Rise?

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By William Peacock, Esq. on October 13, 2014 10:42 AM

Here's an interesting statistic: According to a 2013 study by the Open Technology Institute, 75 percent of VCs and 20 percent of venture-backed startups had been affected by patent trolls. In the biotech/pharmacy/medical device industries, only 13 percent were affected.

But according to a recent article by Inside Counsel, that may be changing: Patent trolling against the medical device industry is on the rise, spurred in part by the higher royalties, damages awards, and nuisance settlements.

Cause: More Medical Device Patents

Intellectual Property litigator Jay Nutall, in an interview with Inside Counsel, noted that the rise in patent trolling against medical device manufacturers correlates with increased patenting activities by the manufacturers themselves. As trolling in other industries increased, manufacturers responded with more patents, he says, to increase the revenue from those patents.

It also could have been a defensive maneuver: Defensive patent aggregation is a long-standing practice where you gather as many patents as possible in order to stop them from falling into the hands of non-practicing entities (trolls).

Either way, like any war, the more weapons that are stockpiled, the more likely it is that they will be used. And companies can not only use patents defensively, or even offensively against other companies, but they can license or sell the patents to trolls who will then enforce the patents against others.

Effect: More Payouts, More Activity

Nutall notes that medical device patent trolling is especially lucrative due to the high stakes: Patent royalty amounts are typically much higher, as are damages awards. There are fewer defenses available as well: Unlike business method patents (or software patents, thanks to the Supreme Court), medical device patents are far more difficult to have invalidated.

Higher stakes. Fewer defenses. Care to guess what happens next? More settlements, which as you might guess, leads to even more trolling.

How do you respond to the increase if you're in the industry? Nutall recommends the standard playbook: Check the strength of the patent itself, the ownership, scout the opposition (litigation history, funding), and finally, seek early claim construction (and summary judgment) or inter partes review.

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