Innovation in the health care industry is heavily focused on data. Data is now considered an integral part in health-related applications ranging from managing patient records to analyzing drug and genetic screening data within a research or clinical context. It is regulated and protected. It also carries significant value when analyzed for purposes of determining trends, effects, and conclusion. Today’s transactions involving innovation often take into account ownership of proprietary information and how it results in the value proposition of a business. Protection of today’s innovation is more critical than ever, and information – not just functionality – is itself an asset.

Intellectual Property (IP) assets are thus critical assets of an innovative health care business. After all, a vast majority of the allocated value of today’s businesses are comprised of intangible assets, including branding and goodwill, culture, and human capital. IP rights are clear contributors to overall market capitalization, and historically, patents have played a central role in the leveraging of innovation captured by a business.

The Patent Mirage

But there is a battle being waged in regard to what types of “inventions” are capable of patent protection. Many of today’s innovation in health care involve computers processing complex algorithms designed to identify treatments, diagnose a disease, or discover trends not easily seen or noticed. Health-IT and telemedicine continue to see innovative solutions made possible by computing power. However, patents have come under increasing scrutiny over the past 5 years, ranging from court precedence on patentable subject matter to damages calculations. The mere ability to enforce your patent now requires significant risk and time (not to mention expense), with less guarantee of success. Patent litigation has fallen as a result, as companies and inventors realize their patents may not be as bulletproof as previously thought. Non-practicing entities (sometimes referred to as “trolls”) are changing their business models – some even shifting toward more collaborative opportunities.

The resulting patent climate is two-fold: (1) patents are hard to get, especially if a computer is involved; and (2) patents are easy to invalidate, especially if a computer is involved. Factor in that the life sciences and health care industries (possibly as collateral damage to efforts of the high-tech sector), are seeing patents for gene discoveries and diagnostics – both seen as possible attempts to patent products of nature or abstract ideas – become devalued or even invalidated.

Because of these moving targets, patents may no longer represent the cornerstone of any nutritious IP portfolio. The patenting process is difficult enough, but when courts move the ball on patentability standards, the results are potentially disastrous for an innovation-driven company.

The size of one’s patent portfolio is often thrown around like 40-yard dash times for athletes. However, there is a qualitative aspect to patent portfolios, and with the current climate, there should be skepticism with any patent portfolio. The patent mirage lies before you.

The Modern IP Strategy – Thinking Inside the Black Box

While patents should maintain a role in a cohesive IP strategy, health care companies should explore all opportunities to protect its assets. Today’s innovations utilize data or executable applications that are cloud- or web-based, and may never require disclosure or transfer of source materials. It may therefore be worth focusing on careful management of information and exchange rather than subjecting that innovation to the disclosure requirements for purposes of trying to get a patent (which you may not get). One area to exploit further is the universe of trade secrets.

Trade secrets are defined to be inclusive – the list of qualifying information is quite broad – provided that: (1) it is truly a secret; (2) it represents something of value; and (3) reasonable steps are taken to keep it a secret. As opposed to patents, trade secrets have unlimited shelf life (so long as they cannot be reverse engineered) and they can significantly increase a business’s value in multiple ways. While independent discovery by others is always a risk, building a portfolio of trade secrets is possible, even for the most basic of businesses.

The introduction of data aggregation and analytics – ranging from applications in health care to marketing and advertising – hits at the heart of trade secret law. Properly protect it and you’re valuable. Mismanage it and your toast. None of the data is patentable, that’s for sure.

Creating a culture within of harvesting expertise and know-how, inventorying it, and protecting it against disclosure or misappropriation should become a core function of management. This involves starting with the correct policies, employee documentation, security parameters (both electronic and physical), and ensuring consistent compliance throughout an employee’s arrival and departure. HIPAA compliance and data privacy are already requirements for businesses involved in health care. Extension of these fundamentals to a successful trade secret program allows for robust amounts of information to be identified and accounted for, and possibly becoming core assets of the business.

Effectively leveraging the intellectual assets of today’s health care business requires a holistic approach to IP protection. The shifting sands of patentability means that your patents may not be able to fulfill your needs, nor may they be as strong as you expect. One option is to enhance your position by focusing on what you can control – identifying, protecting, and exploiting your information in a vigilant manner, consistent with the expectations likely placed upon you by your stakeholders and your patients.

Utilizing all forms of IP, particularly the expansive trade secret classification, will help ensure that your IP strategy takes advantages of all the tools for maximize value.

About the Author

K. Lance Anderson is a Member in Dickinson Wright’s Intellectual Property Practice group. Lance has extensive experience preparing and negotiating technology and intellectual property-focused transactions, as well as technology aspects of mergers and acquisitions, joint ventures, and other complex commercial transactions. Lance can be reached at 512-770-4207 or and you can visit his bio here.