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Who should own ideas for innovation in healthcare?

on July 14, 2011 Source: Healing Innovation

Researchers at universities, similar to employees of medical device companies, are accustomed to assigning patent rights to their institution in an employment agreement signed during the hiring process. What may not be as obvious is that many non-academic hospitals are now including intellectual property (IP) rights in their physician employment agreements.

Hospitals, especially large hospital systems composed of a multitude of individual hospitals, are realizing the large revenue source that medical device licensing can provide. For example, here is a subsection of Edwards County Hospitals intellectual property employment policy:

“Any work of authorship or invention created by an employee during the scope of his or her employment with Edwards County Hospital shall be considered the property of Edwards County Hospital, including any patent, trademark, copyright, trade secret, or other intellectual property right in such work of authorship or invention.”

Clearly, the “scope of work” can be a gray area and an invention developed exclusively on a physician’s own time will typically be “owned” by the doctor and not the hospital. For physician inventors, however, assigning IP ownership carries significant implications and restrictions.

One favorable aspect is that the hospitals typically have a responsibility to pursue patents and licensing opportunities with no cost to the physician. And, more progressive hospitals have created a profit sharing plan that allows the inventor to gain a significant stake in any royalties or licensing fees.

On the negative side, the physician inventor loses control of the future development of his idea. Any contract with an investor or medical device company will need to be approved by the hospital, even potentially confidentiality agreements. This obviously adds a layer of bureaucracy that can bog down discussions with potential partners.

There are some strategies to consider, including:

  1. Have an attorney review any new employment agreements with a focus on keeping the intellectual property clauses to equitable language.
  2. Negotiate better terms in your employment agreement to restrict assignment to inventions that are based on research projects at the hospital. At a minimum, clarify “scope of work” statements or define revenue sharing.
  3. If you are bringing previous areas of invention to a new hospital employment, consider excluding these areas from the intellectual property clauses.
  4. If you are already employed by the hospital and you have an invention that you would like to pursue as part of a start-up company, negotiate a license agreement with the hospital. If possible, obtain an exclusive license with no up-front payment and reasonable royalties tied to actual product sales.

Having a strong technology transfer office at your hospital can be a blessing and relieve you of the financial burden and time-consuming activities involved with filing patents and negotiating with potential acquirers or funding sources. Assigning intellectual property ownership to your hospital without a capable technology transfer office, however, can be a losing proposition. Regardless, the effect of your IP being owned by the hospital needs to be factored into your approach to developing a medical device idea.

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