Health start-ups: Generating revenue from intellectual property
Doctors in private practice and private healthcare operators are often innovators, developing software, equipment and treatments, and building a ‘brand’. Using these more widely, both in British healthcare and further afield, could bring benefits to patients – and private practitioners are often keen to help this happen.
However, they need to consider what happens to their intellectual property in their innovations. IP is a valuable asset – as is being increasingly realised by the NHS – and needs protecting.
The term “intellectual property” or “IP” is used to describe a specific set of intangible assets that are generated through intellectual effort and creative activity. It typically covers patents, trademarks, copyright, designs and databases. It is often used as a broader term to include “know how” and confidential information as well, although these are not, strictly speaking, IP.
Some types of IP, such as patents and registered trademarks require registration in order to gain protection, but others such as copyright and some types of design right, do not with the right arising automatically when the work in question is created. Each requires a different strategy to ensure effective protection is obtained and maintained.
The type of IP that may be created by an individual doctor or by a private healthcare operator varies dramatically. Potentially, there is a huge range from training materials and software which attract copyright protection, to patentable inventions and distinctive brands that are registered as trademarks. In all cases, identifying, capturing and appropriately protecting the IP are just the first steps on the road to realising the value in that IP. Private practitioners and companies may miss out if they do not look at what can be done to maximise the return on their innovation investment through exploitation of their IP.
In some cases, they will want to use the IP within the existing company, potentially giving them exclusivity – and what those working in marketing describe as a “unique selling point” (e.g. ‘the only company to offer X……’). On this basis, they may be reluctant to see the same technology used by rivals.
However, the potential revenues that can be gained by commercial exploitation should not be ignored.
IP can be licensed out to third parties – for further research and development, to facilitate the manufacture and sale of products in other markets, to permit services to be offered under a proprietary brand or, increasingly, to allow exploitation overseas. Licensing terms require careful consideration to ensure that the IP is properly protected, maintained and enforced, to ensure the scope of rights granted to any third party is clear and to provide appropriate mechanisms for payment of royalties and other fees to be implemented. There are many possible approaches and the licence agreement must be tailored to the relevant circumstances.
Companies and individuals may want specialist advice on this. A 2002 Department of Health document (“The NHS as an Innovative Organisation”) has some information which may be of use to those working in private healthcare – for example, what to include in a licence agreement.
The guidance also contains information on how to manage the risks on a variety of commercial exploitation projects. It acknowledges that licensing is just one route to market. Exploitation can also take the form of an outright sale or assignment of IP or the setting up of a spin out company which takes the IP, either by way of licence or assignment, and exploits it in return for fees, a revenue share, royalties and/or shares in the company itself. All of these project structures can be a highly effective means of exploiting IP.
So what should private practitioners and healthcare operators do to ensure they make the most of any IP? A good starting point is
- carry out a review of potential IP generating activities to ensure that IP is being captured and protected adequately;
- develop an IP policy so that in future additional opportunities to exploit IP are identified and assessed;
- examine how staff are empowered and incentivised to innovate within the organisation;
- review the existing IP portfolio to determine whether all rights are being appropriately maintained and whether all potential exploitation options have been explored; and
- review and update any existing licence arrangements.
IP can be a complex area and legal support is often essential, but it will also present some interesting opportunities for organisations and individuals to generate new revenue streams from assets that may potentially have been under-utilised to date.