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Monetizing Your Intellectual Property: Not Just For Academic Hospitals Anymore

on Thursday, 22 May 2014 in Health Law Advisory: Zachary J. Buxton, Editor

Monetization of a hospital’s intellectual property (IP) has long been thought to be the exclusive domain of academic or research hospitals. However, a growing number of other types of hospitals have recently begun to implement systems for procuring and exploiting their innovations in an effort to protect their property rights and supplement their income stream.

 

Intellectual property (IP) generally encompasses innovations which may be legally protected by 4 types of mechanisms: 1) patents; 2) copyrights; 3) trademarks; and 4) trade secrets. Patents can be obtained for innovations such as new, useful and non-obvious devices, chemical compositions and processes. A patent gives its owner the right to exclude others from making, using, or selling the patented innovation for a specified, limited term. Examples of patentable innovations in the hospital context may be: surgical instruments, medical devices/equipment, chemical compositions for pharmaceutical use, diagnostic or treatment techniques, or even something as simple as a new type of hospital gown. Copyrights protect the expression of ideas and give their owner the right to prevent others from duplicating their innovations which are protected by those copyrights. Examples of copyrightable innovations in the hospital context may include: training videos, whitepapers, webinars, research tools on health IT, patient safety solutions, healthcare reform materials, and data-sharing materials created by a staff member of the hospital. Trademarks are distinct terms, designs, or logos (e.g., brand names) which distinguish the services provided by the trademark-owning service provider from those of other service providers, thereby allowing consumers to reliably associate a particular level of service with that trademark. Finally, any business information that is: a.) not publicly known, b.) is valuable due to its secrecy, and c) is subject to reasonable procedures to keep it confidential, may be protectable as a trade secret. For example, items which may be protected as trade secrets may include: patient lists, or recipes for foods developed by hospital staff members. Further, other innovations such as: telemedicine-related innovations, value-based treatment models, databases and software programs may be protectable under one or more of the mechanisms for protecting IP listed above.

 

Most, if not all hospitals have examples of the types of innovations described, which have been developed by persons who are employees of the hospital, such as physicians, nurses, or other hospital staff members. Also, it’s important to recognize that although innovations protected by patents, copyrights, etc., initially belong to the person(s) who created them, exclusive rights to make, use or sell the innovations can be freely transferred to the hospital via contractual mechanisms, such as employment agreements or assignments. Thus, for hospitals looking to procure and monetize intellectual property, it is important for them to clearly specify in employment agreements that any innovation created by one of its employees within that employee’s scope of employment belongs to the hospital. In so doing, it is also crucial to specify the definition of innovation. For example, some hospital employment agreements may define an innovation as “any work of authorship or invention” created by the employee within the scope of his/her employment within the hospital. Typically, such contracts will further specify that the hospital owns any patent, trademark, copyright, trade secret or other IP rights in said works of authorship or invention. Some hospitals provide incentives for innovation by creating profit sharing programs which allow their employees to receive a percentage of profits derived from the hospital IP. Once ownership of IP by the hospital is contractually established, through employment agreements or assignments, the hospital may sell and/or license the innovations to industry (e.g., so that products implementing the innovation can be developed) or to other health care providers for royalties. A practical example of how IP is monetized is manifested by the presence of IP management companies which provide an online marketplace so that hospital executives at any-sized hospital can locate licensed or free IP (e.g., such as webinars) provided by other hospitals or health care providers.

 

Aside from having a solid employment agreement in place, hospitals, as part of their IP monetization strategy, will want to have other important policies/procedures/mechanisms in place for preventing accidental loss, disclosure, or under-utilization of its potential revenue-generating IP. For example, confidentiality agreements and other security measures (e.g., providing information about IP to other hospital employees on a need-to-know basis) are good ways to prevent loss of IP. Further, rules/procedures for recognizing, reporting and documenting when IP has been created are important, as well as processes/strategies for further developing and ultimately, licensing that IP. Still further, it is good to have periodic auditing processes in place for reviewing licensing agreements for determining if IP can be better utilized, or to determine if it is cost-effective to pursue protection on certain IP.

 

Although implementing such measures may initially be costly, the long-term benefits which can potentially be obtained through IP monetization are certainly worth considering. For example, IP monetization can allow a hospital to draw revenue from a broader geographic base, as well as from a broader customer base. For example, IP monetization allows hospitals to obtain revenue from and to serve not just its patients, but also other industries, other health care providers, and those other health care providers’ patients.

 

Jeffrey M. Andersen

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