Compliance, Legal & Malpractice

Patented Lab Tests and Your Laboratory: News from Executive War College

One hot issue in laboratory medicine is patent-protected and proprietary tests. By design, patented and/or proprietary assays either restrict other laboratories from offering the test to clinicians, or require a stiff royalty payment to perform the test. Probably the best-known example is Roche's  patents for PCR (polymerase chain reaction)

But there is another beneficial side to patented or proprietary diagnostic tests. It provides an opportunity for those pathologists and laboratories developing these tests to protect this intellectual property and generate revenue that can fund further research and improvements to the technology.

That was the theme of a presentation delivered at the Merger & Acquisition in Pathology and Clinical Laboratory conference conducted at the Executive War College  in Miami, Florida earlier this month. Legal expert Dave Cupar, who specializes in patent and intellectual property law at McDonald Hopkins, Cleveland, Ohio, provided valuable advice to pathologists, Ph.D.s, and laboratories interested in protecting proprietary diagnostic tests and bring them to the clinical marketplace.

One recurring theme to Cupar's advice is to "Act fast! You want to establish your role in developing unique intellectual property," he told a rapt audience. "This forms the basis of your defense should others seek to infringe your patents or your proprietary lab tests.

Cupar was specifically making recommendations to laboratory sellers and laboratory buyers at the M&A conference, but the advice applies in almost all clinical laboratory settings. "Obtaining and maintaining patents are time-consuming and time-sensitive processes," observed Cupar. "It is imperative to manage these processes, especially when contemplating a sale," continued Cupar. "That means they are able exclude others from making, using, selling, offering to sell or importing the invention. A patent is not a right to exploit the invention. Licenses may be an issue, since most inventions are improvements of prior inventions.

Cupar noted that prospective lab sellers need to understand how intellectual property rights and assets impact mergers and acquisitions. As part of due diligence, buyers will focus on four key areas. First, they will examine the seller's procedures for identifying, harvesting and protecting inventions. These include procedures for determining whether inventions should remain a trade secret, making foreign filing decisions, and ensuring the timeliness of patent filings.

Second, buyers will require extensive documentation regarding all existing and pending patents, unfiled invention records, and any filing timing issues. Third, buyers will determine whether any action needs to be taken during the transition or due diligence periods to protect the patents. Finally, buyers will identify revenue streams or royalty obligations associated with any licenses.

Cupar's presentation was part of a specialized learning track devoted to the needs of pathologists and laboratory companies focused on offering patent-protected and/or proprietary diagnostic tests to the clinical marketplace. During this learning track, two specialty laboratory companies delivered case studies. They were Redpath Innovative Pathology, Inc.  of Pittsburgh, Pennsylvania, and Signature Genomics, Inc.  of Spokane, Washington. Dark Daily subscribers and readers who are interested in listening to these, and other presentations from the Merger & Acquisitions in Pathology and Clinical Laboratories Conference, as well as additional presentations at the full Executive War College, can purchase audio recordings http://www.executivewarcollege.com/2008/PDFs/08Audioorderform.pdf.

• Merger & Acquisitions of Pathology and Clinical Laboratory Agenda (2008)
• Merger & Acquisitions of Pathology and Clinical Laboratory Audio Recordings (2008)