This week, I chose
to do a topic of my choice (with professor's approval, of course). The topic I
chose is patent wars in the medical device industry.
I read an article
titled, "Going Toe to Toe With Medical Device Giants". Abbott
Laboratories, Roche, and Medtronic claimed that Nova Biomedical (a company that
makes blood-testing equipment for diabetes) infringed on their patented
technology. Nova only had $165 million in revenue, so the company really
couldn't afford battling the case legally. However, interestingly, the CEO,
Francis Manganaro, decided to battle it anyways, noting "My partners and I
decided we would rather go down with the ship and lose the company than to give
in to people who behave like that". I definitely think it takes courage
and guts for a CEO to make a decision like that!
Nova's home glucose
meter is a cellphone-size device that digitally displays the blood glucose
level from a drop of blood. By late 2010, Nova had spent $31 million defending
itself. When all these large companies sued Nova, Nova had to take the burden to prove that
they were innocent. However, making that case can cost up to $10 million, and
much of that is factored in before a trial even begins. Because of this, many small companies don't try defending
themselves.
Manganaro launched
Nova with six partners in 1976. The company first made tabletop blood-testing
machines used in ICUs (intensive care units). Their hand-held blood glucose
reading device for home use came to market in 2003. At that time, it required
only 300 nanoliter of blood and took in five seconds to make a reading.
Handheld meters are an $8 billion market-- while the individual meters are sold
for 20 dollars, most of the money comes from selling replacement test strips on
which the drop of blood is placed.
In 1997, Chung Chang
Young and Handani Winarta improved the glucose meters using laser etching to
allow the device to use even smaller amounts of blood. Nova made a deal with BD (Becton Dickson) to
distribute the meter under its own name (BD Logic Meters) In Spring of 2003,
Therasense, a small company that made diabetes tests, claimed that the meter
infringed two of their patents. The situation got much worse for Nova when
Therasense was bought by Abbott for $1.2 billion. The case later expanded to
involve four Abbott patents. First, Manganaro tried to negotiate a cross
license or royalty arrangement. BD struggled to compete with Abbott and Roche
and thus decided to leave the glucose monitoring market. This left Nova to find
another distributor.
Also, when Manganaro
tried to reach a settlement with an Abbott executive, the executive basically
told Nova that he would let it all go if Nova left the glucose monitor business
and gave the technology to Abbott.
In 2007, Roche sued
Nova for infringing two of its patents, and while Roche says that "Nova's
size had nothing to do with this lawsuit", Manganaro believes that the
purpose of this law suit was to get rid of Nova.
Then, in February
2008, Medtronic sued Nova for theft of its trade secret: "the mechanism
Nova used to communicate with Medtronic's insulin pump"
The result is as
follows: In 2008, federal judges invalidated parts of two Abbott patents and
declared that Nova did not infringe the third patent. The fourth patent was
declared invalid. In September 2009, LA jury ruled that Nova had not stolen any
of Medtronic's trade secrets.
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