Irfan Lateef 0:04
Thank you everyone for coming to our meeting today, especially with lunch been at the same time or around the same time, but hopefully everyone got lunch. Today's discussion, we're going to talk about IP rights, how you can utilize them for your company to promote your your company and your inventions and also on the other side, how to avoid it being a problem to your company and things to look out for. But first, let's go through and have each of our panelists introduce themselves, Leah.
Leah Brownlee 0:33
Thank you. Hi, I'm Lea Brownlee, I am President and General Counsel at lazerbrite. We have the first FDA cleared wireless surgical camera. Prior to labs Ray have spent 19 years of my career inside and out of life science companies and global law firms.
Sabing Lee 0:53
Hi, everybody, my name is Sabing Lee. My partner with Orphanet couldn't be Martin's. I'm the co chair of our med tech practice. I represent clients from early stage companies to multinationals. So work with Kath works recently, we do represent and reads life sciences. I work with some early stage series A companies so kind of runs the gamut. So I have I think, hopefully good perspectives from both sides. Investing companies and companies that are looking for those investments.
David Beylik 1:23
Great. Um, can you guys hear me, I'm David Beylik. I am a lawyer by training not practicing anymore. clerked for Chief Justice John Roberts before joining Latham and Watkins was doing venture capital and private equity work there and then transitioned over to the business side, and now work as an investor and operator at Ajax Health, which is a medical device focused private equity firm. And I'm also dedicated at the moment to a specific platform we just formed called Mavericks, which is a collaboration between Hologic KKR and HX, focused on the lung cancer space and have done a lot of diligence on a pee pee issues as an investor. And we've also faced many IP issues at our portfolio companies.
Irfan Lateef 2:03
Great and I'm Irfan Lateef. I'm also a partner with Sabing at Knobbe Martin's, I mostly do litigation. My clients include Massimo, which is here in Irvine, worked with them for about 25 years. And I also do consumer product litigation in the patent and trade secret fields. So why don't we first start by talking about the positive of using IP? And could you guys give an example of how intellectual property protection influences innovators and investors. And maybe we can start with talking about patents and how patents are important to companies in getting investments?
Leah Brownlee 2:46
Thank you. So I'll start off. So I'm at the, I'm at a company. Today we have two, two patent families. That mean, we have about 21 issued utility patents across the world, across the world. We also have designed pens, trade secret pens, the reason why I influenced that patent portfolio to really be built and built out is because when I'm sitting when I was sitting in the law firm and the General Counsel See, so what I saw kind of time and time, again, is the value of the IP to the investors, when I was corporate counsel on the deal, especially when we got to this stage of kind of the more professional level investors coming in.
David Beylik 3:34
Great, yeah, I can speak from an investor perspective, this might be a little bit controversial, but I think we typically don't place a ton of value on the IP portfolio when we're making an investment. And the specific reason for that is in our contexts, these tend to be PMA products, or 510, KS with clinical data. And there's so many other categories of defensibility that you get from the regulatory approval, the know how the manufacturing processes, etc, that IP is a nice to have for sure, but it's not typically the primary source of defensibility. But I will say it's also the type of thing where it oftentimes doesn't matter. But when it does matter, it matters a lot. So I think we do occasionally find on the diligence side, that there's some FTO issue that could be catastrophic, and could lead us not to invest, because I think the last thing that we want to do is take all of that clinical risk, regulatory risk, technical risk, and then layer on an unanticipated IP risk. On top of that, it's like, you know, one thing too many. So I would say 90% of the time, it's not a huge focus, not a big issue. 10% of the time, it could, you know, be the difference maker and making an investment.
Sabing Lee 4:43
Maybe I'll debate you on this one. Obviously, I'm biased because I represent a lot of startup companies. And so I do think having patents is important for these companies. I think a lot of the companies here should have at least some patent filings in place and the question we often get Is, is that enough? So just having a provisional in place for early stage companies, or depending on the stage of the company, do you expect to see issued patents. So I think we're your company has a number of issued patents now, but you're a bunch, seven years old, right. And so to me, it depends on the stage. But my opinion is that early stage companies need to have provisionals on file, as you get a little bit further along. I do think, and in my experience, the investors want to know, if you have something valuable, that gives you the right to exclude competitors. And so what we tend to look for, and what we try to promote is, clients getting their patents through at least something through as early as they can to be able to demonstrate to the investor not only that they filed something, but that they actually have been able to obtain some meaningful protection. And we can talk about what that's going to be. But I've got one client right now, where I do think it's been pretty important to be able to say to the investor, we got our first patent allowed, and it's just going to be the first of many, and I think that adds a lot of value. But I agree with you also in terms of it's not only IP. So regulatory issues I often find are just as important. And what is the regulatory barrier, that can be established that if you go through a PMA and you get your product approved, then that gives you a significant leg up on the others that would have to go through that kind of process themselves. And so it can be complimentary, in my opinion.
David Beylik 6:27
I agree with that. And I appreciate the debate, because actually, I think that raises a really important nuance, which is, I think the earlier you are the in the more you just have an idea or a concept, the more a provisional filing, for example, might be the difference in protecting your idea from a competitor who has more resources, more capital, could kind of out execute you and outpace you and get to those other moats I'm describing. So I think I, my perspective is a little bit more of late looking at the later stages, by the time we're looking at an investment, often there are these other forms of protection, whether it's clinical data, or a regulatory approval or something like that. But I do think you're right, that when you're in the infancy, that's when it's really important, because if you don't have IP protection, and you don't have all these other things yet, and someone else could get them more quickly with your concept, I think it's, it can be very important.
Irfan Lateef 7:14
Yeah, one thing I wanted to have you guys address is, as sipping mentioned, provisional patents, how do you evaluate the strength of the patent or patent filings that a company has in investment strategy or in how well your portfolio or how strong your portfolio is?
Sabing Lee 7:35
Okay, I'll go first. There's a lot of different ways you can do provisionals. My clients tend to file fairly large, more comprehensive provisionals, because they're just trying to establish the areas that they're trying to protect, but not necessarily pay for all the prosecution getting all the claims issued. Because once you file, the most important thing on the patent side, is you want to get an early date, and you want to have your initial patent filings be as comprehensive as possible. One thing that I find though, is with early med tech companies, the designs often change the first gen product or what you think is going to be your first gender, your prototype is often not the same thing as what ends up being commercial, it's often several generations later. And so the more comprehensive the initial filing is, the more likely it is you're gonna be able to mine that to get valuable protection out of it. But what I tend to see and what I like to promote is for companies to file early and often meaning that as you go through the innovation process, as you're doing your animal studies, you're doing your prototypes, you're going to make changes to the product, you have to be very conscious of when things are going to publish. So when are your parents going to publish? When are you going to conferences like this showing something that can be used against you, because all of this creates prior art to your later filings. And so we always encourage our clients that if they're going to a big trade show, they're about to announce something they're giving a press release, then think about is your patent strategy current, because I often challenged by the fact that my clients don't tell me everything that they're doing. And so it's best to make sure your attorney knows what you're going to disclose so that we can make sure that we file on it, and then that will hopefully coincide with what the investor is looking for. So when the investor is looking at the technology and the IP, there should be some matching, it should match pretty well, because if it doesn't look like what they think they're investing in, then that IP doesn't have as much value.
Irfan Lateef 9:36
Great. I wanted to switch now to some examples of where IP has really meant a difference in a company's progress. I'll give a quick example of one of my clients Massimo that in the late 90s had its major competitor and market giant nellcor And they had to sue them for patent infringement in order to make a dent in the market share. And so they sued them on some patents eventually won in 2004, eventually had an IPO in 2006. And now is the market leader. And if anyone wants to talk about specifics of that, I am happy to do so. But it's one example of where patents really came in handy in differentiating you from a competitor and making your company, you know, turn from the market, you know, having a very small market share and to the the market leader.
Leah Brownlee 10:36
So I'll give a couple of comments as an earlier stage company than that, where we've found value in in the IP outside of the investment world that's really helped propel the company is we developed all of our IP in house and then went out and made collaborations with medical institutions after it was fully developed. And so having a well thought out IP kind of portfolio that matched our technology, good technology was a little bit of a critical role in getting good collaborators that would then do research studies with us and help us get that technology and that data going into the marketplace. And then the secondary I've seen it, it's just a couple of critical employees coming in on the that are really science heavy employees that, you know, looked to make sure one that they liked that we had IP, but they really liked the practice of protecting the IP, the way in which we made them sign a confidentiality agreement before they visited our office. And that was, at least for a couple of our key employees kind of like the clincher of why we won. And that employee now works for us and helps develop new IP.
David Beylik 11:54
Yeah, I guess I would just say that the couple examples that come to mind are companies where the IP claims were at a fairly high level and describing a concept that is not obvious, because it can't be obvious, but is simple and broad enough that you could just kind of describe it. And it'd be hard to imagine iterating around that basic concept. So just to give one example, we have one portfolio company, that's it's a multipurpose electrophysiology catheter that can do mapping and a couple different types of ablation, all from kind of a Swiss Army Knife type of approach. And when we got our first patent, through, that, to us, it was kind of that basic concept of combining these different things into a single catheter is something that someone like me can explain and intuitively know. And I think gave us a lot of comfort that that's going to be very strong and lead to probably whole families of other things that get into more of the design details. I think what's what's less attractive is something that's so specific that it's, you know, the electrode spacing of this or that, you know, sort of very specific feature where you can imagine the next person in writing around it pretty easily. So, that's one example. We've seen a couple other examples like that in our portfolio, but it's something that's very high level and almost at the concept level, as opposed to the specific features,
Sabing Lee 13:08
I'd say you have to look at your portfolio and what you've invented to see, do you have something that gives you the ability to get that super broad or potentially broad, non obvious claim, I mean, if you can get that, that's fantastic. And what that enables you to do, and hopefully, the situation that you're in is that you don't have competition, right. So you've identified an area that you can protect with your IP, and you don't find competitors in your space. If you're that kind of company, then hopefully, you can get that kind of patent. And you're in a pretty good situation. I do see a lot of clients and companies where they don't quite have that because they're in a space where there are competitors. And then you are looking to protect the more specific examples. And that's valuable in a way. But it can't just be with one or a couple of hands, you're building what we call picket fence protection, where you have to build up, what are the ways that you're doing it that make you more commercially viable or clinically advantageous over somebody else. And so when you can start picking up on some of those details, then getting a bigger patent portfolio can help you but then that is the kind of thing that takes time. And so you have to have a vision for that to be able to outline to your potential investors, what kind of IP portfolio you think you can get you can you get that one super broad patent. Again, it's great if you can, but oftentimes, it's not going to be that easy. And you need something a little bit more developed than that.
Irfan Lateef 14:28
Great, I want to kind of move on to another type of IP protection, trade secrets and how companies utilize or evaluate the trade secrets in either investing or in the growth of the company.
Leah Brownlee 14:44
And I think you know this comes back to the confidentiality and making kind of IP and confidentiality a culture within a company. So for us, you know, trade secrets, it can be anything from the code on the device to kind of our secret sauce on how to make one of, you know, one of the components. So all of that. One, it's very limited on how much people can see, it's very limited, you know, when you go out into a marketable product that's going to live at a customer on designing the product, so that nothing that they could be taking apart, take apart the product, they can find something inside of it. But it's just like honing in on that culture all the time. And it's, you know, everybody on our entire team is enabled to go get in da outs, send it out, they can't sign it when it comes back. So we have to know who are we talking to about our confidential information. But everybody knows that they have it at their fingertips, they need to send it out when they have a conversation, when we go to an RFP stage for something.
Sabing Lee 15:55
I'm curious about your perspective. But one thing that I see challenging is that companies don't always know what they would call their trade secrets. And if you don't know what your trade secrets are, or don't know what you're gonna say, or your trade secrets, then it's harder to protect them. Because to have valuable trade secret protection, you actually have to keep it secret. And so if you're not maintaining that sort of confidentiality, if the employees are out at conferences like this, showing things, you know, disclosing to potential investors, some of the secret sauce, then that kills your trade secret protection. And so you have to make sure the culture that you're talking about is really ingrained and able to maintain that sort of confidentiality, confidentiality level.
David Beylik 16:37
Those are all great points. And just one practical note that is related to trade secrets is on the topic of NDAs. As an investor, we always insist on a clear term, a cutoff date where we're not under the NDA anymore. And our policy is two years because we evaluate so many companies, and we see so many things, just keeping track of these agreements for years and years. It's just not practical for us. But I will say that most companies will ask that the NDA last perpetually with respect to trade secrets in particular. And I think that's very important for them to ensure that they remain trade secrets and are kind of inadvertently disclosed at the expiration of that agreement. And that's something we'll always agree to as an investor and something we always ask for at our portfolio company. So it's kind of a very specific practical point. But as I mentioned, you guys are signing an NDA is all the time, that is something that I'd make sure that you you do is practice. Yeah,
Leah Brownlee 17:30
I want to say we actually flag the NDA set don't have the trade secret protection, and we restrict what those people can get.
Irfan Lateef 17:40
Yeah, that's a great practice. Oh, one thing I wanted to mention that even in an earlier presentation here, in this room, someone was talking about their IP coverage, they listed patents. And then they listed a column with trade secrets. And I'm sure they described it at a very high level. But it was just kind of surprising to see in the presentation.
Sabing Lee 18:02
Actually, several comments on this, but I'll try not to take up too much time. On the trade secret aspect I've seen through recent deals, many companies trying to tell the potential investors that they have trade secrets. And then the CEO has had difficulty even articulating what the trade secret is. And then we as IP counsel started looking into it. And what we realize is that what they thought was a trade secret was actually easily reverse engineer trouble. And so it was harder for us to articulate to the investor that there was actually a trade secret here, even though that's what the company was saying. And so make sure you test that. That's one point. The other point I wanted to make is that when you deal with vendors, so companies, early stage companies deal with so many different vendors, you have engineering work, potentially you have consultants looking at regulatory issues, things like that. So I oftentimes find that companies are pretty good at getting NDA signed, but not always. And then the other aspect is on the ownership. And so you might hire somebody to do some consulting work for you. And you think, okay, I get an NDA, I'm good. But what we're looking for also is who owns the IP. So if you hire a consultant, do something, and they don't agree to assign to your company, all the IP, then you have a problem. And I've seen this where you have a company that goes through funding gets ultimately acquired. And then when the hundreds of millions of dollars are announced in the press, then these people come out of the woodwork and they say, Hey, I actually invented something that you guys have now developed. And now I deserve a piece of that. And I've seen clients go through litigation to try to fight over this. And so if you can take care of these agreements early on, don't just assume that the NDA you get signed is good enough. Oftentimes, the NDA leads to a another agreement, which would be a consulting and joint development or something like that. Yeah,
Irfan Lateef 19:54
another another point on trade secrets, is when you have employees leaving your company And what they take with them, and how you could try to prevent them from, you know, staging that information that might be considered a trade secret with another with their next employee. I don't know how you've dealt with that in your company. Yeah,
Leah Brownlee 20:17
I think there's the practical side of, you know, if somebody's leaving you give them all their documents, can you pay a severance that binds them again. And then there's also the, don't be a jerk, like treat people well, and they won't necessarily, they won't be likelier to be a jerk back to you and take what they know.
Sabing Lee 20:38
I'll give an example of a recent situation I had where one of my clients had a Chief Operating Officer. So he was called, leaving the company. And he was identified as an inventor on some of the patent applications. And so we were trying to get him to sign the assignment, which is typical. He refused, because he wanted to get something out of the company. And so typically, in that situation, you would at least go back to his employment agreement to see okay, he has up he was under obligation to assign to the company. In this situation, he had not done that the company hired him or gave him the title of C O, but actually had never made him an employee. I've seen other situations where I have a client right now, where we have a bunch of inventors who have been named on patent applications, and they have employment agreements. But when you dig into the employment agreements, there's actually no IP assignment clause, which is surprising these days that you, you would miss something like that. In diligences, I see these ownership issues come up again, and again and again. So as an investor, you know, you look at these companies, you'd kind of assume or you hope that they have their ownership checked out. And you ask the attorney, just double check this, check the box and make sure it's good. And we find very frequently that it takes a lot more than that. Because when you start digging into things, things are not as buttoned up as they should be. So if you can, for any of the companies in the audience, just make sure you look at that and make sure all the ownership issues or buttoned up early so that you don't have to deal with these problems later on.
David Beylik 22:09
I completely agree. And the only thing I would add as a little bit of a war story is the one time we had to deal with trade secrets, we were doing due diligence on a target that was involved in pretty advanced trade secret litigation. And they were the defendant, there were some cross claims, but it was basically that fact pattern of a key employee leaving being hired by them. Allegations of trade secret. And what made it incredibly difficult and actually impossible to ultimately diligence is that all the trade secrets in the litigation were kept under seal to protect the party that was asserting the trade secrets. And so it was all these sealed court filings. Our attorneys didn't really know what to do with it. And we thought it was low probability, but it was the possibility at least of a permanent injunction if they had prevailed. So it was this kind of low probability potentially catastrophic risk. And we were trying to quantify this as an investor. And because of all the sealed filings, we just we ultimately couldn't we pursued an insurance option, we pursued escrows. We tried to get creative and as a way of sort of allocating the risk, but ultimately couldn't get there just because we couldn't get enough information about the trade secret. So I don't really know what the lesson is there, if that's a caution or an opportunity or depending on what side you're on. But I will say that the specter of trade secret infringement is really difficult for that reason.
Irfan Lateef 23:25
And then trade secret lawsuit, the you're you're required at some point in most courts to list your trade secrets, and with particularity, and that will be a sealed filing that only the court and the party's attorneys can see. So you're very limited in what you can pull out from public filings about the trade secret. David, I wonder if circle back on something you'd mentioned earlier efthimios, and get your thoughts on the extent to which you need to do an FTO? How broadly you need to do it? And what kinds of things do you look for when a company says, oh, yeah, we have this clearance?
David Beylik 24:02
Great question. So it does depend a little bit on the stage. And the space that they're in. There are some spaces where there's enough prior art out there that we're not terribly concerned. And sometimes if the company is so early, where it's not worth the expense, we'll be okay without it. But I'd say for 90 plus percent of the time when we're looking at something, we do want an FTO. And our practice is basically, we want the company to get one, we don't want to see it because that will likely waive privilege. But we would like to know the analysis behind it. If we can walk through that live on a zoom call in a way that doesn't waive privilege. And because we can't see the FTO we would we would like to feel very good about the quality of the counsel that they've retained. So somewhat someone like a Kenobi are similar. So yeah, that's a long way of saying we generally require it. The reputation of the firm matters a lot to us because we are limited in what we can see. And if we can with our counsel at least, get a grasp on what are the key claims terms of concern and what's the logic of why there's non infringement, we'd like to see that we typically hope there's non infringement, plus invalidity arguments and other things. But if we need to rely on invalidity or some other grounds, we can be open to that. So, yeah, that's how I think about it. As an investor. I don't know if you guys would add anything.
Leah Brownlee 25:19
I would say that we absolutely. We went out and got an FTA. ourselves, I do have concern over blowing the attorney client privilege on that. And I've seen on due diligence list from venture firms asking for copies of the FTO. Which actually leads me to concerns of who within the company gets that due diligence list? And do they know that they can't give it out? Because I think there's a lot of risk of unintentional disclosure on that. In kind of, on the other side of that, when we did our FTO, we put every key engineer in the room on the Zoom call, because the only way that the patent counsel can know what the people designing the device are thinking about designing is if he talks to him. And so it's an over disclosure on one side and try to undisclosed on the other side.
Sabing Lee 26:12
So we've seen a lot of these investor presentations. So presentations you might make at this conference that the company has done FTO, or the company has FTO, that's almost meaningless to an attorney without knowing the details of what was done. And so to us, an FTO means somebody has to have done a search. So FTO, for anybody who doesn't know already is freedom to operate. And investor would want to know does the company have freedom to operate, it's impossible to give a freedom to operate unless you had perfect knowledge of every piece of prior art every patent that's out there, to be able to say, my company does not infringe any patent that's already out there or any plan that some competitor might possibly get. And so the value of the FTO is only as good as the level of searching that was done. And so depending on the stage of the company, I think there are different levels that you can perform. I can be pretty comfortable myself with a client who is not knowledgeable about patents can do some sophisticated Google patents searching, you can do some of this yourself and look at the landscape and look at the claims. So obviously, you have to read the patent claims to determine do any of these claims read on what you're doing? The better approach typically is to hire a searcher, you don't have to hire your law firm to do this law firms like ours, outsource it to somebody else. So you can have your law firm do it or you can have even contact the searcher yourself and get the results that the key is actually looking at them. I have one deal right now where we did a an FTO search a few years ago, the results were sent to the client, the client didn't really pay close attention to it, they felt like they had done enough because they had done the search. But don't do the search unless you're willing to put in the money to go through the results. You kind of have to know what you're getting into. And then if you're talking to your counsel, find out what kind of search that they recommend for you, because you're going to open yourself up to a lot of additional costs. And so they can tailor things for you depending on what level of results you want. But it often depends on what stage you're at, if you're already talking to investors, what we think the investors would want. But to me, there's so many different levels here that this is a pretty sophisticated conversation that you have to have to understand what is necessary.
Irfan Lateef 28:25
Yeah. And on top of that, I just wanted to ask maybe do you have a feel any of you for what is the approximate number of patents you want someone to find or cost that you want to put in for the search to kind of validate that you think it's going to be thorough enough? I don't know if you have thoughts on?
Leah Brownlee 28:46
Yeah, I mean, I could see how much we probably paid was just 10 to 15 grand when we did our search. And we did pre search it before in populates kind of all the information to our patent attorneys that they found some stuff that we weren't able to find that which made us feel good about their search capabilities.
David Beylik 29:09
Yeah, I would say there's no magic number. It's really, it's quality, not quantity. So I think you have to make sure you get the search scope and terms and everything, right, so that you're capturing everything that would be important. Whatever the result ends up being. I will say sometimes we need to limit it somewhat arbitrarily, just for budget reasons. So for example, we might say, we know there are six companies in this space that are the incumbents that are likely to be litigious. And maybe we can't catch everything out there. But if there's some physician or some academic center or something that has some IP, we could probably license that or acquire it or something like that. But if it's one of the key competitors, that's an issue. So sometimes we'll limit it by the author or by the owner of the IP. You know, we typically start with the US even even if we have a global opportunity just because it's not worth the expense of doing a global search out of the gate. That sort of thing. Yeah,
Sabing Lee 29:59
I think what you said about competitors is a really good point because oftentimes it's it's quite easy to find the patents that your competitors have. And so you can get a search done pretty cheaply just to find out all the patents that they filed. And then hopefully, what's important for your company is make sure you have people internal to the company that are well trained on how to read patents, because the better you can do that yourself, the more money you'll save. My goal in FTO searching is to when I get to the point of we're talking to someone like David, I want him to see the work product that we've done, non privileged, but just here are the search parameters that we use, here are the results that we came back with, you don't need to do any more work, you can look at the work that we did, and have confidence that we found everything that's relevant, because the problem that we run into is, if an investor does their own search, they're probably going to find something else that we didn't find. And it's always a good reminder, everybody that searching is never perfect. So you hire to different searchers, they're going to find different results. And you don't have unlimited funds to hire every searcher to look for these things. So you have to go with somebody that you'd like understanding that there might they might miss something, and you want to least convince this the investor that what you did is sufficient, and they don't have to do any more work.
Irfan Lateef 31:18
Yeah, one question that follow up on the FTO that we had spoken about previously, was what if you're in a situation where you might think you might have an infringement risk? You may not have a great invalidity case. And now you have to wonder about it, you know, if this product gets Are you get sued for this product? Will you be facing an injunction? And what kind of damages? Could there be? And how do you evaluate that risk? I don't know if anyone has some.
David Beylik 31:48
I can maybe start I think one. One interesting difference that I've observed from being on the legal side of the firm, and being on the investor side is that I think lawyers tend to think very logically, and deterministically. There's like a series of propositions, and then a conclusion, and it's black or white. And I think investors think more in terms of probabilistic thinking there's, you know, a percentage chance that this outcome could happen, and this would be the cost. And so I guess my answer to that is, the analysis would be what's what's the level of risk, it's probably not obvious 100% You're infringing? Or else you probably would have gotten wouldn't have gotten to that position. But you've you see that there's some risk that's maybe worse than you thought, what is the range of outcomes ranging from a permanent injunction to a settlement to a license to unexpensive trial to resolving a motion to dismiss phase. And I think, being disciplined enough to try to think in terms of quantitative terms and probabilistically, about the percentage risk, I think that's the framework that an investor is going to approach it with. And it might be that that's still a doable deal, but with a different valuation, or different terms, or different protections that you can solve versus structure versus just a binary risk. In extreme cases, maybe it is a like a clear outcome. And that was just a goof. And maybe there's a malpractice claim against an attorney or something like that. But I think that'd be the rare case. Usually, it's a range of outcomes, and you can sort of find some solution.
Sabing Lee 33:15
I think for a lot of the companies that might be here, if you're pre commercial, then a lot of these things are future risks. And so there's not an immediate threat to your company. And so typically, the lawyers can help you identify, hopefully, a non infringement, and then an invalidity if you can't find a non infringement. But think about the other possibilities. So if it's something that really could be a problem for you have a backup plan. So start thinking about design around So is there something that you can do to avoid this patent? To me, it's not the worst thing in the world to have to take a license. It may not be something that your company is willing to do, but look for opportunities. And so if there's something out there, maybe that is not being commercialized. So maybe you find a patent that's owned by a doctor that nobody's doing anything with, you might be able to buy that pretty cheaply, and then leverage that to build your portfolio. I think that can be valuable regarding injunctions. So medical companies often worry about, and investors worry about, does a competitor have a patent? That's going to shut you down? And so this is going to apply more to commercial stage companies. I mean, injunctions are possible, certainly, but think about do you have an argument against an injunction because you're serving the public good. And so oftentimes, for med tech companies, a good defense to an injunction is that you have life saving technology. Now, that may or may not always be the case. But if you can build up the story, that you have clinical evidence that your device is superior to the competition, because you're going to save more lives. I mean, Irvine can comment on this, I'm sure, but that's the kind of thing that could be valuable. And if you can sell the investor on why you're not going to be enjoined, and the worst case scenario for you is that you're going to have to pay some royalty, then build that into your If your financials so that you can project that the worst case for us is that we might have to pay an X percent royalty. So we built this into the valuation and all that. And therefore, you would know that this is what you're getting yourself into.
Irfan Lateef 35:12
Yeah, just kind of statistically medical device companies and patent litigation can get a permanent injunction about 70% of the time. And I would say, for all other companies, it's probably closer to about 30%. One of the factors that the courts evaluate is the public good. And so that is about whether the there's life saving technology, and that they can meet a demand that's out there. So there's, there's some equitable factors that courts look at. But an injunction is a very powerful tour tool. I wanted to talk a little bit about employee mobility, and maybe Lea you could talk about employee mobility in your state, because that'll change from from state to state, and how that affects outgoing employees.
Leah Brownlee 36:00
Yeah, and I'll say, I'm lucky to be based in Ohio. As far as restrictive covenants, and managing of kind of the employees and what they expect when they leave, it's odd to say that sitting in California, but I'll say is, when employees leave in a way, all of our scientists and engineers are based in Ohio with us. Which, and we have a good, you know, ecosystem here, within, you know, our area, but we're not seeing employees leaving in like going, going to other states, people move to the location I'm at, because the housing is affordable. They, you know, they prioritize family, etc. There's a reason why they moved there. And it's not just it's not because of the booming startup economy. So I see less mobility problems with Ohio. And I also see a lot more of a kind of recognition that they expect to have restrictive covenants when they leave the company, the employer, the company, and they don't, they don't expect to be able to take with them what they learned.
Irfan Lateef 37:14
And how is that for like one or two years or how long we have, we have a one year restrictive covenant that we have built in, I think it's you can uphold it under Ohio law up to two years without post employment pay. In California, there's nothing like that the the the state, and the courts want everyone to be able to move to whatever company they want to work out. Except for that they can't obviously take trade secrets with them. But that obviously, can be problematic if they don't know what the trade secrets are. And they move on to another company and start doing the same thing. I don't know if you have,
Sabing Lee 37:49
I just wanted to add, I do see this as a trend more recently that employee mobility issues have come up with hiring companies or more frequently sending letters to their competitors, warning them about some hire that they've heard, they're going to make or have actually made. And so the onboarding procedures for a company, if you're hiring somebody from a competitor, you got to be very careful. And you I think you have to be very clear, and have them sign off in writing, that they are not taking anything confidential from their prior employer, they're not going to use any of that. Identify, and hopefully they keep a copy of whatever contract they signed, because if they signed a restrictive covenant, depending on the state, maybe that's enforceable. And so companies hiring have to be very aware, because I do see this come up and diligence quite a bit now where you do see employees leave one competitor for another competitor and start working on something very similar. And that creates legal issues. And we're seeing Irfan knows very well, lawsuits are being filed over these things. And they don't tend to look good for the company that's hiring away from somebody else. Like if there's any email that shows that they were solicited. I mean, that just looks horrible to a jury. So those types of things can really come back to bite you.
Irfan Lateef 39:03
Yeah, on that note, there was a case we had where an former employee went to another company was solicited. And then all these emails came back that happened before they actually got hired, and caused a lot of a lot of problems. Obviously, when you hire someone, you're you can't ask them what their trade secrets are, that they know, or to list them out. But you just have to be very careful in trying to cordon off in their memory, at least what they've learned from another company that people are allowed to take general know how with them from company to company, but not trade secrets. But I think we've got to our end of our time, so thank you very much for the panelists for your comments. And thank you for listening to us.
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