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Safeguarding Intellectual Property Rights in the Medical Device

  • 06 Pages
  • Published On: 30-11-2023
MEMORANDUM

The business run by Joshua Obieze and Lexi Martakis by the name of Kardioda Research, known as KR, hereinafter, deals with developing and improving already existing medical devices in the market. KR, particularly specializes in improving devices for patients with heart failure. Hence, KR has been well in the market from 2015 and has been running a profitable business, which can be valued at about £2.5 million including goodwill. Since, the product dealt by KR requires not only capital investment but also sufficient intellectual investment which requires for the researchers and owners of KR to have some reserved intellectual property rights. Thus, it is of utmost importance that these rights are protected as well has prevented from any future misappropriation or infringement. KR has secured the production of a Heart Tracker for patients suffering from heart failure by the name of Kardiowatch. This product is largely responsible for about 23% of the company’s turnover and has been a reliable device in the market. Along with this, another new product is being researched on by the team for Ventricular Assist Devices, which is known as VADs. This product is used to support Heart function and blood flow for patients having weaker hearts but this product is the extremely viable to the future of the company as it has the potential to revolutionize the market which could bring in massive profits. However, this is an ongoing project and is yet to be patented and only then can it be released in the market with its due. Since, this product is not patented yet, therefore, this qualifies to be protected from being released in the market unauthorizedly. Now, with Sysmed ltd. willing to enter into a sale agreement to purchase the assets of the business, must be termed and signed into a Non-Disclosure Agreement, that would protect the confidentiality of the product that is not yet patented. The only reason being, the intellectual investment or the idea that is invested in creating this product is extremely lucrative and can be easily misappropriated by the purchasing company as there is no rights to idea until the product is officially patented or any other party in the market due to its individuality and the revolutionary power of the product. Once patented, Joshua and Lexie, both would receive royalty for the product which would help them recoup the capital investment of the product for a term period of 20 years and also keep them the original owner of the product’s creation. Thus, it is of absolute importance that VADs be qualified as a commercially sensitive information that holds the future profits of the business and Sysmed Ltd, be entered into an NDA to keep such information undisclosed until it receives patent. Secondly, the valuation of the business of £2.5 million including goodwill as well as the valuation of premises of £600,000 must also be included in the agreement and be treated as a commercially sensitive information.

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The key provisions that must be included are:

That the assignor was the owner of the proprietary business of Kardioda Research in relation to the patent identified as Kardiowatch, which was developed in contemplation of being used either directly or indirectly, by Sysmed Ltd. in carrying on the business in future.

That the assignor is the owner of a product by the name of VADs, currently in the development stage and shall apply for patent once the prototype is secured, until then Sysmed ltd. shall maintain absolute secrecy and treat both the assigned products as commercially sensitive information.

The assignor also requires Sysmed ltd. to have information integral to the operations of Kardioda regarding the turnover, profit accrued and the valuation of the premises must also be treated as sensitive information, barring from disclosing it to any third party or use it for any commercial purpose.

That, on breach of any such terms and confidential agreement clauses Sysmed ltd. shall be considered as a breach of a professional and ethical standards which would be a violation of the entered contract. This shall make Sysmed Ltd. liable to pay compensation for the losses incurred as per the damages calculated.

The Non-Disclosure Agreement is absolutely essential in preventing your business from divulging essential core information that drives the company’s profit prediction as well as help sustain reputation and goodwill of the company. Especially in products concerning intellectual property, the protection of unpatented products has huge risks since the idea can be easily used by a third party for commercial purposes by provisionally applying for the same product since the applications are accepted on first come first serve basis. In case there is a breach of the NDA, due to either unauthorized use of information or divulging confidential information due to carelessness, or with any malicious intent which is not limited to any informal use of such information. This breach can result in either civil penalties or criminal as per the contract entered into. If such penalties arise, then the compensation shall be valued after calculating the damages caused to the owners which can also be beneficial as against having disclosed information but no resort to recoup the losses. It shall be considered as a destruction or tampering of essential information that the purchaser inappropriately used.

A warranty is nothing but the assurance of the seller regarding the product sold, its quality, value within the Sale and purchase Agreement. This concept of warranty arises from the idea of “Let the buyer beware” and this is used by the buyer to negotiate possible risks by making pathway for the buyer to conduct any inquiries in their right. The buyer in this case, Sysmed Ltd. shall have the opportunity to seek for damages in case a situation that turns out to be different from what was originally promised. Thus, in inclusion of a warranty clause, the Purchaser has the power to bring a claim against the seller in case there is a breach of the title as mentioned in the agreement. The due diligence carried out by Sysmed Ltd. which ensures the buyer of all material information that are to be disclosed by Kardioda which is backed by the warranties within the contractual agreement. Kardioda shall also prepare a letter in consonance with the clauses of warranties and the exceptions that shall entail. This warranty also clarifies the position of Kardioda if any legal dispute already exists or any such information that could possibly bring forth further complication in future must all be disclosed. Largely, Sale of assets have ideally two main functions; firstly, making it easier for buyers to be aware of any existing issues and secondly to mitigate risks. This means that Sysmed Ltd. stands at a privileged position. Especially with the existing clauses around VDAs, must be made clearer with regards to the future possibilities of profits that can be earned and a realistic idea of the existing assets regarding the goodwill, the industrial unit, furniture, fixtures and fittings, equipment, stock, records and Intellectual property rights leaving no holes to claim any breaches. If any breaches are found, Sysmed ltd. can claim monetary relief as compensation which shall not go beyond the necessary consideration received by Kardioda.

The seller shall be liable in case any breach of implied or express warranties are expressed within the terms of agreement either by deliberate concealment, non-disclosure or mere silence in cases of the assets sold which have resulted in a reduction of the costs. In case some breaches do arise, Joshua and Lexi have the option to opt for creating a disclosure letter. This disclosure letter is basically a drafted letter created by the seller either a general state of disclosure or specifics. The general disclosure clauses are generally a part of company’s general policies but the specific disclosure letters shall address the specific issues on the part of Kardioda that is specifically crafted against the warranties that are included in the contract. The disclosure letters are a possible way to avoid any such situation to rise where a possible breach may take place.

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Along with the disclosure letter, the sellers should also include limitations on time within which the buyers may claim the warranties if they were to arise and also create a maximum cap of monetary compensation that can be asked in future which is decided by seller and suits their requirements. Also, the due diligence run by the buyers are also a place to avoid liability in case such an issue is already encountered by the buyers through the due diligence, then such claims will stand unreasonable and will not have a potent chance.

Q.3. legal requirements of a valid retention of title clause

The Sale of Goods Act, 1979 discusses the concept of Retention of Title which is predominantly found in the contracts related to Sale of Goods. This clause is created in favor of suppliers in case the purchaser defaults on the payment, the supplier of goods has the capacity to retain the ownership of the goods. This clause was to ensure effective transaction between the two parties and also allows the supplier to have retention of the goods even after the goods have been delivered. This clause shall be applicable only if such is stated in the contract in between the parties otherwise such title shall be passed on the delivery of the goods.

There are different types of clauses like all sums or Current account, proceeds of sale or mixed goods, where the goods are retained until debts are paid off and the rest are all known as multi-purpose clause, which depends on the retention until the entire cost price of the goods are repaid. In the event, that a bankrupt sells the products or has them made into some other property, in that case the first provider may secure responsibility for of the subsequent property or continues of the deal, yet that would rely on the presence of a trustee relationship which doesn't necessarily emerge under an agreement available to be purchased except if there is a particular arrangement by the gatherings to the agreement making one or an enrolled charge on account of organizations. It is feasible for a provider to join a few sorts of condition, so that if the authority recipient concludes that one piece of the proviso is invalid, the provider may in any case be qualified for recuperate the merchandise under another component of the statement.

In some cases a provider looks to depend on composed standing and conditions imprinted on a receipt or conveyance note, where no composed agreement was set up before the products were provided. Solicitations and conveyance notes are by and large are considered as records made in the execution of a current agreement, instead of archives with isolated authoritative effect3, and a provider looking to depend on a maintenance of title condition imprinted on the opposite of a receipt or conveyance note won't typically be treated as having joined the maintenance of title provision into the agreement.

The sellers ought to guarantee that their retention provisos are reliable with their terms and conditions overall and the broadly useful of the agreement with the client. It is on the sellers to undertake extraordinary consideration in drafting maintenance of title conditions to guarantee that on indebtedness there is a programmed trigger requiring the client to quickly recognize any excess products and give ownership of those merchandise to the provider.


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