Pharma and Medical Startups on the Hook to Attract Strong Counsel

Startup and midsize pharmaceutical and medical device companies face a range of challenges that need the help of a strong legal team from hiring to conducting clinical trials to finding investors. Targeting legal counsel early in the process better positions companies to manage risk.

Development of an invention—such as a new drug, method of treatment, medical device, or medical test—immediately triggers a company’s need to start assembling a legal team of IP, corporate, and litigation counsel.

The pharmaceutical and medical device industry depends heavily on intellectual property, particularly patents, to protect proprietary rights and build an exclusive area of operation.

IP counsel are some of the earliest members of pharma startup legal teams, even before corporate or litigation counsel are engaged or a corporate structure and business plan are in place.

There are several considerations when establishing IP and brand protection. Patent applications should be filed early and often to begin building a patent portfolio for any new inventions.

IP counsel also can help guide the company’s filing strategy to obtain the best coverage for the intended product, method, and device. The patent portfolio can establish a larger area of exclusivity for the company and keep competitors further away.

Filing early is also important for trademark protection for the product, treatment, and company names to stake out the company’s field of operations in any areas of interest. IP counsel can identify and act against potential infringers of the company’s marks by establishing trademark and domain name watches.

Once IP protection is pending, the company will often engage corporate counsel to help with official formation. This assistance includes incorporation, creation of corporate governance documents, and—working with IP counsel—establishment of proper employment agreements and nondisclosure agreements.

Considerations include ensuring strong NDAs are in place with any third-party vendors to protect company IP, and that employment agreements include proper assignment of IP.

Later in development, IP counsel perform freedom to operate searches and prepare a formal FTO opinion to provide the company with comfort that infringement of third-party IP is unlikely. This also helps protect the company from willful infringement findings.

As the company grows, it must also protect new discoveries and prepare to defend itself against likely litigation.

Attacks on intellectual property, contract disputes with suppliers, employment litigation, and product liability litigation for those alleging the products harmed them are each potential sources of litigation. A litigation counsel team of business, product liability, and IP litigation attorneys can work with corporate counsel and IP counsel to place the company in the best position to defend against such claims.

Engaging strong litigation counsel will also assist the company in litigation prevention and pre-litigation preparedness. Litigation counsel will help establish careful communication guidelines for employees and a thoughtful document retention plan; assist in employee training at all levels; and help position the company to resolve issues prior to litigation.

Carefully crafted guidelines and training help minimize thoughtless communications, which can give the appearance a company isn’t operating in the patient’s best interest, can prompt legal action against the company, and damage the company’s reputation.

Implementing corporate document retention policies—as well as a plan for instituting hold notices to maintain documents when there is reasonable anticipation of litigation—is also important to avoid allegations of spoliation. Such inferences of bad intent for thoughtless communications and haphazard purging of documents can be used to inflame a jury and exponentially increase risk of high damages awarded against the company.

Retaining strong litigation counsel is an excellent way to resolve claims pre-litigation by signaling opposing counsel that you’re ready to defend any claims, and assisting the company in assessing the appropriate value of various claims for early resolution.

The pharmaceutical and medical device industry is riddled with high-stakes legal issues. As members of a strong legal team, a combination of IP, corporate, and litigation counsel can help young companies navigate these issues to mitigate risks and establish themselves in a competitive marketplace.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Mollie Benedict is partner at Tucker Ellis and represents clients in federal and state courts.

J. Derek Mason is partner at Tucker Ellis and advises national and international clients in intellectual property matters.

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