Welcome And Why Patents Matter

SPEAKER_01 0:01

Welcome to the Chalk Talk Gym Podcast, where we explore insights into healthcare that help uncover new opportunities for growth and success. I'm your host, Jim Jordan. In today's episode, I sit down with James Gorley. He's a partner in an IP boutique firm and a chemical engineer turned patent attorney who has spent two decades helping medical device, life science, and digital health companies turn invention into a defensible position. James has a real talent of making a famously dense subject feel practical. We unpacked how the shift to first to file reshaped the landscape for startups and why freedom to operate opinion is worth far more than its price tag. We also talk about where AI is showing up in drug discovery and medical imaging and the one-year clock that has quietly killed more patents than any examiner ever has. So, James, tell me in the audience a little bit more about yourself.

SPEAKER_00 1:02

Yeah, I'm James Gorley. I'm a partner at my own little IP boutique law firm, Karsten Zallen and Gourley. I'm a patent lawyer. All the attorneys at my firm are IP lawyers. Almost all of them have engineering degrees. And my undergraduate degree is chemical engineering. That's how I got into patent law and IP law is I did chemical engineering undergrad and then went to law school. The Kimmy undergrad involves a lot of the basic science classes that percolate up into other engineering fields as well.

SPEAKER_01 1:32

Why patents are important to those folks and how it helps them have a competitive advantage?

First To File And Provisional Clock

SPEAKER_00 1:37

Yeah. So, you know, a patent gives you a legal monopoly. So if you come up with a brand new device and you go to the U.S. Patent Trademark Office, you get a patent on it. That gives you the right to go into a court and prevent others from making, using, selling, or importing your invention. And if you found that somebody is guilty of doing any of those things, making, using, selling, or importing the invention that you patented, then you can sue for damages and maybe even get an injunction, which is a court order telling them to cease doing that. So it's a really powerful weapon. One way it shows up is in court. Whenever you find somebody that's infringing, you go enforce your patent and you can get them to stop or pay you. Another place that it's a little more subtle is a lot of companies monitor the patent activity of their competitors because they don't want to infringe. They don't want to be dragged into court and they don't want to be ordered to stop selling a product. They actually have to look at their competitors' patents and say, hey, can we do this or not? And if we see a patent, is there a way that we can design around it? Can we come up with like a different way of doing this that wouldn't infringe their patent? That's actually the whole incentive structure behind the patent system is to incentivize that exact kind of behavior because that the theory is that that advances innovation because it basically forces people to come up with new ways of doing things.

SPEAKER_01 2:55

Now, for our audience, patent law has changed in the past decade or so. Can you explain what the change was and what it means?

SPEAKER_00 3:03

So when I first got out of law school in 2005, we were under a system that they called a first to invent. So the first person that thought of an idea and reduced it to practice would be entitled to the patent. But I think it was around like early 2010s, like 2011 to 2013, some in that time frame, we switched over to a first-to-file system. Under the new system, the first inventor who came up with it, but actually filed the application at the U.S. Patent Trademark Office, they were entitled to the patent going forward. So it was a pretty big change in U.S. patent law. So as we sit here today, the first inventor to file gets the patent. There's a relatively inexpensive way to sort of plant your flag in the sand wherever you are, and it's a provisional patent application. Usually, whenever you file a regular, what we call a utility patent application, you pay much higher fees to the US PTO. You probably pay an attorney to do a much better job writing the application. But if you file that application, it's actually examined by a patent examiner. And the patent examiner makes their own independent determination about whether you have met all of the requirements of patentability. A provisional application just serves it as like a basis for, okay, where are we at today? What have we invented today? But it's never actually examined by a patent examiner. What it does is it starts in one-year clock where you have to file the previous application that I described, where you probably pay an attorney to do a really good job with it to make sure you satisfy all of the legal requirements for patentability. That determination is not really made for the provisional application. It's only the non-provisional that you file within one year of the provisional. The provisional is just basically like a cheap way of saying, hey, I invented this on this date, but you don't have to go through all of the hoops, you got to jump through on the non-provisional. And the other good thing about a provisional, too, is that if it's just kind of like a rough idea and you put it in the provisional and file it, if over the following year that idea doesn't really develop into something that you really want to go to market with or it doesn't look like it's going to be, you can just let the provisional expire and it never sees the light of day. It's never published, never publicly available. Like nobody can find it. It just kind of like dies in the patent office records.

SPEAKER_01 5:20

Because they have people that have been afraid to put it in because it'd be publicly disclosed, but if it expires, it's not. Yep.

SPEAKER_00 5:28

After a year, it just goes away. And if you never file a non-provisional utility application that claims priority back to the provisional, it just goes away and it's gone. There are really only three. And they are design applications, design patents, utility patents, and plant variety patents. Plant variety patents are pretty rare. It's like if you come up with a new cultivar of a certain fruit or vegetable or something like that, you can get a plant variety patent. And the two main types are utility and design. Design patents protect the ornamental look and feel, basically, of a product. And it does not protect the functionality. Design patents are solely looking at, okay, what does this thing look like to a consumer? And that's what it protects. It doesn't protect the functionality at all. And in fact, it's you can't protect functionality with a design patent. It's solely ornamental features. Utility patent is for things that function. So you're talking about like methods, devices, novel molecules, things that have a functional significance in the world that you want to protect.

SPEAKER_01 6:36

Okay. I was thinking of methods patent as being one of them, but they're underneath utility.

Design Utility And Software Challenges

SPEAKER_00 6:41

Yeah, it's a utility application. So you're the different types of claims you make, you know, you can make a method claim or an apparatus claim or composition of matter kind of thing. But yeah, those are all under utility patents. You can actually get a design patent on a graphical user interface. If you come up with something novel in that respect, I've gotten quite a few design patents on the graphical user interface, like an icon for the app. You can get a design patent on sort of like a mobile device screen with a certain icon on it. Those are kind of interesting. But even on the utility side, it's difficult to get a software patent, like on a software-related invention. What really helps is if you can show that your software is actually making the computer more efficient in what it's doing. That's one way to help you kind of overcome the type of rejection that you usually face at the U.S. Patent and Trademark Office. That's not always easy to do. Things like financial products, like moving money around, are very difficult to patent. The US PTO just does not want to restrict the ability of like banks and financial institutions to engage in kind of financial transactions. So it's tough. But if you can show that you're improving the way the computer actually operates, that can be a pretty easy way to get a software-related patent. When you work with clients, what's the biggest thing they do not give you that you need? It's always a challenge getting the level of detail that we need. I have some clients that send me 15, 20 page documents to describe what they're doing that are super helpful. In fact, I had a guy do that last week. A lot of times we'll just get like a couple paragraphs or a page and we have to turn that into a 15, 20, 25 page patent application. And that's a bit of a challenge sometimes. But it's usually pretty easy to overcome by just having another call or two and kind of flesh out the details that we didn't get on the first go around.

SPEAKER_01 8:34

Percent of your medical device and pharma companies, when they give you stuff, give you that sort of input document so that you have that understanding.

SPEAKER_00 8:43

It really depends. What helps when it's a large enough company to have an in-house attorney that knows about patents and has a process in place to get that amount of detail out of the inventors. For those clients that I'm dealing directly with the inventors with no in-house attorney intermediary, it just requires a little more time. It's not that big of a problem, but it just requires a little bit more hand holding.

SPEAKER_01 9:07

But for startup companies, they're always financially constrained on the money they want to give their patent lawyers. And what strikes me is they never give you an education piece, which is basically if they don't want to pay for it, how are you supposed to get educated? It's one of the biggest challenges I see in your space.

SPEAKER_00 9:24

For startups with founders that are kind of newer to business, sometimes there is that education piece to explain really the entire process, like what it takes to actually get a patent. A lot of people have never even looked at a patent. They don't even know what it looks like. It's a lot of writing. You know, to get a good patent, if it's a Word document, you're probably looking at like 20, 25 pages of writing. And if you don't put in that level of work, you're probably not going to get a patent because you really have to lay everything out for the patent examiner and show that you do have invented something and show that it's novel and non-obvious and all that stuff to give you a shot during the examination process.

SPEAKER_01 10:02

Talking to examiners, that gives them some context of where to start mentally, right?

Freedom To Operate And Legal Risk

SPEAKER_00 10:06

So the two biggies are you got to show your invention is novel over the prior art, over everything that came before it. That's pretty easy. It's just not the exact same thing that came before. What we usually argue with examiners about is whether something was obvious to do. So, like an obvious combination of different elements that were already found in the prior art. And the kind of like marketing stuff that you were talking about can help overcome those obviousness rejections because you can show that, hey, I'm addressing a new problem that the prior art wasn't really looking at, or I've conferred some benefits that the prior art never recognized. That kind of stuff can really help with obviousness rejections. Yeah.

SPEAKER_01 10:46

The next piece people don't understand is explain freedom to operate and having a patent, and sometimes having a patent, you can't have freedom to operate. Why do people want freedom to operate? That's a complex topic.

SPEAKER_00 10:59

Yeah, and it's it is very complex and it gets kind of difficult to explain, but I will try. If you have a patent on your device, that doesn't necessarily give you the right to make your device because there may be some subcomponent of your device that has its own patent that's owned by somebody else. Like big companies like smartphone manufacturers get into this kind of trouble all the time because there's like one little chip, you know, on the iPhone that infringes somebody's patent that Apple didn't, you know, invent from whole cloth, and they'll get accused of infringement just because one tiny little thing on the iPhone is accused to be infringing somebody else's patent. So if you want to make a device and it's made up of elements A, B, C, D, and E, you want to have the quote freedom to operate, freedom to not be infringing anybody's patent, then you need to go do a search and see what's out there on each of those subcomponents, A, B, C, D, and E, to see whether you actually have the right to sell the device that you want to sell. Like I said, if there's a subcomponent of that that somebody already owns, then you might have to pay them some kind of licensing royalty so you can practice your own invention. Like I said, your patent gives you rights against third parties. It doesn't really give you the right to do anything. I think it really it's a decent proxy of freedom to operate. Like if you have a patent on it, unless it's like something super complex, like a smartphone, you're probably okay, but it's not guaranteed.

SPEAKER_01 12:31

Startup companies struggle with is why is it so expensive? I mean freedom to operate, can you explain what it means and why it is so expensive to people?

SPEAKER_00 12:41

Yeah, I mean, the expense depends on how complex the product is that you're trying to clear and a freedom to operate opinion. But I guess back up maybe like the value that a freedom to operate opinion gives you is that if you are ever accused of patent infringement, you can say, hey, look, I paid some attorneys a bunch of money to tell me that I have the freedom to make and sell this device and that I wouldn't be infringing anybody's patent. So that can get you off the hook for something called willful infringement. That really affects the economics of a patent infringement lawsuit, and it makes it much less enticing for somebody to sue you for patent infringement if you are like for sure off the hook for willful infringement. Because if you can get willful infringement, you know, you can get like 3x the damages, you can get your attorney's fees back. Sometimes you can get like punitives, and it just makes the prospect of losing a patent infringement lawsuit much scarier if you're on the hook for willful infringement. Usually the damages in a sort of kind of run-of-the-mill patent infringement case are what we call reasonable royalty. And it's reasonable by definition. It can't be like something that puts you out of business. No, it's got to be something you can afford, something that's like standard in the marketplace or reasonably approximating that. And it's just not something that's gonna like end your business, but a willful infringement case conceivably could.

SPEAKER_01 14:03

Yeah, absolutely. For the law firm, there's some risk in this for them too. So they have to do a very thorough job, right?

SPEAKER_00 14:12

Yeah. So if like somebody asked me to write a freedom to operate opinion, and I did it, and they were later dragged into a lawsuit, and they held up my legal opinion saying, Hey, look, James said we had freedom to operate, and it ultimately ended up with like a willfulness determination, then they may come after me for you know professional negligence, malpractice, all that kind of stuff. So yeah, we're taking on a lot of risk by putting that opinion out there.

SPEAKER_01 14:38

Freedom to operate generally 70 grand. It's not cheap. And start a lot of times startups will say, I don't understand why the law firm's spending, you know, that. And we just explain why that is what it is. And on and so when that happens, a lot of times they pass on it. They don't do a freedom to operate. And to your point, that 70 grand, which might seem like a lot of money at this particular moment in time, when you're scaling and you're looking at being bought for a half billion dollars and someone puts a lawsuit in and you don't have that, you're talking about throwing away all the money that all your investors put in. So it was pennywise and pound foolish, but for the startup person at that seed stage, it's in most cases more than the CEO's gonna make that first year while he's waiting to raise capital.

AI Drug Discovery And Imaging

SPEAKER_00 15:21

Yeah. Nobody likes paying lawyers until they need to. Exactly. It's about AI in the healthcare space. It's not just in the medical space. We have a lot of clients that are trying to do AI for everything, every vertical that they're in. They're trying to add some kind of AI layer to make it work better. But in healthcare, I mean, it's the protein folding AI models that are really accelerating drug discovery. That's a big one. Medical imaging is another biggie. Like anytime there's just a bunch of data to crunch and you're looking for trends and patterns, AI is actually really valuable. I think if AI is really bad for a lot of stuff, but anytime there's just a bunch of data and you're looking for trends in that data, it's really useful. And like medical imaging is one space that people are seeing like outsize gains in, like detecting things early that a human probably wouldn't have spotted. Yeah, it is. I mean, it's very good about sort of predicting what's going to happen based on trends. Like that's the whole thing. It's sort of like predicting the next word, the most likely next word or the next phrase or whatever. But that's helpful in some things related to text, but it's really helpful when you're looking at data that's not super processable by the human mind, like big giant data sets, nuanced data sets where a computer can really like chew on it and see if it can get a trend out of it. That's where the AI models are really helpful. As a lawyer, and I'm not an in-house lawyer, so I can't really be like that involved with the business. I'm fairly involved, like most lawyers are. Either touch the chief legal officer kind of level or the other C-suite people. But for a bigger company with like at least a decent size, if not large, patent portfolio, the place where those insights come is whenever we do like a quarterly, like kind of like what you're talking about. Are we protecting everything that you're doing? And over a period of years, several older patent applications and patents kind of build up, you know, and sometimes the business sort of like subtly shifts or maybe majorly shifts direction. It's helpful to look back at what we did and say, is the stuff that we're still paying for in the past helping the business still, or do we need to cut that stuff away so we can focus on the newer stuff going forward? That's the conversations that I'm involved in. I don't know that I can be like, hey, you know, you need to be protecting that without having some dialogue with them where we're actually sitting down and focusing on, okay, what do we have and what are we doing? And have that conversation with them. I can't really do that independently.

SPEAKER_01 17:55

Yeah. And having the appropriate process for that quarterly meeting or even every six-month meeting, because the other thing we see too is people will do improvements on the manufacturing floor, or they'll address the customer complaint that, you know, you have to address them for FDA reasons and labeling reasons and all that, but they never think about is that patentable? You were using it as old patents we no longer need. The scarier thing is I've morphed to a place where I'm no longer protected by my patents. Right. So I think those meetings are incredibly helpful. What percent of your clients actually consider that?

SPEAKER_00 18:32

I don't know what the percentage is. I would say once you kind of get up into the range of maybe having like, I don't know, five to ten pending matters that you kind of need to do periodic review because stuff can just get lost in the shuffle. And you need that focused time to like look at okay, what do we have and what are we doing?

SPEAKER_01 18:52

Yeah, that's great. What are the resources that are publicly available to people that they don't commonly know about?

SPEAKER_00 18:59

Like in terms of patents? Yes. The USPTO has a ton of information about patents, statistics, databases that they if you want to do your own like prior art search and not pay an attorney, you can get a decent job at Google Patents. Google has aggregated public patent data from probably 10 or 15 different patent offices around the world, like China, Korea, everywhere in Europe, the United States, Canada. You can get a pretty good idea of what's out there if you go do a search on patents.google.com. Now, you if you're not an attorney or a patent agent or something like that, and you don't have experience doing it, it's just a fact you're not going to do as good a job as an attorney would who knows how to read patents. But at the very least, you could maybe find if there's something out there that's like killer, like dead on, and you wouldn't have to pay an attorney to do that. You say, oh no, I found a.

SPEAKER_01 19:58

He would actually draft the freedom to operate using the tools that you're talking about, not necessarily claiming that he got it right, but his way of educating himself and then at least giving you a starting point. And from the lawyers, they said that saved tens of thousands of dollars just in sort of figuring out how do we structure these things. I think that's also critical for people to realize that they need to be into that level of details if they're doing a startup.

One Year Disclosure Trap And Closing

SPEAKER_00 20:24

Yeah, it's just a kind of an individual determination about what kind of bandwidth do I have to do this versus other priorities of the business, because I'm fairly efficient at going and doing patent searching and looking at what's out there and kind of making a rough cut at okay, this is relevant, this is not. But somebody who doesn't have that experience is gonna spend a lot more time doing it. They might ultimately end up getting to a good, helpful place, but it's gonna take them a lot more time to get there than it is an attorney. Yeah, absolutely. As long as they're ready to spend that kind of time, that's great. That's fantastic, but it's gonna be an investment.

SPEAKER_01 21:03

If you look back across your experience, what's the biggest lesson you've learned in your journey?

SPEAKER_00 21:08

My own personal. Yeah. I guess I've just personally like my practice, when you're a young attorney, you are mostly doing work for clients that partners have relationships with and are brought in. I guess I didn't appreciate early on that you, in addition to doing that, you also need to get out there and meet clients and new clients if you're going to have your own law practice and not just be doing work for another partner. That was an evolution over time. Kind of started to realize, okay, I can't just sit in my office all day doing client work, which is fun. I mean, it's interesting work and everything. But if I ever want control of my own law practice, I've got to get out there and meet people like you, you know, like everybody else, and try and develop my own clients if I'm gonna have a law practice that I actually have control over. Yeah. And there are plenty of attorneys that works for them. I mean, that that's just like my practice. Personality. I just I would rather own my own practice and kind of all that comes with that, the ups and the downs, hopefully more ups, you know, but I would rather own it than be reliant on another attorney. Yeah, I mean that's accelerating drug discovery because these protein folding AI models are able to predict protein behaviors based on the amino acid sequence and how they're going to structure and how they're going to fold. If a researcher is looking for a very specific functionality in a protein, you can kind of do a good job predicting that using an AI model before you go make the protein itself and test it. And it just cuts down on the number of sort of like real-world testing scenarios that you have to do to arrive where you want to arrive. Protein folding is a massive opportunity in drug discovery.

SPEAKER_01 22:50

What else would you like to share with the audience?

SPEAKER_00 22:53

Well, I guess so we've talked a lot about patents. The only thing I guess I would say that we haven't talked about that's really important is if you actually invent something new and you offer it for sale or sell it to the public, that starts a one-year clock where you have to file a patent application on it or you will lose the right to do that forever. Because your own sale to the public or your own offer for sale becomes prior art to your later patent application. So an examiner can go look and say, nope, you started selling this more than one year before you applied for a patent. So you're not entitled to a patent. Or if the examiner never finds that and you later try to enforce the patent, the person you're accusing of infringement will figure that out. And they will have a court invalidate your patent because you started selling it more than one year before you applied. So that's all I would say that we haven't talked about.

SPEAKER_01 23:43

Can I add to that story? Because you reminded me of another caution I think you should give folks is academic facilities and tech transfer. And you sometimes find out that the physician published it in a paper, the scientist published it in a paper, did a talk on it in some weird place that no one ever knew about, and they licensed it and you're 10 million in, and all of a sudden you realize he gave a speech in Norway. And, you know, it that's another watch out, correct?

SPEAKER_00 24:11

Public disclosure. Usually it's in the form of a sale or offer for sale, but the academic world knows the professors they publish in journals. And if they publish the idea in a journal, that could be prior art if you don't apply within one year of that public disclosure.

SPEAKER_01 24:28

Well, how can people find you and what's your LinkedIn address?

SPEAKER_00 24:31

LinkedIn, just James Gorley, G-O-U-R-L-E-Y. Pretty active on there. I don't post a lot, but I do kind of direct message with people on there fairly often. My email address is just James at caglaw.com. So happy to have email correspondence as well.

SPEAKER_01 24:49

Very good. I'll put your website in the show notes too. Well, thank you very much. I appreciate it. Thanks for having me. Thanks for tuning in to the Chalk Talk Gym podcast. For resources, show notes, and ways to get in touch, visit us at Chalk TalkGym.com.