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Patents: Plague or Panacea for the Health IT Industry

By: Lindsey Chessum *

Been to see the doctor recently? Got a check-up? Maybe an MRI or X-Ray? Did you use your primary doctor, a specialist, or emergency care? Did the attending doctor know about your allergies or your medical history? How about the wait? How long did you wait for charts to come in or for records to be transferred from your primary doctor to your specialist or from your specialist to the emergency room?

Online medical records are becoming more common to address issues of inefficiency and disharmony, both of which lead to mistakes by doctors or lack of care to patients. The force behind the switch from paper to electronic files can be traced to two sources: government legislation and business income statements.

With amendments to the American Recovery and Reinvestment Act of 2009 the government empowered the Center for Medicare and Medicaid Services (CMS) to run an incentive program, the Medicare and Medicaid Electronic Health Record (“EHR”) Incentive Program. CMS used this program to entice hospitals and professionals into using electronic health records by offering sums up to $44,000 under Medicare and $63,750 under Medicaid. During the two stages of the EHR Incentive Program participants must demonstrate “meaningful use” by meeting the measurements listed on CMS’s sheet of core objectives. Specifically, by 2014 participating hospitals and professionals must provide timely online health record access to their patients.

The implications for the healthcare IT industry are enormous. The federal government spent $4.5 billion on health IT for 2011, and it is pegged at $6.5 for 2012. Businesses see the direct impact this can have on their income statements. Increased demand means potentially increased revenues and increased net profits; needless to say, businesses are gearing up for battle.

MMRGlobal, Inc. (“MMR”) demonstrated foresight by stockpiling patents covering various methods and systems for managing and accessing health records by email, text, phone, facsimile, and mostly recently, web-based portal. The President and CEO, Robert H. Lorsch, sees MMR as properly positioned to now “reap the benefits,” but only because MMR will unabashedly sniff out and pursue patent infringements, filing suit as necessary. In fact, it engaged outside patent litigation counsel, Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP (“Liner”), for just such a task.

Alternatively, Allscripts announced the “Allscripts Open App Challenge.” Vendors and developers race to develop new applications for Allscripts’ software by February 3, 2013, that will improve management of chronic diseases. Prizes of $10,000 are given to 15 initial winners, and a separate series of 5 winners will receive between $75,000 and $250,000 judged on actual results from client use.

With the increased activities, industry analysts predict the health IT industry will be swept up in the same flood of litigation and trolling practices now plaguing the IT industry at large. Companies like Google resolve one claim only to begin another. This has been the cause of much debate between advocates of patent and advocates of open source. The problem with patents arises in situations similar to MMR with its most recent patent, 13/352,026. This patent gives MMR the right to assert a claim for infringement for “any Web-based portal used for consumer access to personal health information;” that is, unless it is a product of or licensed by MMR. That covers…everything. Should such a concept be protected by patent law, or as open source advocates protest, does it stifle innovation and ingenuity?

In part, it depends on which side of the coin you fall. MMR with numerous patents in pocket, like others in the technology industry argue that patent law is the impetus for innovation, knowing that expenditures can translate into protected revenues in the future. Others argue that vague patents allow holders to claim ownership of “completely unrelated products built by others.” Further, patent law favors large, public companies, since they have the capital to fund dense patent applications and patent litigation.

Several ideas have been promoted as functional alternatives to litigation and trolling. One such idea comes from Twitter, which developed an Innovator’s Patent Agreement, pledging to only use patents defensively. A similar idea originated with the law school faculty at UC Berkeley, a Defensive Patent License. Patents are pooled, and participating businesses can use any pooled patent defensively, the stress being on defensively only. But promotion has not translated to widespread adoption.

Businesses are hesitant to implement these alternatives because of the potential loss to profits and fear of abuse. Understandably, profits are “the bottom line” for a business, but without betraying capitalistic notions, sharing a patent could lead to greater profits in the long run. These agreements are for mutual benefit, meaning you give and you get. Plus, pooled rights may translate to cooperative efforts in defense of those rights. This balances the capital discrepancy between the smaller businesses and the large, public corporations. Lastly, these agreements have the potential to create goodwill amongst industry suppliers, workers, customers, and investors, and that bodes well for the bottom line.

* Lindsey Chessum is a second year law student at Wake Forest University School of Law. She has a Bachelor’s in Economics & Business and Philosophy from Westmont College and spent nearly two years in the stock market industry prior to law school. Upon graduation in 2014, Ms. Chessum plans to return to California to practice business law.