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Patents under MRI examination
"There’s a big learning curve in this market!"
Michael N. Rosenheimer, an electrical engineer and entrepreneur, used to file patents whenever he thought his German medical supply company was on to something big. A doctor would say he had a problem at the hospital and that if Mr Rosenheimer could come up with a technical solution, he would buy it, as would everybody else. “So then you make it and patent it and find out that ‘everybody else’ is that one doctor,” says Mr Rosenheimer. Over the years he has filed numerous patents, half of which he no longer enforces. “There's a big learning curve in this market,” he says.
After more than two decades in business, Mr Rosenheimer is getting better at choosing which ideas to back with patents versus which ideas to let go. Still, it is not easy and his experience shows the challenges small companies face when patenting and promoting new inventions in highly regulated, complicated industries.
International sales are significant
MIPM was originally founded in 1982 by a physicist named Rudolf Mauser, in cooperation with the Koglek & Starck Company. In 1987,Mr Rosenheimer, an engineer from Koglek & Starck, bought 30% of the company’s shares and became its president. In 1991, he bought the remaining shares. Today, MIPM is a 20-person company that mainly sells electronic devices such as patient monitors and drug application systems to be used in conjunction with MRI scanners. MIPM’s products are based on products of other producers but have been modified by MIPM for MRI compatibility. These products are sold directly to hospitals and also to large Original Equipment Manufacturers, such as Siemens, General Electric and Philips.
The company primarily assembles seven niche products in which MRI equipment makes up 60% of sales. Compartment pressure measurement technology accounts for 20% of sales, while another 20% comes from services such as the maintenance and repair of hundreds of MIPM’s products as well as products of other companies used in German hospitals.
The USA is its biggest market and international sales are significant, accounting for 50% of sales. In countries such as Malaysia, the U.A.E. and India, MIPM sells products through distributors, or as part of a customer’s product. Arab countries represent a big potential market for the company, as does Japan, which Mr Rosenheimer says has the highest number of MRI scanners per capita. He avoids China out of fear his technology will be ripped off. “When I’m in China I like to cover my pockets,” he says, half joking. “The Chinese copy everything.”
MIPM’s biggest competitors are in the US and include Invivo, Schiller USA, and Datex-Ohmeda, a subsidiary of General Electric. Mr Rosenheimer’s company is small: his wife, Elisabeth Rosenheimer, manages the finances, while his daughter Jennifer, being an electronic technician, helps in the service department during school breaks – and his competitive advantages are low prices and best customer service, thanks to low overheads and the protection its patents afford.
Making a difference between life and death
The walls of MIPM’s conference room are decorated with framed quality control certificates, trademarks and all of its patents. “It’s to impress the people because we are in our meeting room,” says Mr Rosenheimer. “It’s very simple.” The reality, however, is that while MIPM has 18 patents in half a dozen families, half will soon expire. While the company continues to innovate it lacks the cash to protect and exploit all of its ideas. “It doesn’t mean there is no market,” he says. “It just means that we can’t pursue it.”
The medical supply business is a complicated industry. The products MIPM makes can literally mean the difference between life and death. Producing, marketing and patenting new products is costly, time consuming and obviously risky. When MIPM comes up with a new technology, it has to patent the idea, continue to develop it, convince potential customers that there is a market for the technology and then invest in costly clinical trials. Then there are quality standards to meet, hundreds of regulations and ongoing investments to be made in research and development. In 2005, MIPM spent roughly €230,000 on these last three areas alone. Getting a product to market can take anywhere from months to years. “But if we stopped doing any of this,” explains Mr Rosenheimer, “in two years we would be out of business.”
Sales are a tough job. Small customers cannot always afford to market MIPM’s products. Large customers are wary of small suppliers, especially those from another country. Sometimes money is wasted on elaborate sales efforts. There was a time when Mr Rosenheimer courted a potential customer for a year in America, only to call one day and discover the contact he had been dealing with had left the company. All that effort had been in vain. “This happens all the time,” he says. “The bigger the company, the bigger the problems.”
Given sales are so unpredictable, it is especially hard to know which technologies to protect with IP. Over the years, Mr Rosenheimer has become more selective. The decision is more or less a gut decision, but he has some criteria for checking his instincts. First, he decides the strategic value of a patent and whether it represents a significant niche with big sales potential. He sizes up whether a patent is necessary to keep away competitors, if competitors making something similar exist, and, if so, how far along are they? Other questions include: how easy will sales be, are there potential sales partners, and how long will it take to get the product to market?
Not invented here
It is a gamble, however, and there is always the risk of failing to patent something that could have been lucrative. Sometimes he does not patent an innovation because he lacks the resources to produce and sell it, and the exploitation of patents through licensing is difficult within the specific market sector of his company. On the one hand, large companies are not interested in these niche technologies. On the other hand, their own R&D departments are reluctant to integrate external technologies (“not invented here”).
Sometimes, a patent on a technology will sit in a drawer for years before its potential is realised. In one example, Mr Rosenheimer patented an idea, but did not market the product because of cost constraints. He also wrongly assumed his technology was not as good as other technologies on the market. When a doctor asked recently about his technology – a probe that would check the oxygen saturation of a foetus during birth – Mr Rosenheimer gave it a second look. It turns out that the products made by competitors were not as advanced as he had thought. Today the product is in clinical trials and Mr Rosenheimer says the market is worth about €300 million per year.“ If you drop these patents, you may have wasted a lot of money and missed out on making a lot more,” he says.
Spending time at hospitals
At MIPM there is no IP department or any set budget to pay for patent-related issues. Mr Rosenheimer uses an external patent attorney. Monitoring potential patent infringement is not something anyone internal has time for. “Who should do that here?” asks Mr Rosenheimer. “We all have other things to do.”
Like at other companies that sell small numbers of niche products, keeping an eye on competitors is somewhat easier. Mr Rosenheimer and colleagues attend industry tradeshows, read publications and, indeed, see what is being installed at the hospitals themselves because they spend so much time there.
Spending time at hospitals is key to the company’s success. In part, employees are at the hospitals to repair and maintain the equipment. However, after one experience a number of years back, Mr Rosenheimer now sees time spent at hospitals as crucial to good research and development. He learned this the hard way. In one case a product had got as far as the hospital room before it was discovered it did not work. It was an inter-cranial pressure measuring probe and it turns out the employees at MIPM had not accounted for the exact way in which the equipment would be sterilised prior to use. Now, Mr Rosenheimer and other colleagues spend hours each week in hospitals seeing first hand how their equipment is used – a tactic that at least helps reduce some of the company's risks.
Challenges by IP cost and ligitation
Mr Rosenheimer sees significant challenges in the costly patent process where a lot of money is spent on translation and attorney fees. Furthermore, his ability to enforce MIPM’s patents is limited. The cost of litigation is high and the process is complex. Small companies are in a very difficult situation especially when its patents are infringed by large companies.
Product facts
MIPM designs and patents its own products, as well as providing research and development services for professional medical customers. Its products include devices for MRI application, compartment pressure measuring, intra-cranial pressure monitoring, blood and scientific pressure monitoring.
Company profile
MIPM works the medical technology field in the areas of service, research & development, and production, especially focusing on the demands of MRI applications, special medical pressure measurement technology and oxymetry probes for measuring oxygen saturation.
Staff: 20
Sales 2005/2006: 11.77 million
Key product: Makes medical equipment for MRI scanners, compartment pressure measurement systems and oxygen saturation probes.
Customers: Hospitals and Original Equipment Manufacturers, such as Siemens, General Electric and Philips.
MIPM Mammendorfer Institut
für Physik und Medizin GmbH
Oskar-von-Miller-Str. 6
82291 Mammendorf
Germany
www.mipm.com
IP background
Patent protection: 18 patents in six families.
Patent filing order: Germany first, then US and UK.
Department: None. Founder manages IP himself with the help of an external patent attorney.
Budget: Varies from year to year.
Success factors: Niche products and best prices.
Challenges: Costs, especially those spent on translation. Knowing which technologies to bet on given the long sales cycle, number of regulations and inherent risks associated with the medical industry.
Contact
European Patent Office
Erhardtstr. 27, 80469 Munich, Germany
Tel.: +49 89 2399 4636
e-mail: sme@epo.org
www.epo.org
German Patent and Trade Mark Office
Zweibrückenstr. 12, 80331 Munich, Germany
Tel.: +49 89 2195-0
e-mail: info@dpma.de
www.dpma.de