Many people in the medical technology and business world are familiar with the case of Theranos, the now-disgraced healthcare tech company whose owner and founder, Elizabeth Holmes, is currently standing trial for wire fraud. Theranos claimed to have developed revolutionary blood testing technology that would allow real-time blood tests for all kinds of applications, using only a few drops of a patient’s blood. The company relied heavily on massive venture capitalist investment, with Theranos claiming that they raised around $724 million from venture capital and private investors. At the peak of their success, the company was valued at $10 billion, and Holmes was viewed by many in the tech world as a Steve Jobs-esque figure, destined to have great influences on her field.
The fall of Theranos is well documented. It’s quite possible that Theranos executives intentionally lied to investors and the general public about the capabilities of their tech, and leveraged initial momentum and excitement to increase investment opportunities. This article will focus on the portfolio of patents that Theranos was issued, and particularly where outside observers might have been able to sense weakness or at the very least detect something suspicious well before the Wall Street Journal’s 2015 article spawned multiple investigations that would ultimately lead to bankruptcy. Studying a given company’s patents can tell you more about the health and prospective future of the organization than you might think.
What Is Inventorship?
Inventorship is a concept that can tell us a lot about a company’s patent portfolio. Determining who should be named on a patent when it is issued by the U.S. Patent and Trademark Office (USPTO) seems like it would be as simple as listing the people who worked on the invention in question. But this doesn’t take into account the complexity of so many modern patents, and the amount of cooperation usually required to produce a potential product or patent application. Any given device is made up of component parts, and ownership of those component parts is essential to determining inventorship. Even extremely prolific inventors don’t claim that they invented all the pieces of a highly complex invention.
In order for a person to rightfully hold inventorship over a patent, they must have contributed to one or more of the component parts of that invention. However, it is common for patents issued by the USPTO to only approve claims for some of the component parts of any given patent, not all. If the component parts that the USPTO allowed to issue as a patent do not include those parts to which you contributed as an inventor, you should not be listed as an inventor in the issued patent.
As the patent prosecution team tries to convince the patent examiner that each component part/claim in the patent application is novel and non-obvious, the patent examiner may reject any number of these component parts. This forces the patent prosecution team to be constantly updating exactly what they are claiming while keeping track of which of the listed inventors contributed to which claims. If these updates are not made quickly or clearly enough, this can cause abnormalities later in the process, or far later when someone is looking back at the patent records. If not done correctly, a prolific inventor who was not paying close attention to each patent process could find out much later that they did not have a hand in the specific parts of an invention that were declared patentable at the end of the process, and thus realize that they perhaps should not be listed as an inventor in the issued patent.
Possibilities of Inflated Inventorship And What They Can Mean
Now that we have some background on what inventorship is and how it can be determined, let’s take a look at how this concept can be applied to the Theranos situation.
It’s no secret that Theranos used their extensive patent portfolio to encourage venture capitalist firms to invest. But looking at their patent portfolio from the perspective of an intellectual property professional, one thing in particular stands out as a red flag. As of today, Theranos’ patent portfolio (now owned by another organization) contains 859 issued patents, 544 of which list Elizabeth Holmes as an inventor.
These patents were produced and approved over an 18 year period, between 2003 and now. While this is not an unheard of number of patents for a single inventor to produce, it’s easy to call into question the degree that Holmes was involved in inventing many of these products because during this 18 period she was also building and running the company. For much of this time, her documented role within the company was far less technical than executive. It’s quite possible that Theranos inflated the number of patents that Holmes was actually involved with in order to exaggerate her image as an emerging auteur of the medtech world.
Another lesson to take away from this situation is that many of these patents may be vulnerable to future intellectual property lawsuits if they do not list the correct set of inventors. Looking for misrepresentations of inventorship is one of the first things that a rival company might do if looking to attack some of Theranos’ intellectual property.
Patenting Ideas That Don’t Exist Yet: Constructive Reduction To Practice
One essential hurdle in the USPTO patent application is the need to prove that an invention works, either theoretically, or in practice. For most of their patents, Theranos chose to do so theoretically with what is called “Constructive Reduction To Practice.” This means that the patent prosecution team must appreciate the significance of the invention, and then describe the invention in a way that would allow someone else to reproduce the invention. In other words, even if you don’t have the equipment and funds to actually produce a working prototype of your invention (i.e., “Actual Reduction To Practice”), the USPTO should still reward you with an issued patent for your innovation if your idea is truly novel and non-obvious. The central idea here is that at this stage of the process the USPTO examiner should be able to clearly discern that the invention has a high chance of functioning as described when it is actually fabricated.
Clearly, many of Theranos’ products didn’t work. This begs a few questions: How did they get these patents approved? And could this be an opening for current legal challenges to the otherwise protected intellectual property if many of these supposed inventions don’t actually work, and if the listed inventors knew they didn’t work when the applications were filed? At worst, these issues could result in the determination of attempting to defraud the USPTO, which has implications for both the issued patents and the people involved in the application filing, including the inventors and the patent attorneys.
Theranos’ patent portfolio is still quite active, even if the company itself is now defunct. Now owned by Labrador Diagnostics and its parent company, Fortress Investment Group, Theranos’ patent portfolio was used recently in a patent infringement lawsuit. Labrador claimed that another company was making COVID-19 tests that infringed on these old patents. Of course, Labrador took a lot of flak for suing a company making possibly life-saving tests at the beginning of a pandemic. However, the essential takeaway from this is that Theranos’ patent portfolio still contains elements that may be important in the fields of biotech or healthcare and, if nothing else, could be the basis of patent infringement lawsuits for years to come.
Clearly, the story of Theranos’ possible missteps during their patent application processes is not over. It’s likely that Labrador and their parent company will find uses within the portfolio while also trying to protect what may be shaky intellectual property to begin with. More than anything else though, this modern-day parable demonstrates the importance of the correct determination of inventorship as well as careful and fully descriptive patent applications.
