Legal finance provides an important means for patent owners to access the courts and enforce their intellectual property rights.
Innovation in the healthcare and medical device industries is crucial to discovering new lifesaving technologies. However, innovation is inherently risky and expensive. Companies and inventors that invest their time and money into groundbreaking new technologies, products and methods must have a way to recoup their investment and make a profit through their patents. It is on this basis that companies invest in the innovative technologies that improve our daily lives.
However, patent owners who seek to protect or recoup meaningful value from their intellectual property rights often must do so by litigating, typically against large, sophisticated entities with ample resources including people, money and expertise. Patent owners can use specialty finance to shift the cost and risk of their patent litigation without losing control of their claims. Legal finance is key to enabling patent owners to enforce their IP rights, so that enforceability is not limited to just the biggest and most established market players.
The importance of legal finance as a tool to help companies protect their patent rights against more dominant market participants is illustrated in how the medical devices company Colibri Heart Valve LLC used legal finance capital to protect its IP.
The background of the case
Until around 2011, the only way to treat a serious problem with the aortic heart valve was open heart surgery, which is invasive and dangerous for patients who are often not good candidates for open heart surgery. Cardiologists Dr. David Paniagua and Dr. David Fish (founders of Colibri) invented a method to safely deliver a new improved artificial heart valve via a catheter that is guided through a patient's blood vessels up and into the heart where the aortic valve is located (Transcatheter Aortic Valve Implantation – TAVI). Crucially, the method they invented gave doctors more than one shot to get the procedure right and “stick the landing” to get the valve in the right place.
Drs. Fish and Paniagua were among the first in the world to successfully implant artificial valves via catheter in animals in June 2000 and humans in April 2003. They went to the patent office in 2002 with their important lifesaving invention and were awarded US patents directed to heart valve delivery systems and methods of use.
As Dr. Fish notes: “In our early work Dr. Paniagua and I understood that catheter heart valves must be placed exactly to be safe and effective. So, we worked to develop and test technology to allow doctors another opportunity at placing the artificial heart valve in just the right position. We were gratified to have that invention recognized by the patent office as a new and useful contribution to the field of medicine.”
Medtronic then created a roster of heart valves, and instructed surgeons to place them in a manner that infringed Colibri’s patent. Medtronic sold over 350,000 such devices in the US, generating over $3.5 billion of revenue, but refused to pay Colibri a reasonable royalty for the use of its patent.
Colibri wanted to hold Medtronic accountable for this breach of its patent rights but lacked the financial means to pursue a potentially lengthy battle in court against the much larger and well-financed company. Colibri approached Burford for financing of their patent litigation claim against Medtronic in December 2019.
The role of legal finance
As a start-up, some of Colibri’s biggest assets were the patents it had obtained for the inventions of its founders. But despite owning the rights to the TAVI invention, Colibri has not yet penetrated the commercial market as clinical trials are ongoing, but in the meantime Medtronic took Colibri’s patented technology and incorporated it into its own product line. Medtronic’s superior size, market power and marketing capacity allowed it to use Colibri’s TAVI technology to establish its substantial position in the TAVI marketplace.
Colibri engaged Burford Capital to finance the fees and expenses of its litigation claim while the patent dispute was in process. Burford’s investment allowed Colibri to both enforce its patent rights against Medtronic and to continue to pursue vital ongoing clinical research and development while the case progressed.
The benefits of this are illustrated in a comment from Colibri’s in-house lawyer Mark Yaskanin: “Patent litigation is particularly complex, requiring costly expert witnesses and legal fees and it can take many years, so we really benefited from offloading litigation risk from our company to Burford.”
Highlighting the financial implications of Burford’s finance, Colibri’s CFO Michelle Blagg added: “Without losing control of our litigation or our IP, we got a vital finance partner in Burford for a business critical dispute, which freed up resources so that Colibri could focus on our clinical study in Europe and other important contributions to the TAVR marketplace.”
Colibri’s lead investor Thomas Reagan expanded on how the structuring of Burford’s capital helped the business without ceding any control and without diluting the substantial value of Colibri’s equity: “The capital provided by Burford allowed us to meet our short-term litigation costs, but because the arrangement was not an equity investment, it did not dilute the ownership of any of the current investors.”
Financing led to a successful resolution at trial
After some Covid-19 related delays and other rescheduling activities, the case went to trial in January 2023 with Bartlit Beck representing Colibri. In February, the jury found that Medtronic had infringed Colibri’s TAVI patents and Medtronic was ordered to pay $106.5 million in damages. The jury also rejected any counterclaims by Medtronic that the patent was invalid on the grounds that the invention was obvious or not new.
From this successful trial, Colibri has had its intellectual property rights verified and now has an asset in the judgment. While Medtronic has indicated that it intends to appeal,1 the success at first instance is a strong indicator of the merits of Colibri’s claim.
Colibri Heart Valve LLC
Fees & expenses and working capital
1 Christopher Yasiejko, “Medtronic Owes $106.5 Million on Colibri Heart Valve Patent (1)”, Bloomberg Law, February 9, 2023 available at: https://news.bloomberglaw.com/ip-law/medtronic-owes-106-5-million-on-colibri-heart-valve-patent