Responding to Bullies

by James Cavuoto, editor

Startup firms in pretty much any industry face a host of challenges they must confront before they can achieve commercial success. One of the most insidious of these challenges is the threat presented by larger established firms that do not welcome the potential competition that the startup firm may offer. Of course there’s nothing wrong with established firms using the normal tools of capitalism—their sales force, press releases, established customer relationships—to denigrate upstarts in its space. But there’s something sinister about large firms abusing the legal system by threatening or filing unwarranted lawsuits just to force the startup out of business. And there’s a serious void of morality when large firms dangle the prospect of partnership or M&A as a ruse to obtain confidential information from a startup with novel technology.

Unfortunately, the neurotechnology industry is not immune from tendencies such as these and Ray Cohen, the keynote speaker at this year’s Neurotech Leaders Forum, related his experience to attendees at the conference. In particular, he highlighted some “dirty tricks” he said his competitor Medtronic had played on Axonics.

“We shared everything we were up to with Medtronic in 2016. They came, they looked, they learned everything that we were doing—we opened the kimono. And then they disappeared,” he said. “They had different corporate priorities. They just waited, sitting in the bushes, and as soon as we treated our first patient commercially they filed an intellectual property lawsuit against us alleging infringement on seven different patents.”

The trial lasted five years and in the end, Axonics won the case and Medtronic had several of its patent claims disallowed in the process. Cohen said the jury only deliberated for one hour before deciding there was no infringement. But it cost Axonics $30 million in legal fees.

“Getting sued really sucks,” he said. “Because you know they’re looking to chill competition. They’re trying to drain your resources. In America, anybody can sue anybody for any damn reason and there’s no recompense if you lose.”

In case the patent suit wasn’t enough, Medtronic sought to have the Federal Trade Commission block the sale of Axonics to Boston Scientific on anticompetitive grounds. Many neurotech industry observers found this ironic, given the near monopoly position Medtronic had for many years in the SCS, DBS, and SNS market segments. This effort also fell short and the $3.7 billion merger finally closed earlier this month.

While this saga has a happy ending for Axonics shareholders—and for OAB patients who now have access to more therapy options because of the new competition—it nonetheless sends a chilling message to neurotech startups who might not be as resourceful as Axonics and Ray Cohen.

Perhaps it is time for Congress to consider legislation protecting vulnerable startup firms from predatory legal antics. If our country truly believes that small business is the engine of commerce, and that new technology is what drives our economy relative to the rest of the world, then we should afford startup companies the same level of protection that we offer to endangered species.