Unintended consequences: American Well loses, loses patent, to Teladoc

On Tuesday, the Federal District Court of Massachusetts not only dismissed the American Well patent infringement lawsuit against Teladoc, but also invalidated American Well‘s patent, held by co-founder Dr. Roy Schoenberg since 2009. It was invalidated on the grounds that the claims in the patent were “too abstract” to be patentable and do not “amount to an inventive concept.” American Well is appealing the court decision.

Teladoc started this call-and-response in March 2015 by petitioning the USPTO (US Patent and Trademark Office) to invalidate several American Well patents. (AW claims to hold 28 patents and 22 pending applications). Shortly before Teladoc’s IPO on the New York Stock Exchange last June, American Well sued Teladoc on patent infringement. Those in the industry saw an effort to scupper the IPO. Our Editor Chrys at the time took a decidedly jaundiced view of American Well’s grounds for infringement:
This author is wondering who thought this was such a novel technology as to warrant a patent? What were they thinking? Having worked on developing unified messaging systems for a mobile phone operator at the turn of the century (now that’s a scary 15 years ago) I am just picking myself off the floor after reading this.
Surely all these functions are no more than what is in every instant messaging program, dating back to 1990s? Replace the words “medical service provider” by “friends” or “contacts” and “consultation” by “chat” or “call” it seems to me you get … Skype and Face Time and more! [TTA 9 June 15]
No matter, the result was yesterday’s double shot of a decision. In addition, three Teladoc complaints against American Well‘s patents to invalidate them are still in progress with the USPTO. A triple, anyone? MedCityNews, Teladoc press release, American Well press release
All this is despite the sobering facts that telemedicine has been unprofitable to date–and that IP wars have unintended consequences.Telemedicine (remote doctor-patient consults) in a consumer driven (or payor driven) market remains far from profitability–as most of health tech is. See report on Teladoc’s Q1 and 2016 projections. Telemedicine is rife with competition (e.g. Doctor on Demand, SnapMD, MDLive). Specialist services like Spruce (dermatology) and InSight (telepsychiatry) are slicing off potentially profitable segments. There are also variations on the model, for instance Zipnosis‘ whitelabeled, health system-based questionnaire/asynchronous telemedicine.
IP wars have put companies into the ditch. Recall that Bosch Healthcare initiated aggressive legal actions on potential patent infringers. They acted against mainly smaller companies (MedApps, Waldo Health, Cardiocom), giving a perception that they were picking on smaller, vulnerable companies, though their actions included a few larger ones like Philips. The 2012 challenge to Cardiocom on a patent proved to be their undoing, as Medtronic purchased them a year later and decided to fight rather than settle. The end result was that the USPTO’s Patent Trial and Appeal Board invalidated Bosch’s patent as ‘obvious’ (rendered obvious by prior inventions) and then proceeded to rule likewise on several other patents six months later, leaving Bosch with hardly a fig leaf of IP to its name. In June 2015, Bosch Healthcare closed their doors.[TTA 19 June 15]
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