Marty Gomez - Goodwin Law

0:05
The lawyer makes an introduction to an investor, that's usually not the reason that investor's gonna invest. An investor's gonna invest because they like the team, they like the technology, they like the, really the business model, right? And that the, the path to exit. But lawyers can certainly make it easier.

Giovanni Lauricella: 0:22
Cheers, mate. This is the MedTech Startup podcast where today we're laying down the law, the MedTech law, and I'm gonna jump in and introduce this guy real quickly, but little do you know that to this. Direction this way. I have one of the most gorgeous views ever of the Bay Area. Behind here is actually Alcatraz, and we're getting spoiled with Goodwin because over the summer we ended up going to the Seaport in Boston and seeing an absolute awesome view there as well. So this is just to follow Marty Gomez's and Goodwin's involvement with the MedTech Malta conference that we hosted in Malta this year. In addition to that. We just literally wrapped up. It's awesome. With within the past hour we hosted, and by the way, this is the week of JPM, so this is the first day, Monday, January 8th, 2024. I'm dating us. We just hosted over 70 CEOs here in MedTech talking about. How difficult and the challenges that come along with actually building, raising, growing, commercializing a MedTech company. So what we wanted to do here is actually talk about the other side of actually building a company with the community members that support entrepreneurs. And I think honestly the most important, at least, especially in the very, very early parts, and then that actually carry throughout the whole life of the company, is having amazing legal counsel. And so yes, we're here in the Bay. Yes, Alcatraz is right behind me. But no, we're not drinking California beers. We're drinking Sam Adams. This is Bostonian beer, and I'm sitting right across from my very good friend, Marty Gomez. We've traveled the world together at this point. We have, we've gone to Malta. You've come down to Florida for us.

Marty Gomez: 2:15
Yeah.

Giovanni Lauricella: 2:15
We've been up to Boston and now we're here in San Francisco. And thank you for all the support. Thank you for helping create the community. And speaking of. I wanna know who you are. I want you to tell the world what Goodwin is and we're gonna jump into really what great legal counsel means for MedTech companies. So let's start off Marty, who are you?

Marty Gomez: 2:36
Awesome. Thank you Giovanni. Likewise, can't thank you enough for, all the partnership over the past year and we're, just getting started here. So yeah I am I guess we'll just start at the beginning, work our way through, so I. I was born, raised in the suburbs of Boston. I'm a Boston guy. It was my choice to have the Sam Adams today.'cause even though we're in Goodwin, San Francisco offices for JP Morgan this week I'm based out of our Boston office. And more or less have lived my whole life in the Boston area. And it's a, as we'll get into, it's a great MedTech town. And I like to think that maybe has something to do with why I'm in the space today. When I got out of high school, I think maybe like a lot of people, I think, very few and far between. There are people that know exactly what they want to do with their career. I didn't really know what I wanted to do when I got outta high school. I. I think deep down somewhere I knew that I always wanted to be a lawyer. I don't know where that came from. Probably didn't even really know what lawyers did back then. But I've always liked sort of advocacy, persuasion, representing a client, negotiating. Those are things that, I always really enjoyed and I think somewhere deep down thought, thought that I might like to be a lawyer someday, unlike. For example, like the medical profession doctors where there's like a defined set of undergraduate degrees that one often will do if you're thinking about going to medical school for law. There really isn't a set undergraduate degree or path. You can really study anything and, still go on to become a lawyer. Always been interested in technology, understood how things worked, was pretty good at math and science. I wouldn't say that, I was like I have a lot of MedTech CEO clients that were engineers. And that just, needed to take everything apart and know exactly how everything worked. I wouldn't say that I was quite at that level, but certainly was interested in technology. And my dad had been a mechanical engineer I decided, what the heck, I'll go to Boston University, I'll study mechanical engineering at B.U. Probably because of what a sort of MedTech town it is. A lot of the coursework for mechanical engineering is really biomedical focused. Whereas in I think some engineering programs the examples that you'd be taught in class for loads and things like that might be with a bridge beam. For us it was spinal columns, right? Fluids class might be, with motor oil in a lot of programs. And ours, the example was blood, right? So it was very, I think that was kinda the first time that I realized that. But it was pretty cool, engineering can really be applied to the body and medicine. Wasn't really until it was my, I still remember it, it was my it was getting towards the end of college. Still didn't know exactly what I wanted to do. As I said, I'm not sure that I thought that I would've been the best practicing engineer. I took a class, it was on entrepreneurship. And the class was really supposed to be, maybe, probably a lot of the listeners, maybe took a class like this. It was supposed to be for engineers that were thinking about starting a company. And there was, the whole course was about that. But there was one sort of segment of the course that was about intellectual property protection, and it was talking about how, if you're gonna build a technology company. You really need to protect the IP in that company because that's one of the most important assets in the early days. So I was like, wow, this is cool. I can, you mean I can, be an engineer and actually practice law by combining technology and do law. And I was like, that's it. Like that, that's what I wanna do. Went to law school, went to a a small law school. I'd found this ability to combine the stuff that I'd been studying in technology and I could go be a lawyer with that skillset. So I went to law school. I went to a small law school in New Hampshire called university of New Hampshire School of Law. And the school was really focused on IP. So I learned about IP, learned about how to apply IP to different types of businesses, and when it. Came time to enter the workforce and join a law firm. I was really looking for a law firm that would give me a platform to work on the stuff that had really excited me, which was, helping entrepreneurs the first time I'd really been exposed to IP and using that as a tool to help, a business grow and to help companies, build that foundation that they were gonna build their company on top of. Hopefully we'll talk about Goodwin, I think in a bit, but Goodwin was a fantastic platform to be able to do that. It's a firm with Boston Roots. It's a international firm now, but for me it was a great place to to start my career and I'm, knock on wood, still there. But, so I joined theM&A s a summer associate and then later as an associate. And in the early days, I worked on a lot of different types of companies. I got to work on software companies. I got to work on consumer companies. I got to work on biotech companies. I got to work on a lot MedTech companies. And really what, I did as part of my job was to help all these different types of companies, figure out what their IP strategy was going to be. And that was really helpful because it allowed me to understand a lot of different types of businesses, a lot of different types of IP strategies, and to be able to apply those to different types of businesses. I did that for a while and then as the years progressed, typical in a law firm, I progressed through the associate track. And then as I was getting to senior associate level and starting to make a preparation to become a partner at the firm. I really had to figure out what industry I wanted to focus on. And, looking back when I thought about it, the companies that I had really enjoyed working with, I think the most was really the MedTech companies. I think part of that is my technical background was, really relevant to those companies, but also IP really matters for those companies and the people running those companies usually value IP quite a bit. And I really felt like I could make a big difference working with those companies. So for the last several years now as I've been a partner at Goodwin, I have focused on really representing MedTech companies. And we'll talk about a little bit of what we do, but for me it's really helping those companies figure out what their IP strategy is and how to, maximize the value of that IP through the course of the business. So there we have, that's soup to nuts start to, to, to where I am now. But that, that's the background.

Giovanni Lauricella: 8:29
Awesome. Thank you very much for sharing that. So we wanna know what is Goodwin? Yeah. And tell us about, I believe you guys are a full spectrum firm, but I'll let you tell us the juice. We, we talked about the IP thing, which is really where you sit, but what is Goodwin known for? What do you guys do and make it relevant to MedTech?

Marty Gomez: 8:48
Yeah, absolutely. Goodwin is a, a hundred year old, 110 year old at this point, I think, law firm. And we're what's called a general practice law firm. So we do a lot of different things. You may have heard, we have a robust litigation group. We've got financial industry services group. But the group that I am in is the Technology and Life sciences group. And I think one thing that makes us a little bit unique is that we organize ourselves as a firm based on the industries that we serve. I think in a lot of law firms you would see they'd have a they organize themselves based on the type of law that they practice. So you'd have a venture capital group, you'd have a mergers and acquisitions group, you'd have a, IPOs or capital markets group and a good one. We have all of those things, but first and foremost, we organize ourselves based on the industry that we serve. So first and foremost, I'm a MedTech lawyer, right? And I'm a IP lawyer that works with MedTech companies and we have venture lawyers that work with MedTech companies, M&A lawyers that work with MedTech companies. And we've really organized ourselves as a firm to focus on particular industries. And we think that brings a lot of value to the clients that we serve because having a, deep understanding of the issues that are facing clients in a particular sector, we think is a differentiator. And if you're working with a, an M&A lawyer it's not necessarily somebody that, was doing M&A for real estate companies. It's somebody that was doing it for MedTech companies. And the group that I'm in, we're a lifecycle practice is what it's called. So we represent companies really from day one through their lifecycle as a private company. Formation. Through all rounds of VC financing, licensing arrangements regulatory and any sort of exit transaction that a company may have. And when you organize yourself based on industry, what we found is, um, you end up bringing in specialties. You're strategic and thoughtful about bringing in specialty groups that are really important to the clients that you're serving in that particular industry. For example, in Goodwin's MedTech group we represent clients in this space and we wanna understand, or our clients tell us what are the legal issues that these clients are often running into over and over again as we represent these companies through their life cycle. And so these days, we have, um people like me in our group that focus and represent companies in IP matters, but we have a very robust FDA regulatory group that helps companies think through their FDA regulatory strategy. We have a different set of folks that focus on what we call healthcare regulatory. So that's, even more specialized like HIPAA and a different sort of patchwork of state laws that relate to healthcare reimbursement things like that. And then in more recent times we've added even more folks as MedTech has evolved and incorporated more software components and more data collection. We have a whole data privacy group and cybersecurity group that, advise clients on. Again, all of these issues that we see MedTech companies facing through their life cycle.

Giovanni Lauricella: 11:57
If you're a full spectrum law firm, when we talk about timing, advice for companies, and we're gonna stick on and focus on MedTech startup companies MedTech companies in general, but there are boutique companies that only do IP or they only do regulatory or only M&A, whatever it may be. When you think about when a company should think about getting involved in good legal counsel, so when in their lifecycle, and then how to vet out all of the choices that they have, do they piecemeal it and go with this boutique IP and that boutique M&A, that boutique regulatory? So let's talk through that. So the clear question would be, how would you advise a MedTech startup to think about good legal counsel and when to think about bringing on good legal counsel and why?

Marty Gomez: 12:49
So you're right, there's a lot of different different types of law firms out there. And one of the themes that I've heard in a lot of your podcasts over the years, Giovanni, and I think a lot of people in the MedTech space understand this now, is that if you're looking for an investor right, in the MedTech space you should be thoughtful about the type of investor that you're talking to, right? You probably don't wanna go and talk to an investor that only invests in, growth stage SaaS companies if you're building a, class three medical device. And think that the same thing is true for law firms. So you should when you're thinking about law firms focus on a law firm that, has a focus in the industry and works specifically and expressly with companies like the ones that that your listeners are building as far as, timing goes right. And so this is, a question that, I get a lot from MedTech founders, which is I know that I need to have a sophisticated law firm and I know I need a, firm that focuses in MedTech, but. I can't work with a big law firm right outta the gate. I'm going to work with, different service providers early on and then maybe at some time down the road, I'll think about working with a bigger law firm and I think, there's a couple of different, misconceptions that lead folks to that decision. But just my opinion is a lot of times that's a mistake. I think the earlier in your life cycle that you engage with the law firm that is gonna help you, take you through these big important transactions that, hopefully your company will someday go through the better. Because a lot of legal things, a lot of the mistakes that we see, in the later stage transactions, many MedTech companies are trying to, get to an exit and M&A, to be purchased or maybe go public sometimes, or that, that big, do a big commercial transaction or a joint venture. A lot of the issues that we see come up in those transactions, the true the big issues that are like really hard to fix. There are things where the foundation was laid, many years earlier when they, first formed the company and they and were working with advisors that maybe didn't understand MedTech or didn't understand what the typical exit was gonna be or didn't understand that, for a company like a MedTech company to grow, they're often gonna need to take an investment from an outside, venture capital fund. And so there was something structural in the way that the company was set up or in the way that the IP was protected or something like that, that, we're now years down the road. And that's really the nightmare scenario, right? You finally get to that kind of finish line or close to that finish line. And there's some issue that was baked in, years earlier that, causes an investor to walk away or causes an acquirer to walk away. And so that's why, from a timing perspective, I do think it's great to engage, who your law firm is going to be very early on in the process. And for that same reason, you're right there, there are boutique law firms, right? And there's an absolute sort of, I think need for those services. Just there's a need for many different types of investors and many other different types of service providers. But when it comes to a MedTech company, having all of your disciplines and all of your legal team aligned at the outset, it can help minimize some of those issues that can come up, again, years down the road when you get to the finish line. So I'll give you an example, right? Can be really helpful to have both your IP council and your regulatory council working together, right? Not, a an IP boutique firm over here on a regulatory consultant over here. And, maybe theoretically they can talk to each other, but they don't work on the same team and they're not under the same roof. So I'll just give you one example, right? Some of the listeners if you're building a, a 510k company if you're a product, if you're going for 510k clearance, right? The story that you're basically telling the FDA when you go for 510k clearance is as your listeners will be familiar with, right? You'll find a predicate product and you'll say, Hey. We're basically the same as this little thing or as this prior product over here that you previously gave clearance to. So please give us a 510k because basically the exact same as this thing that you cleared earlier. Right now, turn the leaf over to your IP council right? At the same time, right? Your company and many 510k companies have patents, right? You may wanna secure patent protection you're gonna go to the U-S-P-T-O, a different agency of the US government, and you're gonna say, Hey, U-S-P-T-O give me a patent on my technology because it's totally new and totally different and nobody's ever done this before because it's amazing, right? And you can see where again, there, there's a way that it can be done. Many of your, there are many 510k companies over the years that have gotten 510k clearance and also have received patents for, novel and non-obvious inventions. But you want the teams that are working on those two things to be aligned, right? Similarly, right? The lawyers that are going to, particularly for a MedTech company many times, particularly in your early rounds of investment your investors are going to diligence the company's IP. And so having the people that architected the IP portfolio and built the IP portfolio, under the same roof or, working daily shoulder to shoulder with the company, that with the lawyer that is an expert in negotiating the documents that are signed for a VC investment is really helpful because everybody can be on the same page and sort of the same collective story can be told to those parties that you're engaging with. So for a bunch of different reasons. And that's why and we can talk about some of the some of the misconceptions or some of the challenges with, getting in with a big law firm early, but it's not even so much big law firm, although Goodwin happens to be a big law firm. But getting in with a law firm that focuses on MedTech and is going to be your law firm for the life of your company, and it's hopefully going to be the law firm that takes you through these big sophisticated transactions. Ideally, you start with them early in the process rather than, having to switch down the road and get some new firm up to speed and, unwind a bunch of stuff that was done. Previously it tends to be a lot smoother. If, you can make the right decision right outta the gate.

Giovanni Lauricella: 19:02
So you touched on it just now. I'm a MedTech startup, for example, right? So I wanna start with company formation. I want to get involved in ip. I go through my clinical trials, I go through my regulatory strategy. I go through an M&A lot more in between. Hopefully no litigation.

Marty Gomez: 19:19
Although if you do good one's, got you covered.

Giovanni Lauricella: 19:21
Yeah. As a full spectrum firm. Yeah. So what you were alluding to earlier was, and which is gonna be the major topic we're gonna talk about next, which is price. Yep. I get sticker shock, right? So I want a company formation. I want to go wrap up my IP appropriately, and I talk to the big guys, the well-known guys. In my heart of hearts, I know that legal and law is always gonna be a part of my company. It's never gonna go away. It's the necessary evil or the angel that I will need depending on which side, where you are, et cetera. But it's not gonna ever be gone. I need a great law firm, either law firms or one law firm that can take me. So my question is, you talked about unwinding, handing off, et cetera. If I'm a startup company and I'm going for cheapest price that feels good enough to do my IP, et cetera. And then when I get to that next stage my IP lawyers maybe don't do regulatory and then I gotta go source another one, and then I gotta go source another one for a different law firm aspect, whatever it may be. You were touching on it, but what are some of those things that you've seen, those mistakes that have been made, some of those cumbersome moments in time of developing a company's life where. You have understood how to get involved from a compensation or price point, but the benefits of having that one stop shop law firm versus the unwinding or the onboarding of all these various characters throughout a company's life.

Marty Gomez: 20:52
Yep. So I wanna come back on the pricing thing. I want talk about the cost thing.'cause I think that's the element in the room a lot of the time. And there's sort of a chicken in the egg thing there, so let's come back to that. But in order I want to answer the question about specific mistakes that can happen. This is all a learning process, right? It, if you work with, just somebody that maybe they're not even a bad lawyer, they might be a great lawyer, they just don't understand MedTech, right? And they set up the company in a way that doesn't make sense for MedTech. Some of the specific issues that I've seen in my career, people run into, right? So remember, I'm IP focused. So most of the big horror stories I've seen relate to IP. So I'll start there. What I see a lot of times right, is people will, file good enough, right IP or what they think is good enough IP. And a lot of times actually people will try to do a lot of that themselves. And again, I don't begrudge anybody that, right? If, they obviously are trying to be thrifty and really be responsible with their limited resources in the early days of the company. I see a lot of companies do that. They'll either hire a lawyer that isn't an expert in MedTech ip, or even worse, isn't an IP lawyer at all, or try to do a lot of the process themselves. Um, you can get by on that for a time, right? The company can continue, progressing, right? You have your, I hear a lot of times we've got our IP filed, right? And so we're all squared away there. But you've that IP, when you hear that a lot of times it hasn't really been tested until you've been truly diligence either by an investor or sometimes you can even get through an investment round without your IP really being truly diligence. A lot of times it may not be until the acquisition comes and it gets diligence. And what we find is, a truly valuable, I'll take patents here just'cause a lot of MedTech companies file patents. Patents. It's a sophisticated thing where you want to make sure that not only is your product properly described in your patent application, but a good patent attorney will understand the space that you're in and they'll make sure that the disclosure that you've provided in your patent application can hopefully anticipate. Because all products do change and evolve and mold over time, and even though your patent attorney may not know exactly where that evolution is gonna come, a skilled patent attorney can make sure that your application is drafted in such a way so that it remains flexible, so that as the business changes and evolves, you can make sure that your patent application that you filed years and years ago can be modified in such a way so that it can pick up, the evolved product. Maybe it's broad enough to begin with so that it picks up the product as it evolves, or you've got the flexibility to pursue it in, other applications. And what I see a lot of times is a company will file a patent application. They may even, because we all know, MedTech takes a long time. It's a long cycle. They may even get an issued patent through the patent office, and they may say, Hey, we've got this great patent here. Our IP is, buttoned away. But then the first time that they actually get diligence, and a sophisticated buyer or investors on the other side of the table, and they hire somebody like me, right? Sometimes I do represent investors. They hire somebody to, look at the patent portfolio and they go in and they look at the patent and they say patent, it covers, it's got all these limitations in it that you know, your, that aren't in your product, what's going on there? And then they'll say. Oh we, yeah, it, we filed it, years ago and that, that's an old iteration of the product. So that's just one example, right? And then if you don't I don't wanna get too deep into the weeds, but if you don't, maintain your flexibility with your patent portfolio, which a good IP lawyer will make sure that you do, then you're stuck,'cause you've got a patent, but it doesn't cover your product. So that's one example. Yeah.

Giovanni Lauricella: 24:33
I want to talk about the investment piece side. So we both deal with a lot of early stage companies, a lot of slide decks, et cetera. This filed versus granted. Now imagine if I'm an investor and I'm a, at best amateur slash mediocre MedTech investor, I'm not a pro, but I look at the idea, I'm like, wow, I love the idea. Look at the space. Seems safe, really interesting. Big market, whatever it may be. They're raising capital. I give them money as an investor, but their IP is filed. It's not granted. What are some of the downsides for me as an investor?

Marty Gomez: 25:17
Yeah, so the biggest difference between filed and granted IP is that, uh, when we think about the ultimate end game of, having a patent, right? And what I think what we're really talking about when we talk about filed and granted for purposes of this discussion, I think we'll have that apply to patent. So it's difference between a filed patent and a granted patent. Yeah. You can't, what a patent gives you, what an a granted patent gives you is the right to prevent somebody else from doing whatever the scope of your patent is. And you can't, in its most extreme case, and this happens many times, and there's many examples of established MedTech companies doing this, even, early MedTech companies doing this, you can bring a lawsuit against somebody to, enforce your patent against them. You can't do that unless you have a granted patent. So a granted patent is what actually gives you the right to say to somebody, you can't do this. You can't make this product because I have a patent and it covers, it filed. A filed patent application does not give you any of those rights, right? It is, you can't sue somebody for patent infringement if all you have is a filed patent application. Now again, hopefully you're engaging with sophisticated MedTech investors, and I think a lot of investors, get that. But that's the reality. And so when you're an investor. The real value in a pending patent application is in the opportunity for this company to be able to get a patent on the stuff that they've described in the future. And so they filed a patent application and that's good because it means that they're, they filed this application. If somebody else comes along and starts innovating in this space and goes to the patent office after them, they're gonna be entitled to that patent if and when it grants. And they're, being diligent about engaging in the process of getting a patent, which people that are in the space and sophisticated know is oftentimes a multi-year process. You usually don't get an issued patent. The day you start your company, it takes some time. But with that said. Yes, I could file a patent tomorrow on, the most valuable medical device that has ever been known. Doesn't mean that isn't guaranteed that I'm gonna get it right. So sometimes some investors will even dig deeper, right? They will do an independent analysis of the application and the, the higher their own lawyers to assess. What do we think the likelihood of this application being granted as a patent is sometime in the future.

Giovanni Lauricella: 27:49
Gotcha. Okay. So this is leading down a road of a lot of other interesting questions. When it comes down to what's patentable versus what's not patentable, we're now dealing with convergence of industries, software, hardware, digital health, the catheters, the heart valves of the world, like things talk about what's like very obviously patentable in terms of technology and then where does it start getting gray and fuzzy and challenging about actually filing IP around certain things, like what's not patentable?

Marty Gomez: 28:27
Yeah. Yeah. It's a super interesting question and it's one of the things, that's why I started, why I've been super excited about MedTech the last several years because like I said, I've got this background in representing different types of companies and we've seen, I think everybody in the MedTech space has seen there's been a real infusion of different types of technologies, exciting technologies, artificial intelligence technologies and data tracking technologies and software in general being infused into what historically was largely, purely mechanical devices. And there is a whole discussion to be had and maybe at some point we'll do it. But I don't wanna bore the listeners too much. There was a whole discussion to be had about patent eligible subject matter and truly subject matter that there's a body of law in the US that says you can't patent something that is called that is an abstract idea. And so lots of software inventions got swept up in that and a bunch of sort of supreme Court decisions going back a little over a decade ago now. But it's a pretty in the weeds area of the law. And I think probably the more interesting question is regardless of whether or not something is actually eligible for patenting or not, what thing should MedTech companies be looking at seeking patents on and what things should they maybe be considering not getting patents on, even if technically the laws and the rules allow you to get a patent on something? Is that the sort of thing that you should be seeking patent protection on? Yeah. And is a discussion. It is relatively, it's not totally new to the MedTech space, but it's relatively new to the MedTech space because you know what a patent really does is it says okay, here's the big bargain with a patent. You are gonna describe everything about your, a lot about your product in this document that you're gonna file with the government. And if we grant you a patent, if the government grants you a patent, you can prevent anyone else from making, using or selling the subject matter that your patent covers for a period of 20 years. And even if somebody else independently comes up with that idea they invent it completely independently of your work. If you have a patent on it, you can stop them from practicing. It's very powerful. It has very powerful it exclusionary effect. And for something like a mechanical device. It's really one of the only tools you have in your toolbox to prevent that type of copying, because the device itself, it's reverse engineerable, it's out in the world. Somebody can look at it, take it apart, see how it's made, see how it's used. And if you don't have a patent, not only, might they copy the device. They're fully allowed to copy the device. There's nothing in the law that says that they can't copy something that's been sold, unless you have a patent on it to, to stop them from doing it. So it makes a lot of sense for mechanical devices, and that's why sort of the MedTech space for their mechanical devices have forever, leaned heavily on patents and why investors often look for patents. But software is a little bit of a different game, right? Because software, depending on how you're using it, depending on how you're using your algorithms, depending on, how you're using artificial intelligence. That's not really reverse engineerable, that is, your the source code from your software is sitting on a secure, cloud server somewhere now, and the user of your device, the end user can't, open up the device and figure out exactly how your software is operating. They don't know what your artificial intelligence algorithms are or what the weights of the model are. And so for that, there's now an option. There, there is a choice that a MedTech founder needs to make, which is okay for the mechanical stuff that's going into the world patent have to my only strategy. But for software and things like that are not reverse engineerable, you have the option, you can, many of that stuff is not, is eligible for patenting. You can write it all down in a patent application and seek patent protection on it, but you also have the opportunity to. To not do that, to take the strategy of I'm gonna keep this stuff as a trade secret. Something you don't have the option to do for something mechanical. And so a lot of what I'm doing now, and a lot of the interesting things that me and the Goodwin MedTech IP team do is talk with founders. Understand, okay, what is your technology? How do we actually want to protect it? And which of these tools, are you gonna actually take advantage of? Usually it's a combination. And that's fun that, that's kinda one of the most exciting things in MedTech now.

Giovanni Lauricella: 33:03
So if we talk about strategy, I've learned through talking to many companies that if you file patent after patent, one, you look at a slide deck and it sounds like one technology, but there's many patents for that one technology in various components. And then it becomes very expensive to uphold or pay for those IP protections over the years. Yeah. I've heard various stories that I want you to clarify, where some people are super bullish on blanketing the world with IP and the more countries you have protection in, the more countries that you can't get messed with. And then there's other schools of thought that say, do you really care about those regions? Let's think this through. Where are you really gonna make your money? Where's really the exit gonna come from, et cetera, et cetera. So there's this blanket protection strategy and then there's, save your money and just focus on very select countries.

Marty Gomez: 34:04
Yeah.

Giovanni Lauricella: 34:05
Help us out with this.

Marty Gomez: 34:06
Yeah. It, you're right, it comes up all the time. And here again. Different strategies for different industries and ideally though, your strategy is thoughtful and it makes sense for your business and what you're trying to accomplish. Ultimately let's start with this premise. You've hinted at it in your question, right? But let's just demystify this, which is if you get a patent in the US that only gives you rights in the us Patents are territorial. So if you want to have these exclusionary rights that I described, you have to have that patent in. If you want'em in Europe, you need'em in Europe, and even more you gotta select individual countries in Europe at a certain point, if you wanna have granted rights there. Same with, every other country in the world. And a certain point, and there are companies, certain companies that, they're hugely dependent on IP and they raise a ton of money and their investors, expect them to have IP rights in a ton of countries in the world. And so they do file in many countries. For MedTech I'm gonna speak to MedTech for a second. And, there's different sort of schools of thought on this, but I, MedTech companies, especially the one that I'm working with in the earlier stages, they usually don't have this bottomless pit of money. And so I'm always very strategic with my clients about where we're gonna file for patent rights, and really, if we're gonna spend money on it, it better have some value coming back into the business. Um, every company is different, but just generally speaking and this is my philosophy over years is that, I have a, a matrix of, or matrix probably isn't the right word, but a a ranking system, a tiering system of where, generally I think folks should think about seeking patent protection. And basically tier one countries are countries that have huge markets, right? And the patent system functions very well in those countries. If you wanna enforce your patent rights, there is a functioning court system that will allow you to enforce those rights. And so for most MedTech companies Europe tends to be at the top of the list on that. Other regions in the world that people go into as well. Usual as you start to tick down the list, there's, some sort of a notch against the region, which is that maybe the market is a little bit smaller or the region may have some challenges in enforcing its rights, but it's always driven by an individualistic and a strategic discussion with the company. And we also think about a couple other things, right? So where are you gonna be manufacturing makes sense to have patent rights in the country that you're actually manufacturing in, right? In MedTech, right? And for any company, but certainly for MedTech. Do you have an a, a natural sort of acquirer in mind down the road, if you do, probably makes sense for you to have patent rights in the country where that acquirers headquartered? Not always right? There, there are, there, there are, IP strategies don't necessarily fall with where a company is headquartered, if you're gonna be acquired by a company that's headquartered in Sweden, you might wanna think about getting patent rights in Sweden. So couple little individual things that come in based on the specifics of the company. But there's this overarching framework that, that we look to.

Giovanni Lauricella: 37:10
So then let's talk about the other elephant in the room besides price. China. Okay. What's going on with China?

Marty Gomez: 37:20
Yeah. It comes up a lot. And a lot of, China's one of those regions where countries where huge market, obviously it's a, it know tier two country for me, right? Because of this question about, how enforceable the IP rights are over there. So listen I would be lying to you if I told you that, I could sit here and predict exactly what's gonna happen in, geopolitical relations. And I'm a patent attorney. Just, going, day by day here, I think like we all are. But I will say that, it kind of ebbs and flows over time. Based on, I think loosely how kind of US China relations are going. But I will say it's not like China is it's completely impossible to enforce IP rights over there. It's not like a country where give you an example, right? Russia, for example I don't I haven't, certainly when some of the tensions were really high last year, a couple years ago, the US actually got put on a list in Russia where the patent rights, US patent rights were not enforceable in Russia. Not the case in China, right? Not even close to the case. And certainly there are many companies that file IP rights in China. And and many MedTech companies that file for patents in China, particularly if they're doing manufacturing over there could, there, are there, potentially some nuances to the Chinese system. And can we have as 100% certainty in the system over there as we do in the U.S.? No. And not always, but there's still enough of a value that, oftentimes it does make its way onto the list of places where many MedTech companies will file.

Giovanni Lauricella: 38:49
So then if we talk about another topic that I saw, several, I should say, each year I see several press releases about this lawsuit happening. That lawsuit happening. This big company's going after that company for patent infringement, whatever it may be. When we start talking about billion dollar company going after billion dollar company, that's one thing. Then they're just gonna go after each other. But if I'm a little startup company Yeah. And I've raised my series A of we'll call it$10 million. Yep. And I do have granted patents and, I'm chugging along, I'm doing my thing. There's this notion that sometimes law can be bigger than, we'll call it the truth. And I don't mean it pejoratively speaking, but like sometimes it's about money and power and things like that, right? And so when you're dealing with this little a, b, c MedTech startup company with a Series A versus an Edwards Life Science, or a Medtronic of multi-billions of dollars, where, I don't know, I'm, you have to help me out even finish the question where it's okay, I'm Edwards Life Science or Boston Scientific, and that company over there for some reason's threatening to me. Yeah. But I know they have$10 million because I saw the press release and I just want to like, push them out of existence. Yeah. Is that real?

Marty Gomez: 40:13
I think it certainly, can be real. I think all big strategics, right?

Giovanni Lauricella: 40:17
And I'm sorry to cut you off. I think the. The question that I want to get outta that is true IP protection. Yeah. So I spend money on IP protection. Yeah. Now I have it. Does it give me this golden cage against all these lion tires and bears of big companies? Or can these big companies still be like, I know they got gratin patents, but try to weasel me out of this big expensive lawsuit.

Marty Gomez: 40:38
Yeah. So I think what you're driving at, and this is just a reality, right? Like big companies are really well capitalized, real well resourced. They're the incumbents. There's, there's no question that they have all manner of advantages over small companies, not always, right? Small companies are a lot more nimble and are able to adjust and change strategy a lot quicker than these big companies. But there certainly have a lot of advantages and resources and capital is one of them, right? If. A big company, really wants to be a bully. And, bring a, some sort of a lawsuit or something, with their IP portfolio against a small company. And, do they have the ability to maybe stay in that lawsuit for a long time and, just, be a bully basically. Yes. Big companies have an ability to be a bully. No question. I think a lot of people, and I certainly subscribed to this, right? Is that's a reality regardless of what the IP system is, right? So the one of the reasons I love being an IP lawyer is it is IP sort of a golden shield or a golden ticket, against bullying. No, but it's a pretty good weapon. And one of the main reasons, that I like to think that it exists is to give,'cause absent the IP system, absent patents, not only could a big company bully a little company, in a lot of ways, they'd be justified in doing that. They should just take your product. They should look at it, they should. Completely rip it off and then take advantage of their far more established supply chain channels, distribution channels, brand reputation, and just completely push you outta the market. I think, the fact that the IP system is there and that you can get enforceable patents in and no, not a complete defense from bullying. But a pretty good sword and a lot of times rather than, yeah, maybe they could come over there and, poke you, but they know that if they do. They got a, they, they got a, a dangerous lawsuit coming back at them. And it also, makes you maybe an attractive acquisition target. You have something, you have assets that they're interested in acquiring. Yeah. Is the system perfectly idyllic? No. But I think by and large it works for the purpose that it has.

Giovanni Lauricella: 42:43
And I wanna go back to a real world scenario and then give you the spotlight with Goodwin. Yeah. So I'm just trying to think about the real world situation. I come out of Stanford Bio Design, and I have an idea that I want to turn into a company or it's getting more and more, regular for universities to have these systems where you can actually go into entrepreneurship after being an engineer, meaning with your undergrad or even master's. And then it teaches you how to create companies or product technologies that turn into companies. So we're getting all this innovation, like we live in this day, age of innovation and innovating. And building technologies. And building products. Okay. So now I'm an engineer, or I'm a physician and I know nothing about business and I have to start somewhere. I'm going through the old days of the Yellow Pages, or I'm going to Google and typing in, and I heard of the Wilson Sonsini, the Cooley, the Goodwins, the Fox Childs, Rothchild, whatever. Yeah, whatever. Yeah. That's, yeah. They're not big enough apparently. Yeah. But the whole point is

Marty Gomez: 43:52
no free ads.

Giovanni Lauricella: 43:52
Yeah, exactly. So the whole point is, if we can be real for a second, and whether it's recruitment like I'm a recruiter Yep. You're a a lawyer. Yep. There are other service providers like product design houses and contract manufacturers. Like these service providers, when you get asked the question why you, like, when people ask me, why me, I can go on my spiel, but service providers at the end of the day is a commodity. Why Goodwin, why you, what's the benefit of me as a MedTech startup entrepreneur going with this full spectrum law firm? Yeah. And what's the upsides?

Marty Gomez: 44:35
Yeah. Yeah. Appreciate the question. And I think a lot of it is a lot of the stuff that I've been touching on in, in previous questions. But just to bring it full circle here, because I want to touch on what I think the value is, but then also address I guess the element in the room or what a lot of people would view as maybe one of the downsides is you should work. So if you are gonna have a successful outcome as a MedTech company at some point along the, along your travel, by and large, there's always exceptions to everything, right? But you are going to experience a transaction, maybe many transactions where, like it or not, right? There's a big legal component to that. And for those types of transactions, there's only a, a subset of firms that I think have sort of the experience to be able to handle a transaction like that. Because, we've talked about this, there's many different types of firms, but really the firm that you need to maximize your outcome as a MedTech company is gonna be one that has all of these different, areas of expertise. One we didn't even talk about earlier, particularly when it comes to a big transaction, is tax expertise, which we have a big group on, right? Making sure that these transactions are structured and accomplished in the right way. And for those types of transactions, I think, you really need sophisticated counsel. Now why work with us in the early days? I've tried to, explain through this podcast that it's gonna be a lot smoother a ride if your strategy is set in place early, then later on. And so if you can get the strategy set. And, you can be like working with the team that is a long for the ride the whole way. I think there's some advantages to that right now separately from that, right. Warriors get, get a bad rap in a lot of kind of, parts of society, which, some of it is probably warranted, but I, startup lawyers are a little different, right? I think that every founder, I, should view your startup lawyer as like an, an, as critical as, your, an early advisor of the company, right? A a, just as important as a board member or, even maybe a key early hire or somebody that is going to not just execute on the nuts and bolts of what churning out documents. But it's really like your, one of the great things that lawyers do is we live this story over and over again and are concurrently representing companies at many different phases in the cycle. So your lawyers really are your Sherpa, they're guiding you through, this, one of the people that's guiding you through this, difficult path of entrepreneurship. And so for that, candidly speaking, if there's, a handful of firms that have the expertise that you know are gonna need eventually, then you know, really what it comes down to is who do I trust, right? Who do I want to be my partner and help me on this journey? And for that, Goodwin versus anybody else that has that expertise, that's gonna be a personal decision on a company by company basis. Obviously, from my perspective, I like to think that we've got a great group at Goodwin that a good group of Sherpa I certainly, like to build really deep relationships with my clients and, help guide'em along the journey. But that's really what it comes down to at that point is, what's this relationship? And and pick a lawyer. If you don't, if you wanna go grab a beer with your lawyer or go, it might not be, you probably don't need to go and grab a beer with, every lawyer that your company is gonna work with, right? There are some tacticians you just want to get'em in there and, some of these guys, you just want to get'em out of there. You're early stage. Startup lawyer that you're working with should be somebody that you get along with. Yeah. And a lot of these decisions end up coming down to that at the end of the day.

Giovanni Lauricella: 48:21
I wanna wrap up with some mechanics.

Marty Gomez: 48:23
Yeah. Actually, before we do that can I just address the pricing piece quickly? Oh, yeah. Because that's something that I've been trying to get to and I just wanna get that out. And the big elephant in the room is people are like, and I actually just at the CEO event earlier today, there's this chicken and egg issue, right? It's I know I need this, but I don't have the money to, pay for it. And I, I know I need a good lawyer or a good team member, or a good, recruiter or whoever to help my company, but I can't pay for it until I get the funding. I need good IP to get the funding, but I can't pay for it to get the fund. There is I guess the big takeaway is that I think that people should. Not necessarily think that because you're an early stage company, you can't work with, a big law firm. Goodwin certainly wants to work with early stage companies. We wanna work with companies, from day one, right? And there's a we wouldn't be in the business that we're in unless we had a way we were able to make it work with early stage companies. And so there's a bunch of different ways that we do that, right? There are, startup packages and programs that we have where we can, discuss not charging for certain services deferring fees in some instances, if there's a fundraising on the horizon capping fees, right? Some companies just really want a, um, a certainty on their spend. So we can say, okay, we can do, X, Y, and z. Whatever you need, and the cost is gonna be X, you know exactly what it's gonna be going in. So there are some tactical things, some programs that can be put into place. But more than anything, and this is the takeaway that I wanted to make, is that for good companies, right? This comes down to that kind of trust piece and no, it feels a little soft, but I, mentioned about what you want your startup lawyer to be. Listen, law firms do well when companies do well. Law firms just land it all out on the table. Law firms make a lot of money when a big exit transaction happens, right? And that's hopefully when the founders make a lot of money as well. In the early days, you and your startup lawyer can usually figure out an arrangement. That makes it work so that, yes, there's obviously economic realities to running a law firm. No, law services are not free. No. A really sophisticated firm is probably not the cheapest firm that you can find, but you may find actually that they can be more flexible sometimes than some of the places that you think are cheaper. So it's a, it's an individualized situation. But I guess the big takeaway that I wanna make is, I don't think the folks should think that, um, price is a prohibitive factor to working with the right law firm. It's really about picking the firm that can, bring the services that you need to make sure that you have that successful outcome.

Giovanni Lauricella: 51:05
And this is what I wanted to end on, which is really like the mechanics of the high volume things that you get to see you, you get to see so many companies with that. You see a lot of successes. You probably see even more failures. And that builds your own personal algorithm on being a great Sherpa for companies that bring you in. So when you have that lens that you look through, whether it's IP today that sets up the company well or not well for the future, what are some of these common mistakes? And I don't wanna do it where it's a LinkedIn post where it's look at these seven common mistakes. I'm really meaning change the names if you want, but give real feedback in your career where it's I've actually seen a company literally not be able to go through an exit because they, seven years ago took a shortcut when they didn't need to. I don't know what the example is. Yeah. But I want you to give some real world examples to all the MedTech startups listening right now. Yeah. Where you know, and I'll keep on running with the preface here today at our CEO only event, we had one of the CEOs talk about the fact that realistically most acquisitions in MedTech aren't higher than a hundred million dollars. A lot of them aren't, don't even make the press. Yeah. There's a lot of acquisitions that take place that don't make these$450 million,$680 million splashes. Yeah. That everyone who thinks they wanna start a medical device company are gonna work their asses off to go hit one day. Yeah. And that's not the case. Yeah. How do you make that$50 million transaction,$75 million transaction, or hopefully one of those north stars of 450 million plus work? But are you re, are you really gonna skimp off of a$10,000,$50,000, a hundred thousand dollars in legal fees to. Not have that big acquisition. Yeah. Someday happen. So what are some of the actual realities of downsides of super shitty situations that you've seen?

Marty Gomez: 53:02
Yeah, for sure. Yeah. And I, I will anonymize it a little bit. But just to reiterate it so have definitely seen folks that, we have our IP, all, set up, we're ready to go. And when the IP was actually diligence, it didn't actually cover their product. They had filed, patent applications years and years ago, the company had evolved, the product had evolved, and then when finally, somebody was actually looking at making sure that this company was defensible, the answer was no. And I've, legitimately seen people walk away from deals over that issue, right? Wow. So that's a acute, IP issue. Also, what happens sometimes in the IP space is again, maybe we'll do a we've talked about this. Maybe we'll do an IP basic session sometimes, or really get tactical on this IP stuff. But, um, for these purposes founders should know that when you are public about your technology that before you file a patent application, that can be really harmful because your own activities. And again, maybe in a followup session we can talk about why this is, but your own public activities can be used against you to prevent you from getting a patent. So I've seen that a lot of times where somebody was really anxious to get into selling their product or get into marketing their idea, and they did that before they filed their IP. And as a result disqualified themselves from being able to get the type of IP protection that they needed to satisfy their investors. Oh boy. Man, this is like a greatest hits of I'm going through some PTSD here, remembering some of the worst stories. These actually are all real stories. Another thing to really keep in mind is when you hire right from wherever, right? Remember that particularly if somebody that you hired was employed somewhere else, they may have IP obligations to their prior employer. Founders may have IP obligations to their prior employers, and making sure, again, at the outset that prior employer isn't going to come after your company for trying to build a company on something that the former employer thinks that they own. I've seen big transactional issues on not having that squared away at the early stages. So those are IP things. Um, from a corporate perspective, and this is, I know enough here to be dangerous, right? But sometimes you have an issue and it's things, they're simple, right? If you're working with the right folks, you're not gonna make these mistakes. But, there's a particular type of tax election called an 83 B election that founders need to make with shares that are unvested. And if they don't make that election then and it's like one of these things where like clearly there's a 30 day deadline to do it. And if you don't know, if you don't have a lawyer that you know, tells you if you don't make this election within 30 days there can be a huge tax consequence. Because basically what happens is your tax not on the value of the shares when you received them, but on the value of them when they vested. And so that can, that hopefully the value of those shares have gone way up. So I've seen, I haven't, I've seen big issues around that before. And then the other thing that I'll, that that often comes up is, um, founders will oftentimes, the early days when they're not being advised properly, the cap table management, right? So they may just give away too much of the company because they don't know, right? Like how much is normal to give. To an advisor in, advisor shares or 19%. Yeah. And then, and then a, and you know this, right? But then a, the, an investor comes in and, the investor wants to take, they, the very sophisticated investors, they know, okay, the founders. And, when we're looking at this company, we need to take this chunk for us. And we know in order to, have this company exit, there may need to be other investors that are gonna come in and take even more. So we're all gonna get diluted down even further. And the cap table just, it doesn't, like even if we love your business, you have the best IP. You have just it doesn't work. Like we can't make money on this investment. Now, candidly, in a lot of those circumstances that, you can unwind some of that stuff, you can fix some of those things. But again, it's always, way more expensive than the money that you saved, in the early days. So anyways, those are all truly, those are real examples of. Issues that I've seen come up that if you had just, again, spoken with a lawyer at, the firm that you really should be working with in the early days and figured out a financial arrangement that worked and yeah. Again, maybe it wasn't the cheapest, but it was doable and you could make it work. You save way, way more money in the lifecycle of the whole thing than trying to unwind all this stuff later. And some of it you can't fix.

Giovanni Lauricella: 57:49
We're wrapping up with a story that you told in Malta this year. Actually last year at this point, you were on a panel call that takes a village. So I ask this question often to investors, but it applies to a lot of various people in the community. So investors, they're supposed to give a check, right? Here's my money, but there's bad money. Neutral money. Good money. Good money is value added beyond the check. As a lawyer, you give great Sherpa counsel on IP and your whole entire firm has this full spectrum of value that they add. What is, what they're paid for? On the legal side, if I'm a startup company, one of the differentiating factors beyond just wanting to have a beer with my lawyer is what value add or what community aspect can you add to me as a friend also? Yeah. Simply beyond the legal advice. So I want to frame this last question for you is, in addition to the tactician advice that you are paid for these startup companies, what community and value add do you also wanna surround yourself with to be able to offer your clients? And then how do you put that into advice for startups to also use for interview questions as they're trying to choose the lawyer that they wanna work with.

Marty Gomez: 59:07
Yeah. Great. So yeah, I, we've talked about a little bit about sort of the things you should think about in picking a lawyer, one thing about your lawyer, right? Is speaking, you can work with a lawyer for as long or as short as you want, right? You can fire your lawyer at any time and, work with another lawyer if you want. And so your lawyer really should be earning it, right? Your lawyer you should be getting the service that you want out of, your lawyer. And so I'll speak in a second about some of that, the, the network effects, but, you're working with, a good lawyer, you should expect, my client should expect. They can get ahold of me anytime. You can get ahold, you, you should not be waiting weeks and weeks to hear back, from your lawyer, your lawyer should be there and should again, I've made this pitch that your startup lawyer should be considered an early advisor to the company, right? And, you should have the same expectations that you do of them as of the early members of the team. And that means, living and dying with the company. So that's an intangible that doesn't come across in, any sort of marketing decks or whatever. But certainly responsiveness and being very clear that your lawyer's got your back and is on your team is an important piece. Another sort of, again, not on a marketing deck, you should look for right, is another benefit that comes with this building of a team that is focused on an industry, right? Is. We have a network, right? Your law firm should know the people that are the players in the space that you're in, right? And part of that is, frankly, we may represent some, many people in the industry, but even if we don't represent them,

1:00:45
we know them, right? So if you need, connections to an investor, right? You need contacts to, with, a big strategic, right? You need a recruiter, you need a a product development shop. You need somebody to get GDPR certified, all these things, right? Again, because I've been saying that you're a lawyer, touches all of these aspects and we really want to live with the company through its lifecycle. We should have contacts for you. In all of those spaces. And that doesn't mean that your lawyer, your lawyer is usually not going to be if the lawyer makes an introduction to an investor, that's usually not the reason that investor's gonna invest. An investor's gonna invest because they like the team, they like the technology, they like the, um, really the business model, right? And that the, the path to exit. But lawyers can certainly make it easier.

Giovanni Lauricella: 1:01:39
I think that is by far one of the best lines to land on. And what I would say here is I fully enjoyed two boston laggers.

Marty Gomez: 1:01:48
I'm gonna have to catch up with you

Giovanni Lauricella: 1:01:49
made by Sam Adams. and now we all know what it really means on what good IP, but not only that full spectrum legal counsel means and should mean for a MedTech startup. we just got inside the head, the heart, and the guts of this MedTech Sherpa. And I wanna say thank you very much for being here with us and for having us and doing everything that you do for us. My pleasure. Thank you. Thanks for having me, Giovanni. My pleasure.

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