By Larry Storer

Treatment for patients suffering from varicose veins has come a long way since the only conventional treatment was painful vein stripping: Under anesthesia in a hospital outpatient setting when the diseased great saphenous vein was literally pulled from the groin through an incision above the knee.

Medical method patents, which are detested almost universally by doctors and happily embraced by lawyers, came along with the introduction of the laser and Diomed’s endovenous laser ablation (EVL) procedure and the VNUS Medical Technologies Inc. Radio Frequency generator and its Closure system.

EVL is a minimally invasive procedure that uses an optical fiber that delivers laser energy to heat the blood inside the large superficial saphenous vein. Doctors say the laser energy heat damages the vein by directly perforating the vein, or indirectly through boiling the blood and producing steam. The optical fiber is withdrawn while laser energy is delivered, inducing thermal damage and a blood clot to occlude the length of the treated vein. The blood then flows to healthy veins.

The VNUS Closure system operates in a somewhat similar fashion to close the diseased saphenous vein by inserting a proprietary catheter into a vein to heat the vein wall with temperature-controlled radio frequency (RF) energy. Heating the vein wall causes collagen in the wall to shrink and the vein to close. The blood then also reroutes to healthy veins.

The Legal Landscape

Both procedures are commonly performed in the physician’s office, or in some cases as a hospital outpatient procedure. But behind the scenes, the rest of the action seems to take place in federal court. The vein treatment industry in the United States has become an indecipherable web of legal entanglements over medical method patents, trade secret issues and other patent litigation that is complicated by pending cases and bankruptcies. This has been further complicated by the speed – or rather lack thereof -- of the court system in the United States in resolving the issue in a highly competitive marketplace with a high degree of conflict.

A company has been ruined, physicians have seen prices for products and royalties protecting intellectual property increase past the point of reimbursement,  and some doctors say patients could have been denied what might be the newest or best possible treatment as physicians have to make medical, legal and business decisions on the fly.

But James A. “Jim” Wylie, former president of Diomed Holdings Inc., said patient treatment is not an issue in medical method patent litigation issues.

“Doctors are free to provide procedures to their patients whether there is a medical method patent in place or not,” Wylie said. “In other words, you can’t restrict the doctor from taking the health of his patient as his foremost priority.”

The United States and Australia stand alone in defiance of 80 other countries in the world by allowing medical method patents. Of the 100 or so medical method patents issued a month in the United States, about half are issued to foreign doctors who come here to register their patent because they are not legal in their own country.

            Within this medical specialty, the patents at issue are one medical method patent licensed by Diomed, a now bankrupt company that made advances in the use of lasers to treat varicose veins; and six medical method patents held by VNUS Medical Technologies Inc., a company that has pioneered the use of radiofrequency technology. While some of the patent issues have been decided in court or in out-of-court settlements, other cases have yet to be litigated. Diomed has filed five lawsuits against seven defendants alleging patent infringement of its medical method patent, while VNUS has filed three lawsuits against nine defendants, alleging infringement of six of its method patents.

The Diomed Litigation

            All of the Diomed suits defended U.S. Patent No. 6,398,777 B1 (the ‘777 Patent), granted June 4, 2002, and were filed in the federal district court in Boston.

Diomed sued AngioDynamics in January of 2004, Vascular Solutions Inc. (VSI) in March of 2004, Total Vein Solution (TVS) in April of 2004, CoolTouch in October of 2004, Dornier in March of 2007, and in June of 2008, added the individual owners of TVS, a small privately-held Houston company.

“Where the problem comes is not with the physicians deciding to practice a patent, because as I’ve already mentioned they are free to do that, but with other companies who ignore the fact that there is a medical method patent in place,” Wiley said.

“I suppose one of the clearest examples would have been technology for endovenous laser technology that was developed by Dr. [Robert] Min and Dr. [Luis] Navarro and their associates and was acquired by Diomed.

“We elected to spend millions of dollars to acquire and commercialize the technology only to have a whole range of companies come into that market, ignore the fact there  was a patent and convince some portion of the medical community to buy infringing products because they were either cheaper or just because they wanted an alternative source of supply. 

“I believe this is detrimental to the primary objective of creating any of the technologies that offer significant advantages to the physicians who practice the technology and to their patients,” Wiley said.

In 2007, Diomed won its suits against AngioDynamics and VSI and damages totaling $14,575,000 –  a case of winning the battle and losing the war. Balancing five lawsuits against seven defendants and defending a sixth proved to be too much for Diomed, and this year the company filed for bankruptcy protection, selling most of its assets to AngioDynamics for $10, 586,000. Due to bankruptcy proceedings, Diomed agreed to settle its jury award of more than $14.5 million against the two companies for $10.1 million and dismiss all claims and appeals against them. The AngioDynamics share of the settlement costs was $7 million and the VSI part was $3.1 million.

The VNUS Litigation

            VNUS files its suits through the federal district court in San Francisco. VNUS sued Diomed in June of 2005, alleging infringement of four endovenouse procedure patents: U.S. Patent No. 6,258,084 B1 (‘084 Patent), granted July 10, 2001; U.S. Patent No. 6, 638, 273 (‘273 Patent), granted Oct. 28, 2003; U.S. Patent No. 6,752,803 B2 (‘803 Patent) granted June 22, 2004; and U.S. Patent No. 6,769,433 B2 (‘433 Patent), granted Aug. 3, 2004. In October of 2005, VNUS sued AngioDynamics and VSI, adding them to the Diomed litigation.

In June of 2008, VNUS sued Biolitec, Dornier and CoolTouch alleging infringement of three endovenous medical method patents; and in July of 2008 leveled allegations of infringement against TVS and added two more patents to its June suits: U.S. Patent No. 7,396355 B2 (‘355 Patent), granted July 8, 2008, and U.S. Patent 7,406,970 (‘970 Patent) issued Aug. 5, 2008. In September of 2008, VNUS sued TVS and its owners individually, alleging infringement of the five endovenous method patents in the suits against Biolitec, Dornier and CoolTouch.

The suit against Diomed also still pends. Wiley no longer speaks for Diomed, but did have a personal observation.

“I prefer not to comment on the VNUS suit other than to say that Diomed had been in the market for years before we were sued. We had in-depth legal opinions that we were not infringing on their technology,” he said. “If a company is already in the market and has legal opinions that say they are not infringing, then it becomes either a negotiation to find mutual grounds for settlement or you rely on the courts to find whether the company’s legal position is errant or not.”

But given the verdict in the Diomed case, the slow speed of the court system and a desire to get back to business, both AngioDynamis and VSI decided to settle the case with VNUS without attempting to have the VNUS patents declared invalid. Part of that settlement was a public statement by the two companies that the VNUS patents were “valid and enforceable.”

"We elected to end what has been a major distraction for our management team at a cost to our company that is less than the amount Diomed was awarded by the judge after the jury verdict in late March of last year," Eamonn Hobbs, AngioDynamics president and CEO, said of the VNUS settlement. "As a result of the settlement, we will now have additional cash to invest in the growth of our business."

AngioDynamics agreed to pay VNUS $6.8 million and quarterly royalty payments until the VNUS patents expire 20 years after being granted; and VSI agreed to pay $3.1 million and on-going royalty payments until the patents expire. Royalty arrangements were not disclosed, but doctors who do business with AngioDynamics and VSI have indicated dramatic increases in the cost of catheters and other products.

Howard Root, CEO of VSI, said that beginning with the second quarter of 2008, these higher confidential royalty payments to VNUS would be passed along to doctors as part of the cost of goods sold for its Vari-Lase products. As a result of the settlement, VSI expects to be able to reduce its legal expenses by $500,000 per quarter.

“This settlement resolves the third and last piece of litigation that existed when Vascular Solutions entered 2008,” Root said. “We are obviously pleased to have this litigation now behind us, which will allow us to focus entirely on growing sales, launching products and developing new vascular devices.”

In addition to opening its wallet to settle with VNUS this year, AngioDynamics also bought Diomed’s U.S. and U.K. assets for about $11 million.  Diomed is negotiating with other companies where suits still pend.

“This acquisition, combined with the recent settlement with VNUS Medical, provides AngioDynamics with valuable licenses to patents for use in endovenous laser therapy,” Hobbs said.

“The acquisition of Diomed has established AngioDynamics as the market leader in the laser ablation of varicose veins,” Hobbs said in early October in announcing 2009 fiscal first quarter financial results. “During the quarter, we hired 35 former Diomed employees and integrated them into our Peripheral Vascular business unit. In addition, we immediately began implementing laser system and disposable product transition strategies.

“Customer demand for the EVLT disposable products remained strong during the quarter. However, first quarter laser system sales were impacted by the market’s uncertainty regarding Diomed during the months leading up to our acquisition. We . . .expect laser systems sales to grow as the year progresses.”

Also in bankruptcy but continuing operations is Total Vein Solutions (TVS), a small Houston distributor of what they call “unpatented vein surgery products” to vein clinics. TVS co-owners mailed signed letters to all their clients and to all doctors in the field on Aug. 22, 2008, stating that they believe that the VNUS patents in-suit are not valid and enforceable, but that in any case they had not infringed any VNUS patents.  

Unlike VSI, which said they were going to pass along the cost of their new royalties to doctors and vein clinics, TVS co-owners stated in the letter: “We have no intention of settling this (VNUS suit) or any other lawsuit in a manner that would dramatically increase prices to your vein clinic.”

Frustration and Anger in the

Phlebology Medical Community

By this point, millions have been spent, one company is bankrupt and out of business, and another is in bankruptcy. What are the results to date? One patent has been found valid by a jury, and four others have been acknowledged to be valid by two companies in an out-of-court settlement to avoid the cost of a trial. Those four patents and the two new ones are valid unless one of the remaining defendants challenge them in court and win.

But for VNUS, royalty payments for companies selling products to doctors for these procedures have begun to roll in. VNUS estimated its royalties for 2008 fiscal year to be $12.5 million to $12.9 million, a figure that was revised upward by $1 million after the court settlements.

But most of the doctors in the field have grown weary of the cost and distraction of all the litigation and its chilling effects on their treatment of venous disorders. While the law is on the side of the patent holders, doctors are especially critical of those who grow rich from medical method patent litigation and royalties.

            “I’m just so frustrated that I recently wrote a letter to the American College of Phlebology stating that I believe it is time that we just disassociate ourselves with VNUS because their lawsuits are driving up the cost of doing VNUS medicine,” said Dr. John V. Dunne, a cardiothoracic and vascular surgeon in Sun City Center, Fla.

“They did a great job in developing the radiofrequency device, but endovenous procedures were not new procedures – just the radiofrequency was new. I believe that to be able to patent endovenous procedures is totally uncalled for because we had been doing those procedures for many years.”

            Part of his frustration is that he believes that medical method patents inhibit the development of new procedures and techniques.

“Doctors who have to start looking over their shoulders in developing new techniques and figure out who they are going to have to pay off for patent rights, are going to think twice about it,” he said.

Anger about the legal assertion of these patents is reflected in remarks from Dr. Ron Bush, who said physicians should not support these companies.

“Companies that try to monopolize a certain field based on patents that are not new and on existing innovative works should not be rewarded by physicians using their products,” Dr. Bush said. “Physicians and surgeons who would do this should not be invited to participate in future scientific presentations because obviously their opinions are not based on scientific data but monetary reward.”

He said the statement in these patents that laser damage is done by thermal conduction can be unquestionably denied, which could lead to the patent being declared invalid.

“Using Fourniers’ analysis and combining this with the work of Van Genert and Welch, it is clear that heat conduction plays a minor role in tissue damage. Almost all the damage is by convection (steam bubbles). Using the formula for a cylinder without ends, (the saphenous vein,) compute the surface area. Next, using the bio-heat conduction equation, the amount of heat absorption by conductive response can be calculated. The result can vary according to numerous variables, but is less than 10 percent by volume in all situations. Hence, fiber contact is not essential.” This point is also a factor on which existing patents are based.

He also said that including the tumescent solution for this procedure as part of the patent is not warranted.

“Tumescent technique for saphenous procedures was first described in an article by myself and in another article by Dr. Probestle before the year 2000,” Bush said. “Many physicians have brought improved techniques built upon the work of previous investigators. Dr. Jeffrey Klein chose not to patent a technique (tumescent anesthesia); and those surgeons responsible for laporscopic choleycystectomy also did not patent this technique.

In addition to profiting from the work of other doctors, many also believe that undeserved medical method patents injure the public because they can be used by aggressive patent holders to slow or stop development of new techniques or improving and building on existing techniques. This, these doctors say, causes prices for goods to be artificially high, the advancement of science to be thwarted and civil liberties to be restrained.

“When a new technique occurs based on the work of others, it is unethical and arrogant to profit from such greedy behavior,” Dr. Bush said. “Both the tumescent technique and thermal ablation of the saphenous vein had been described previously and not by the patent holders.”

Dr. Edward Mackay also took offense at including tumescent solution in the patents noting that he was unaware that it had ever been patented before it was in common use.

“Tumescent-assisted vein surgery was presented at the American College of Phlebology before anyone ever patented it,” Dr. Mackay said. “It seems hard to patent something you didn't invent and was being done and discussed long before any patents were made.”

            Other doctors oppose medical method patents because the techniques used today include the cumulative improvement to the procedure that has come as a result of every physician who uses it and adds to it in some way. Patents, they said, inhibit that kind of improvement to the science of medicine.

”Physicians are constantly refining techniques and if every time a new twist was added it was patented and lawsuits followed, I believe it would slow progress,” Dr. Mackay said. “It will increase cost due to litigation, stifle competition and slow innovation.”

Dr. Emory Diling said his opposition to method patents stems from this tradition.

“Those inventors learned their medical/surgical techniques (methods) from physicians who built our current knowledge base over generations, and as these inventors were not required to honor the inventors of operations which they themselves performed, it seems unfair to suddenly allow compensation for new techniques.”

Dr. James Campbell said profiting from the work of many through medical method patents, which he characterized as monopolies, is unfair.

“Most procedures have been able to evolve through many hands, and are thus improved,” Dr. Campbell said. “Such patents would slow this natural process. Monopolies never promote innovation; they promote those who hold the monopoly.”

Dr Michael Bardwil, founder of the Texas Vein and Cosmetic Surgery in Houston, is perplexed by the changing relationship within the profession, and the reaction by the American College of Phlebology.

“When I finished my surgical residency 20 years ago, we didn't talk about a ‘health care industry.’ There was a fraternal understanding that knowledge was to be shared. All of us practicing today were taught procedures by our predecessors.  

“The idea of a patent on a procedure is both obscene and offensive.  What VNUS is doing; however, is a new low.  What could be worse than a retroactive patent to extort money from competitors, at physicians’ expense?

“The American College of Phlebology’s recent response is interesting,” Bardwil said in reference to an August letter from the ACP to members regarding “potentially mis-valued services under the PFS.”  The letter noted that the cost of procedure kits has increased and can be expected to continue to increase because several suppliers that were available in 2007 and 2008 have since filed Chapter 11, leaving less competition in the marketplace. Further, “remaining companies have learned they must increase the price of supplies to maintain solvency.” The letter ended with: “We are requesting that PE RVUs for CPT codes 36475 and 36478 be increased to more accurately reflect current cost.”

Bardwil said he thinks the ACP should instead explore the cause of the “less competition” that has led to the higher costs.

“Rather than expose VNUS for what they are doing, they are asking Medicare to increase reimbursement to cover the increased cost of procedures caused by corporate greed,” he said.

Two doctors who did not benefit from the medical method patents they invented are Drs. Mitchel P. Goldman and Robert A. Weiss, renowned dermatologists and co-inventors of four of the VNUS patents.

“When Bob and I set out to do this it was to benefit patient care,” Dr. Goldman said. “And he and I received $10 each, and I don’t know why it wasn’t $1. They sent us a check and I never cashed it. It’s in a folder some place because it’s ridiculous.

“I am totally opposed to medical method patents,” said Dr. Goldman, who is past-president of the North American Society of Phlebology and author of more than 60 books and articles “When we take our oath to be doctors, part of that oath is to teach and to advance patient care. I think that some people have forgotten their oath and it’s appalling”

 Doctors Who Are Not Opposed

Doctors and medical company executives who could have argued these points refused to return calls or declined to comment – not uncommon when those asked to comment are themselves involved in litigation.

Drs. Robert Min and Luis Navarro, who share a part of the medical method patent that they licensed to Diomed, did not respond to messages left with secretaries, on voice mail and sent via e-mail. Also non-responsive was Brian Farley, CEO of VNUS, which owns more than 20 medical method patents. VNUS also declined to write an accompanying independent in-depth article on the value of their medical method patents on medicine and how they help the physicians who practice with the VNUS system.

Farley is on the record, however, regarding the company’s defense of its intellectual property and the results of that defense on the company’s financial outlook through royalties.

Of the agreement with AngioDynamics and Vascular Solutions, Fraley said the agreement validates the importance and value of VNUS intellectual property in the field of endovenous ablation. “It brings to VNUS a favorable result in the enforcement of our endovenous vein laser abalation products sold into the vein ablation market over the next nine years.

“We expect the financial and other terms of our settlement agreement will also facilitate productive dialog with others who practice the patented methods.”

When the U.S. Patent and Trademark Office (USPTO) allowed VNUS a continuation patent on its ‘433 Patent in April, Farley said “The allowed continuation patent broadens the VNUS patent position and helps to confirm that VNUS pioneered the key endovenous methods required to treat venous reflux.

“The decision by the U.S. Patent Office to grant a continuation of the ‘433 Patent in light of the references cited by our competitors is consistent with our longstanding contention that the patents asserted in our infringement suit are valid.”

Then when USPTO allowed another continuation patent of the ‘084 Patent and the ‘803 Patent in May, Farley said that continuation patent is based on references cited by competitors as they challenged the validity of the VNUS ‘084 and ‘803 patents.

This new patent application contained claims that recite methods of administering fluid around a hollow anatomical structure, such as a lower limb, and applying energy (could be light energy) from an elongate member (such as a fiber optic) to the hollow anatomical structure.

The Law

But patent attorneys, who are probably the biggest winners in the patent wars, are not shy about discussing the issues.

Patent lawyer Eric Raciti of the Cambridge, Mass., office of Washington's Finnegan, Henderson, Farabow, Garrett & Dunner, said that medical method patents actually encourage innovation by doctors and companies, making medical method patents good for medicine.

"What it does is it provides something for other companies to work around,” he has stated. “The patent is out there. It's wide open. The whole world looks at it and thinks, 'How do I get around it?' That inspires more creativity and more development."

But Dr. Aaron Kesselheim, who is both a medical doctor and a patent attorney, isn’t so sure. Kesselheim conducts health policy research at Brigham and Women's Hospital in Boston and teaches at the Harvard Medical School.

“The legal concern is that physicians won’t do something because they’re concerned  that somebody will sue them, and if that affects the care they are trying to provide to the patients, then that’s a negative,” Kesselheim said.

Michael N. Rader of Wolf, Greenfield & Sacks P.C. in Boston, who was a part of the Diomed legal team and is now part of the Biolitec legal team, said that Biolitec declined to comment on this article.  VNUS and  Biolitec are involved in ongoing litigation.

With the law on the side of the patent holder, questions about the validity of the patent can only be decided in federal district court, which is distracting from the business side of a litigant and can cost millions. It is not uncommon for patents to be determined to be invalid in court because many patents have been granted by USTPO that are undeserved.

Patent fraud has been around for years, and patent watchdog groups have sprung up in response to patent system abuse. Two of these organizations active in the medical fields are Patients Not Patents Inc. (patientsnotpatents.org) and Public Patent Foundation (pubpat.org).

Ethical Issues

But complicating the question of whether medical method patents are good for medicine or do anything for the physicians trying to practice medicine is that the factual nature of the arguments reflecting just the legal issues might miss the point. In the medical profession, more so than in other areas where patents determine ownership parameters, the ethical discussions must be considered as well.

Both the World Medical Society and the American Medical Society have strongly worded statements condemning medical method patents on ethical issues. The American College of Phlebology (ACP), of which Dr. Min is the outgoing president, does not have a position on the issue.

American College of Phlebology Executive Director Bruce Sanders, said it would be inappropriate for the ACP to have a position on medical method patents.

“We don’t have resolutions, statements or positions on medical method patents or the litigation around them,” Sanders said. “The ACP is a 501(c) nonprofit organization and our mission and purpose is education and research. It is not within our purview to have formal statements of support or non-support on the issue.”

And if traditional legal issues and ethical concerns were not confusing enough, Congress got involved in 1996 on the heels of a court decision where one doctor sued another for infringing his patent on the procedure for an incision in eye surgery that did not require stitches to close it – a great advance in that specialty that the doctor with the patent wanted to license for a fee to the rest of his colleagues.

When President Bill Clinton signed the bill into law in 1996, physicians were granted limited immunity protecting them from suits alleging patent infringements.

While it might seem that this law would have pulled all of the teeth from the arguments and issues being decided in court at great expense, it in fact moved the liability for infringement from the backs of infringing doctors and onto the backs of the companies from whom those doctors purchase the devices and procedure kits for the system used to treat varicose veins through the legal concepts of contributing to and inducing doctors to infringe the patents.

Just as water flows downhill, the real costs for royalties and litigation now moves from the company that has lost or settled a lawsuit to the doctor who buys products from that company. As the ACP letter noted, as more competition disappears, then prices will continue to rise. Unlike a retailer who can always pass along the cost of overhead to customers in the form of higher prices, doctors cannot do that because medical reimbursement limits are locked in, and one doctor predicted this was going to end badly for phlebology as a whole.

This Will End Badly for Doctors

Dr. John Kingsley, founder of the Alabama Vascular & Vein Center in Birmingham and Atlanta, said the obvious result of the business-against-business lawsuits is that practicing phlebologists will ultimately pay the price, and that the total effect on the vein specialty will be devastating.

“Already this has happened if you are purchasing supplies and equipment from AngioDynamics and Vascular Solutions,” he said. “These companies must raise their prices to physicians in order to maintain their own profitability. Our costs escalate while our reimbursement declines, a situation not compatible with survival.” 

He said that if these battles continue and if VNUS presses on in their lawsuits to demand royalties or bury competition, then his prediction is that the “vein industry as it is today will rapidly disappear.”  

“Office-based vein centers will close; only hospitals will be able to afford the high costs of the supplies, including the VNUS catheter, and ultimately the patients and the insurers will pay the price for modern health care. 

“Access will be severely restricted for our patients, and there will be a reverse toward outdated, but more affordable, methods of treatment – even for our patients with stasis ulcers. The number of physicians practicing phlebology will decline as the specialty retracts, the American College of Phlebology will reduce in numbers and will no longer be the successful Society as exists today. The total effect on the vein specialty will be devastating.”

            Although he said he has not yet personally encountered any problems, Dr. Emery Diling of Vein Solutions in Austin, Texas, is typical of many physicians in evaluating the effect of the medical method patents on his practice.

“Reimbursement is at rock bottom levels now, and I simply could not afford to shoulder additional un-reimbursed expenses,” he said of increased costs for supplies and royalties. “Thus, my patients might be stuck with now outdated treatment, or be forced to seek the more current treatment from institutions with deeper pockets.

While most oppose method patents, doctors generally believe that they are exempt from being drawn into the legal battles, looking to the law signed by President Clinton for professional protection. But the immunity is limited, and a prominent patent attorney said doctors could find themselves in court.

Jeffrey Light, a licensed patent attorney practicing in Washington D.C. and the founder and executive director of Patients not Patents Inc., said that the exemption for physicians only applies to patents having an effective filing date on or after Sept. 30, 1996. Because patent term is generally 20 years from the date of filing, the exemption will not provide full protection for medical practitioners until 2016.

Perhaps Dr. Goldman, who has seen the medical method patent issue from both sides of the argument, is right.

“My advice to any doctor who comes up with a new idea that he thinks is worth patenting is to read Shakespeare,” he said. “Shakespeare said the first thing we are going to do is kill all the lawyers.” VTN