ATRC » Topics » Article 6 - Intellectual Property

This excerpt taken from the ATRC 10-K filed Mar 16, 2009.

Intellectual Property

Protection of our intellectual property is a strategic priority for our business and we rely on a combination of patent, copyright, trademark and trade secret laws to protect our interests. Our ability to protect and use our intellectual property rights in the continued development and commercialization of our technologies and products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights is crucial to our continued success. We will be able to protect our products and technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents, trademarks or copyrights or are effectively maintained as trade secrets, know-how or other proprietary information.

We seek patent protection relating to our Isolator system and other important technologies we develop in both the United States and in selected foreign countries. While we own much of our intellectual property, including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to commercialization of our products. For example, to continue developing and commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities.

All of our employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their relationship with us. We cannot provide any assurance that employees and consultants will abide by the confidentiality or assignment terms of these agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy aspects of our Isolator system or obtain and use information that we regard as proprietary. We devote significant resources to obtaining patents and other intellectual property and protecting our other proprietary information. We have already obtained patents or filed patent applications on a number of our technologies, including patents and patent applications relating to our Isolator system and other products. If valid and enforceable, these patents may give us a means of blocking competitors from using infringing technology to compete directly with our products. We also have certain proprietary trade secrets that may not be patentable or for which we have chosen to maintain secrecy rather than file for patent protection. With respect to proprietary know-how that is not patentable, we have chosen to rely on trade secret protection and confidentiality agreements to protect our interests. As of December 31, 2008, we had issued United States patents that will expire between 2015 and 2024.

As of December 31, 2008, we had the following portfolio of patents or patent applications covering our proprietary technologies and products:

 

   

31 issued or approved United States patents;

 

   

25 United States non-provisional patent applications;

 

   

3 United States provisional patent applications;

 

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4 issued foreign patents; and

 

   

15 pending foreign patent applications that are in various national stages of prosecution.

These excerpts taken from the ATRC 10-K filed May 8, 2008.

Intellectual Property

Protection of our intellectual property is a strategic priority for our business, and we rely on a combination of patent, copyright, trademark and trade secret laws to protect our interests. Our ability to protect and use our intellectual property rights in the continued development and commercialization of our technologies and products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights is crucial to our continued success. We will be able to protect our products and technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents, trademarks or copyrights or are effectively maintained as trade secrets, know-how or other proprietary information.

We seek patent protection relating to our Isolator® system and other important technologies we develop in both the United States and in selected foreign countries. While we own much of our intellectual property, including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to commercialization of our products. For example, to continue developing and commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities.

All of our employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their relationship with us. We cannot provide any assurance that employees and consultants will abide by the confidentiality or assignment terms of these agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy aspects of our Isolator® bipolar ablation system or obtain and use information that we regard as proprietary.

We devote significant resources to obtaining patents and other intellectual property and protecting our other proprietary information. We have already obtained patents or filed patent applications on a number of our technologies, including patents and patent applications relating to our Isolator® system and ancillary devices. If valid and enforceable, these patents may give us a means of blocking competitors from using infringing technology to compete directly with our products. We also have certain proprietary trade secrets that may not be

 

21


Table of Contents

patentable or for which we have chosen to maintain secrecy rather than file for patent protection. With respect to proprietary know-how that is not patentable, we have chosen to rely on trade secret protection and confidentiality agreements to protect our interests. As of December 31, 2007, we had issued United States patents that will expire between 2015 and 2023.

As of December 31, 2007, we had the following portfolio of patents or patent applications covering our proprietary technologies and products:

 

   

28 issued United States patents;

 

   

23 United States non-provisional patent applications;

 

   

9 United States provisional patent applications;

 

   

4 issued foreign patents; and

 

   

14 pending foreign patent applications that are in various national stages of prosecution.

Intellectual Property

SIZE="2">Protection of our intellectual property is a strategic priority for our business, and we rely on a combination of patent, copyright, trademark and trade secret laws to protect our interests. Our ability to protect and use our intellectual
property rights in the continued development and commercialization of our technologies and products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights is crucial to our continued
success. We will be able to protect our products and technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents, trademarks or copyrights or are effectively maintained as trade
secrets, know-how or other proprietary information.

We seek patent protection
relating to our Isolator® system and other important technologies we develop in both the United States and in selected foreign countries. While we own much of our intellectual property,
including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to commercialization of our products. For example, to continue developing and
commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities.

All of our employees and technical consultants are required to execute
confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their relationship with us. We cannot provide
any assurance that employees and consultants will abide by the confidentiality or assignment terms of these agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy aspects of our IsolatorFACE="Times New Roman" SIZE="1">®
bipolar ablation system or obtain and use information that we regard as proprietary.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;line-Height:95%; vertical-align:top">We devote significant resources to obtaining patents and other intellectual property and
protecting our other proprietary information. We have already obtained patents or filed patent applications on a number of our technologies, including patents and patent applications relating to our IsolatorSIZE="1">® system and ancillary devices. If valid and enforceable, these patents may give us a means of blocking competitors from using infringing technology to compete directly with our products. We also have certain
proprietary trade secrets that may not be

 


21







Table of Contents



patentable or for which we have chosen to maintain secrecy rather than file for patent protection. With respect to proprietary know-how that is not
patentable, we have chosen to rely on trade secret protection and confidentiality agreements to protect our interests. As of December 31, 2007, we had issued United States patents that will expire between 2015 and 2023.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">As of December 31, 2007, we had the following portfolio of patents or patent applications covering our proprietary technologies and products:

 







  

28 issued United States patents;

 







  

23 United States non-provisional patent applications;

 







  

9 United States provisional patent applications;

 







  

4 issued foreign patents; and

 







  

14 pending foreign patent applications that are in various national stages of prosecution.

STYLE="margin-top:18px;margin-bottom:0px">Manufacturing

FACE="Times New Roman" SIZE="2">We manufacture the majority of the disposable products we sell and generally purchase items that would be deemed capital equipment, including our ASU and ASB. We inspect, assemble, test and package our products in
West Chester, Ohio and our products are sterilized by third-party outside sterilizers at their facilities. Purchased components are generally available from more than one supplier. However some products, such as our ASU and ASB, are critical
components of our Isolator® system, and there are relatively few alternative sources of supply available. We generally carry at least a six month supply of these products, however obtaining
a replacement supplier for the ASU and ASB, if required, may not be accomplished quickly or at all and could involve significant additional costs. Generally, our suppliers have no contractual obligations to supply us with, and we are not
contractually obligated to purchase from them, any of our supplies. During 2007, we entered into a development, manufacturing and supply agreement with MicroPace Pty Ltd of Australia to develop, manufacture and supply our new integrated mapping
system, ORLabTM. Under the terms of the agreement, we are obligated to certain minimum purchase commitments during through 2009.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Order quantities and lead times for components purchased from outside suppliers are based on our forecasts derived from historical demand and anticipated
future demand. Lead times may vary significantly depending on the size of the order, time required to fabricate and test the components, specific supplier requirements and current market demand for the components and subassemblies. To date, we have
not experienced significant delays in obtaining any of our components. There are no unique or proprietary processes required in manufacturing our components. We generally do not have contractual obligations that preclude us from developing products
or sourcing components from new suppliers.

We and our component suppliers are required to manufacture our products in compliance with the
FDA’s QSR. The QSR regulates extensively the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. The FDA enforces the QSR through periodic
inspections that may be announced or unannounced and may include the manufacturing facilities of our suppliers. Our failure or the failure of our suppliers to maintain compliance with the QSR requirements could result in the shutdown of our
manufacturing operations or the recall of our products, which would have a material adverse effect on our business. In the event that one of our suppliers fails to maintain compliance with our quality requirements, we may have to qualify a new
supplier and could experience manufacturing delays as a result. We also could be subject to injunctions, product seizures, or civil or criminal penalties.

FACE="Times New Roman" SIZE="2">We regularly audit our suppliers for compliance with QSR and applicable ISO standards. We have been an FDA-registered medical device manufacturer since November 2002. We obtained our CE Mark in June of 2002, and our
quality systems and facility practices are certified to ISO 13485:2003; MDD 93/42/EEC, or CE Mark;

 


22







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and CMDCAS, or Canadian regulations. We believe that we are currently in good standing with the FDA and are subject to pre-announced inspections. Our current
quality system is developed to comply with QSR and ISO standards. In December 2004, Stellartech, the manufacturer of our ASU and ASB, was inspected by the FDA as part of a not-for-cause, general QSR inspection. The FDA issued a notice with three
observations requiring responses. Stellartech addressed those observations and sent their responses to the FDA.

In June 2006, the FDA
conducted a Bioresearch Monitoring Inspection of the conduct of our FDA-regulated clinical trials and a Quality Systems Inspection of the manufacture of our products. We were notified that these inspections were part of a for-cause inspection. At
the close of the inspections and in subsequent communications, the FDA advised us that it would not be issuing us a Form 483 documenting formal inspectional observations. We received a final Establishment Inspection Report from the FDA on
November 9, 2006. The report included two recommendations for continuous improvements, which were brought to our attention during the inspection and were implemented and reviewed by the close of the inspection.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We are subject to numerous federal, state and local laws relating to such matters as laboratory practices, the experimental use of animals, the use and
disposal of hazardous or potentially hazardous substances, safe working conditions, manufacturing practices, environmental protection and fire hazard control. We may incur significant costs to comply with those laws and regulations now or in the
future, but we do not expect that such compliance will have a material impact on our business.

We are currently increasing our
manufacturing capabilities as our business grows and as we introduce and obtain approvals for new products. Manufacturers can experience difficulties in significantly scaling up production capacities, which may include problems with capacity,
production yields and quality control. If we are unable to manufacture our products to keep up with demand, we may not meet expectations for growth of our business.

FACE="Times New Roman" SIZE="2">Product Development

Our product development
group develops product enhancements and new products to address unmet procedural and market needs with the goal of increasing revenues and optimizing procedural outcomes. Our current product development activity includes projects extending and
improving our existing products, the creation of new enabling devices, and research into new technologies. Product extensions and improvements of our Isolator® system include the 2007
releases of our Isolator Synergy
TM clamps and our ASB. Product extensions and improvements of our multifunctional bipolar pen include the
development of our Coolrail
TM Linear Ablation Pen, which we plan to release during the first half of 2008 and we believe will be adopted by
physicians to created an expanded lesion set during minimally invasive procedures. Enabling devices, such as our multifunctional pen and our Lumitip
TMSIZE="2"> dissector are becoming an increasingly larger portion of our development portfolio and revenues. Examples of devices which extend our product line into new markets include the development of the AtriCure Left Atrial Appendage Exclusion
System. Our product lines have also been advanced through software improvements, cost savings and support for increased production capacity.

SIZE="2">The Cleveland Clinic Foundation and Case Western Reserve University and collaborating businesses, including us, received publicly announced grants from the State of Ohio for, among other things, the creation of the Atrial Fibrillation
Innovation Center. Pursuant to the terms of the agreement, effective as of June 2005, we are required to supply personnel and materials to accomplish certain research-related activities in connection with the grant and, over a three and
one-half-year period, we will receive up to a total of $0.9 million for personnel and materials and The Cleveland Clinic will acquire up to $2.4 million in capital equipment for our use in support of our performance of the agreement. Over the same
period, we are required to expend up to $7.7 million for operating expenses and up to $4.8 million for capital expenditures in support of the agreement. We believe these represent ordinary course expenditures that we would have otherwise anticipated
making. Through December 31, 2007, we have earned $0.6 million under the grant in support of operating expenses and $1.3 million in acquired capital equipment. The agreement terminates in December 2008, however it may be terminated at any
time by either party by giving 30 days’ prior written notice.

 


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Table of Contents


In November 2003, we entered into a license and related agreements with the Cleveland Clinic and a third
party engineering company for the development of the AtriCure Left Atrial Appendage Exclusion system. Under this arrangement, we granted 33,157 options at fair market value to each of the Cleveland Clinic and the engineering company upon
satisfaction of a milestone tied to the technical feasibility and commercial viability of the licensed intellectual property, in addition to payment of royalties to each of the Cleveland Clinic and the engineering company equal to 2.5% of net sales
of any commercialized products using the licensed technology. During 2007, 13,157 of the 33,157 options each expired and were not exercised by either party. As of December 31, 2007, 20,000 options each were outstanding with an exercise price of
$13.95 per share.

These excerpts taken from the ATRC 10-K filed Mar 17, 2008.

Intellectual Property

Protection of our intellectual property is a strategic priority for our business, and we rely on a combination of patent, copyright, trademark and trade secret laws to protect our interests. Our ability to protect and use our intellectual property rights in the continued development and commercialization of our technologies and products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights is crucial to our continued success. We will be able to protect our products and technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents, trademarks or copyrights or are effectively maintained as trade secrets, know-how or other proprietary information.

We seek patent protection relating to our Isolator® system and other important technologies we develop in both the United States and in selected foreign countries. While we own much of our intellectual property, including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to commercialization of our products. For example, to continue developing and commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities.

All of our employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their relationship with us. We cannot provide any assurance that employees and consultants will abide by the confidentiality or assignment terms of these agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy aspects of our Isolator® bipolar ablation system or obtain and use information that we regard as proprietary.

We devote significant resources to obtaining patents and other intellectual property and protecting our other proprietary information. We have already obtained patents or filed patent applications on a number of our technologies, including patents and patent applications relating to our Isolator® system and ancillary devices. If valid and enforceable, these patents may give us a means of blocking competitors from using infringing technology to compete directly with our products. We also have certain proprietary trade secrets that may not be

 

21


Table of Contents

patentable or for which we have chosen to maintain secrecy rather than file for patent protection. With respect to proprietary know-how that is not patentable, we have chosen to rely on trade secret protection and confidentiality agreements to protect our interests. As of December 31, 2007, we had issued United States patents that will expire between 2015 and 2023.

As of December 31, 2007, we had the following portfolio of patents or patent applications covering our proprietary technologies and products:

 

   

28 issued United States patents;

 

   

23 United States non-provisional patent applications;

 

   

9 United States provisional patent applications;

 

   

4 issued foreign patents; and

 

   

14 pending foreign patent applications that are in various national stages of prosecution.

Intellectual Property

SIZE="2">Protection of our intellectual property is a strategic priority for our business, and we rely on a combination of patent, copyright, trademark and trade secret laws to protect our interests. Our ability to protect and use our intellectual
property rights in the continued development and commercialization of our technologies and products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights is crucial to our continued
success. We will be able to protect our products and technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents, trademarks or copyrights or are effectively maintained as trade
secrets, know-how or other proprietary information.

We seek patent protection
relating to our Isolator® system and other important technologies we develop in both the United States and in selected foreign countries. While we own much of our intellectual property,
including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to commercialization of our products. For example, to continue developing and
commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities.

All of our employees and technical consultants are required to execute
confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their relationship with us. We cannot provide
any assurance that employees and consultants will abide by the confidentiality or assignment terms of these agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy aspects of our IsolatorFACE="Times New Roman" SIZE="1">®
bipolar ablation system or obtain and use information that we regard as proprietary.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;line-Height:95%; vertical-align:top">We devote significant resources to obtaining patents and other intellectual property and
protecting our other proprietary information. We have already obtained patents or filed patent applications on a number of our technologies, including patents and patent applications relating to our IsolatorSIZE="1">® system and ancillary devices. If valid and enforceable, these patents may give us a means of blocking competitors from using infringing technology to compete directly with our products. We also have certain
proprietary trade secrets that may not be

 


21







Table of Contents



patentable or for which we have chosen to maintain secrecy rather than file for patent protection. With respect to proprietary know-how that is not
patentable, we have chosen to rely on trade secret protection and confidentiality agreements to protect our interests. As of December 31, 2007, we had issued United States patents that will expire between 2015 and 2023.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">As of December 31, 2007, we had the following portfolio of patents or patent applications covering our proprietary technologies and products:

 







  

28 issued United States patents;

 







  

23 United States non-provisional patent applications;

 







  

9 United States provisional patent applications;

 







  

4 issued foreign patents; and

 







  

14 pending foreign patent applications that are in various national stages of prosecution.

STYLE="margin-top:18px;margin-bottom:0px">Manufacturing

FACE="Times New Roman" SIZE="2">We manufacture the majority of the disposable products we sell and generally purchase items that would be deemed capital equipment, including our ASU and ASB. We inspect, assemble, test and package our products in
West Chester, Ohio and our products are sterilized by third-party outside sterilizers at their facilities. Purchased components are generally available from more than one supplier. However some products, such as our ASU and ASB, are critical
components of our Isolator® system, and there are relatively few alternative sources of supply available. We generally carry at least a six month supply of these products, however obtaining
a replacement supplier for the ASU and ASB, if required, may not be accomplished quickly or at all and could involve significant additional costs. Generally, our suppliers have no contractual obligations to supply us with, and we are not
contractually obligated to purchase from them, any of our supplies. During 2007, we entered into a development, manufacturing and supply agreement with MicroPace Pty Ltd of Australia to develop, manufacture and supply our new integrated mapping
system, ORLabTM. Under the terms of the agreement, we are obligated to certain minimum purchase commitments during through 2009.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Order quantities and lead times for components purchased from outside suppliers are based on our forecasts derived from historical demand and anticipated
future demand. Lead times may vary significantly depending on the size of the order, time required to fabricate and test the components, specific supplier requirements and current market demand for the components and subassemblies. To date, we have
not experienced significant delays in obtaining any of our components. There are no unique or proprietary processes required in manufacturing our components. We generally do not have contractual obligations that preclude us from developing products
or sourcing components from new suppliers.

We and our component suppliers are required to manufacture our products in compliance with the
FDA’s QSR. The QSR regulates extensively the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. The FDA enforces the QSR through periodic
inspections that may be announced or unannounced and may include the manufacturing facilities of our suppliers. Our failure or the failure of our suppliers to maintain compliance with the QSR requirements could result in the shutdown of our
manufacturing operations or the recall of our products, which would have a material adverse effect on our business. In the event that one of our suppliers fails to maintain compliance with our quality requirements, we may have to qualify a new
supplier and could experience manufacturing delays as a result. We also could be subject to injunctions, product seizures, or civil or criminal penalties.

FACE="Times New Roman" SIZE="2">We regularly audit our suppliers for compliance with QSR and applicable ISO standards. We have been an FDA-registered medical device manufacturer since November 2002. We obtained our CE Mark in June of 2002, and our
quality systems and facility practices are certified to ISO 13485:2003; MDD 93/42/EEC, or CE Mark;

 


22







Table of Contents



and CMDCAS, or Canadian regulations. We believe that we are currently in good standing with the FDA and are subject to pre-announced inspections. Our current
quality system is developed to comply with QSR and ISO standards. In December 2004, Stellartech, the manufacturer of our ASU and ASB, was inspected by the FDA as part of a not-for-cause, general QSR inspection. The FDA issued a notice with three
observations requiring responses. Stellartech addressed those observations and sent their responses to the FDA.

In June 2006, the FDA
conducted a Bioresearch Monitoring Inspection of the conduct of our FDA-regulated clinical trials and a Quality Systems Inspection of the manufacture of our products. We were notified that these inspections were part of a for-cause inspection. At
the close of the inspections and in subsequent communications, the FDA advised us that it would not be issuing us a Form 483 documenting formal inspectional observations. We received a final Establishment Inspection Report from the FDA on
November 9, 2006. The report included two recommendations for continuous improvements, which were brought to our attention during the inspection and were implemented and reviewed by the close of the inspection.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We are subject to numerous federal, state and local laws relating to such matters as laboratory practices, the experimental use of animals, the use and
disposal of hazardous or potentially hazardous substances, safe working conditions, manufacturing practices, environmental protection and fire hazard control. We may incur significant costs to comply with those laws and regulations now or in the
future, but we do not expect that such compliance will have a material impact on our business.

We are currently increasing our
manufacturing capabilities as our business grows and as we introduce and obtain approvals for new products. Manufacturers can experience difficulties in significantly scaling up production capacities, which may include problems with capacity,
production yields and quality control. If we are unable to manufacture our products to keep up with demand, we may not meet expectations for growth of our business.

FACE="Times New Roman" SIZE="2">Product Development

Our product development
group develops product enhancements and new products to address unmet procedural and market needs with the goal of increasing revenues and optimizing procedural outcomes. Our current product development activity includes projects extending and
improving our existing products, the creation of new enabling devices, and research into new technologies. Product extensions and improvements of our Isolator® system include the 2007
releases of our Isolator Synergy
TM clamps and our ASB. Product extensions and improvements of our multifunctional bipolar pen include the
development of our Coolrail
TM Linear Ablation Pen, which we plan to release during the first half of 2008 and we believe will be adopted by
physicians to created an expanded lesion set during minimally invasive procedures. Enabling devices, such as our multifunctional pen and our Lumitip
TMSIZE="2"> dissector are becoming an increasingly larger portion of our development portfolio and revenues. Examples of devices which extend our product line into new markets include the development of the AtriCure Left Atrial Appendage Exclusion
System. Our product lines have also been advanced through software improvements, cost savings and support for increased production capacity.

SIZE="2">The Cleveland Clinic Foundation and Case Western Reserve University and collaborating businesses, including us, received publicly announced grants from the State of Ohio for, among other things, the creation of the Atrial Fibrillation
Innovation Center. Pursuant to the terms of the agreement, effective as of June 2005, we are required to supply personnel and materials to accomplish certain research-related activities in connection with the grant and, over a three and
one-half-year period, we will receive up to a total of $0.9 million for personnel and materials and The Cleveland Clinic will acquire up to $2.4 million in capital equipment for our use in support of our performance of the agreement. Over the same
period, we are required to expend up to $7.7 million for operating expenses and up to $4.8 million for capital expenditures in support of the agreement. We believe these represent ordinary course expenditures that we would have otherwise anticipated
making. Through December 31, 2007, we have earned $0.6 million under the grant in support of operating expenses and $1.3 million in acquired capital equipment. The agreement terminates in December 2008, however it may be terminated at any
time by either party by giving 30 days’ prior written notice.

 


23







Table of Contents


In November 2003, we entered into a license and related agreements with the Cleveland Clinic and a third
party engineering company for the development of the AtriCure Left Atrial Appendage Exclusion system. Under this arrangement, we granted 33,157 options at fair market value to each of the Cleveland Clinic and the engineering company upon
satisfaction of a milestone tied to the technical feasibility and commercial viability of the licensed intellectual property, in addition to payment of royalties to each of the Cleveland Clinic and the engineering company equal to 2.5% of net sales
of any commercialized products using the licensed technology. During 2007, 13,157 of the 33,157 options each expired and were not exercised by either party. As of December 31, 2007, 20,000 options each were outstanding with an exercise price of
$13.95 per share.

This excerpt taken from the ATRC 10-K filed Apr 2, 2007.

Intellectual Property

Protection of our intellectual property is a strategic priority for our business, and we rely on a combination of patent, copyright, trademark and trade secret laws to protect our interests. Our ability to protect and use our intellectual property rights in the continued development and commercialization of our technologies and products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights is crucial to our continued success. We will be able to protect our products and technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents, trademarks or copyrights or are effectively maintained as trade secrets, know-how or other proprietary information.

We seek patent protection relating to our Isolator system and other important technologies we develop in both the United States and in selected foreign countries. While we own much of our intellectual property, including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to commercialization of our products. For example, to continue developing and commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities.

All of our employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their relationship with us. We cannot provide any assurance that employees and consultants will abide by the confidentiality or assignment terms of these agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy aspects of our Isolator bipolar ablation system or obtain and use information that we regard as proprietary.

We devote significant resources to obtaining patents and other intellectual property and protecting our other proprietary information. We have already obtained patents or filed patent applications on a number of our technologies, including patents and patent applications relating to our Isolator system and ancillary devices. If valid and enforceable, these patents may give us a means of blocking competitors from using infringing technology to compete directly with our products. We also have certain proprietary trade secrets that may not be patentable or for which we have chosen to maintain secrecy rather than file for patent protection. With respect to proprietary know-how that is not patentable, we have chosen to rely on trade secret protection and confidentiality agreements to protect our interests. As of December 31, 2006, we had issued United States patents that will expire between 2015 and 2022.

As of December 31, 2006, we had the following portfolio of 74 issued patents or patent applications covering our proprietary technologies and products:

 

   

24 issued United States patents;

 

   

23 United States non-provisional patent applications;

 

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Table of Contents
   

3 United States provisional patent applications;

 

   

6 issued foreign patents;

 

   

10 pending foreign patent applications that are in various national stages of prosecution; and

 

   

8 pending foreign applications filed pursuant to the Patent Cooperation Treaty, or PCT, not at the national stage.

This excerpt taken from the ATRC 8-K filed Jul 20, 2006.

Article 6 - Intellectual Property

 

6.1 Subject to the terms and conditions of this Agreement, all rights and title to Intellectual Property emanating from this Project shall belong to Grantee.

 

6.2 Grantee will promptly notify Grantor of any Intellectual Property conceived or developed during the Project Period as part of this Project. Such notification shall either be made in a manner so as not to constitute full public disclosure or otherwise jeopardize the Intellectual Property’s patentability, or after Grantee takes reasonable steps to protect its ownership interest in any such Intellectual Property. Grantee shall keep Grantor advised as to all material developments with respect to such patent application(s) or copyright registrations.

 

CCF    TECH 05-066   Page 3 of 11


WROIPV

 

6.3 Grantee shall insure that a reasonable portion of any financial benefits derived from any technological developments emanating from this Project accrues to the Grantee. Nothing herein shall prohibit other contributors to the technology development activities from receiving a portion of the financial benefits if it is reasonable in the view of the financial or other type of investment of such contributors in the commercialization of the technology. The factors to be evaluated in determining a reasonable portion of the financial benefit may include, but are not limited to, the level of investment capital needed to commercialize the technology, the length of time necessary for commercialization and additional related services provided by other contributors. Any licenses, options to licenses or other agreement to exploit commercially any technology developed by the Grantee as a result of funding provided by this Agreement shall include suitable provisions to assure that such commercial exploitation shall create jobs and business opportunities and produce the most beneficial long term benefits to Ohioans to the fullest extent possible. Such economic development benefits for Ohio shall factor significantly as a criterion in Grantee’s selection process for a potential licensee.
This excerpt taken from the ATRC 10-K filed Mar 31, 2006.

Intellectual Property

Protection of our intellectual property is a strategic priority for our business, and we rely on a combination of patent, copyright, trademark and trade secret laws to protect our interests. Our ability to protect and use our intellectual property rights in the continued development and commercialization of our technologies and products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights is crucial to our continued success. We will be able to protect our products and technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents, trademarks or copyrights or are effectively maintained as trade secrets, know-how or other proprietary information.

We seek patent protection relating to our system and other important technologies we develop in both the United States and in selected foreign countries. While we own much of our intellectual property, including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to commercialization of our products. For example, to continue developing and commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities.

All of our employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their relationship with us. We cannot provide any assurance that employees and consultants will abide by the confidentiality or assignment terms of these

 

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agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy aspects of our system or obtain and use information that we regard as proprietary.

We devote significant resources to obtaining patents and other intellectual property and protecting our other proprietary information. We have already obtained patents or filed patent applications on a number of our technologies, including patents and patent applications relating to our bipolar ablation system and ancillary devices. If valid and enforceable, these patents may give us a means of blocking competitors from using infringing technology to compete directly with our products. We also have certain proprietary trade secrets that may not be patentable or for which we have chosen to maintain secrecy rather than file for patent protection. With respect to proprietary know-how that is not patentable, we have chosen to rely on trade secret protection and confidentiality agreements to protect our interests. As of December 31, 2005, we had eight issued United States patents that will expire in 2015, two that will expire in 2016, two that will expire in 2018, six that will expire in 2020 and three that will expire in 2021.

As of December 31, 2005, we had the following portfolio of 68 issued patents or patent applications covering our proprietary technologies and products, of which a total of 19 were acquired from Enable:

 

    21 issued United States patents;

 

    22 United States non-provisional patent applications;

 

    3 United States provisional patent applications;

 

    5 issued foreign patents;

 

    9 pending foreign patent applications that are in various national stages of prosecution; and

 

    8 pending foreign applications filed pursuant to the Patent Cooperation Treaty, or PCT, not at the national stage.
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