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FITM Extended Interview: Emily Ast · AHF Podcast

• 0:26
  Emily Ast: Hi, I am Emily Ast.
• 0:27
  Emily Ast: I am an attorney and my own law firm Ast Physician Contracts.
• 0:31
  Emily Ast: I focus on contract review and negotiation for physicians, typically employment contracts and industry consulting agreements, as well as related shareholder agreements, ambulatory surgery center operating agreements, and those sorts of corporate documents.
• 0:46
  Emily Ast: My practice is probably 75% orthopedics.
• 0:50
  Emily Ast: I will mention that this is not formal legal advice and does not create an attorney-client privilege, right?
• 0:56
  Emily Ast: This is general educational information and my own personal opinions, so I do advise you to seek an attorney on your individual matters.
• 1:06
  Joseph M. Schwab: So Emily, for innovators who have never really worked with industry, can you tell us about the role of a contract attorney?
• 1:13
  Joseph M. Schwab: What role do you play specifically in say, early stages of turning an idea into something that might be a commercially viable entity?
• 1:24
  Emily Ast: I think an attorney can help best find the right ways to protect you and your idea to bring it to fruition, whether that's going to be through a patent attorney and a patent process, or through a contracts attorney more like myself who could help you negotiate an arrangement to co-develop.
• 1:42
  Emily Ast: That idea with a company.
• 1:44
  Emily Ast: Um, those are sort of the two alternative ways that you can go when you have an early stage product idea.
• 1:49
  Emily Ast: And I think having someone who can help navigate those options is very helpful.
• 1:55
  Joseph M. Schwab: So if most of your clients are orthopedic surgeons, what do you see as being the biggest mindset shift that a clinician or a surgeon inventor needs when they begin discussing their.
• 2:08
  Joseph M. Schwab: Idea with a company.
• 2:09
  Joseph M. Schwab: Hmm.
• 2:10
  Emily Ast: Knowing that even a casual conversation or what you perceive as a ca casual conversation could have legal and economic consequences, because there's really no quote off the record innovation discussion.
• 2:25
  Emily Ast: It's hard to do that because.
• 2:27
  Emily Ast: Even informal discussions do create a factual record of you sharing an idea and having a conversation about that and can impact joint ownership or some leverage later for your negotiations or even status of ownership of a patent down the road.
• 2:44
  Joseph M. Schwab: Hmm.
• 2:44
  Joseph M. Schwab: So what are some of the steps that an innovator might want to take?
• 2:48
  Joseph M. Schwab: When they're having a conversation with a company for the first time in order to protect themselves.
• 2:55
  Emily Ast: Sure.
• 2:55
  Emily Ast: Well, it depends if someone is going to go it alone first and try to do a patent on their own.
• 3:02
  Emily Ast: That process can take a few years and can be expensive, but of course can absolutely be pursued.
• 3:08
  Emily Ast: Some people like to do that first and then try to approach an accomp a company afterwards.
• 3:13
  Emily Ast: Others would like to approach a company first because companies do have, you know, in-house legal team, they have developers, they have engineers who can help refine that idea and make it more likely to get a patent or more likely to develop it and bring it to fruition in the market.
• 3:31
  Emily Ast: Either way, you want a non-disclosure in place first, which will protect anyone from using your idea, sharing your idea, or developing it on their own.
• 3:42
  Emily Ast: And even, this is gonna sound crazy, but even just the idea of bouncing an idea off your friends and family, I'd had them sign an NDA, not because I'm suspicious of your friends and family in any way, but because it can actually impact your ability to get a patent or defend a patent.
• 4:00
  Emily Ast: Later on, if you've made the idea what public and public has a pretty low bar, uh, and just telling one or a few people that aren't under NDA your idea, you've now made it public.
• 4:13
  Emily Ast: You've told it to.
• 4:14
  Emily Ast: People without any protection in place.
• 4:16
  Emily Ast: And so it could make it more challenging to either get a patent later or to negotiate for some co-development with a company if they're also concerned that you've shared this idea and that it may be harder to get protection on their end or your end later down the road.
• 4:32
  Emily Ast: So have a, you know, a non-disclosure agreement in place before you even start having those casual conversations.
• 4:40
  Joseph M. Schwab: So are there risks apart from essentially losing control of your intellectual property when you start having early conversations or, uh, is that the biggest risk that people face?
• 4:52
  Emily Ast: The other risk is when people start having conversations with companies, they usually go to their contacts, their friends, their people they've worked with for a long time through the industry first.
• 5:03
  Emily Ast: And while that's great, that is a perfect channel to do that.
• 5:07
  Emily Ast: People need to understand that companies are large and structured and their objective may not align with yours.
• 5:13
  Emily Ast: And so while you as a, as the developer may want to start bouncing ideas off people and get a sense of what a type of co-development arrangement would look like for you, it's important to slow down a little bit.
• 5:28
  Emily Ast: Have that NDA in place and start with very strategic conversations.
• 5:33
  Emily Ast: Um, once you have that, because you don't wanna go too far down the road of sharing your ideas.
• 5:39
  Emily Ast: You know, you're, you think it's a slam dunk with this particular company and you're gonna work together to develop something only to, once it gets through maybe the upper levels and channels of a company and their compliance department and their legal department, and you bring in all these different departments.
• 5:56
  Emily Ast: Then maybe they're not able to do as good of an arrangement for you as you thought.
• 6:01
  Emily Ast: And it turns out you'd like to do something else with that idea, but now you've already gone very far down the road and you've disclosed it.
• 6:08
  Emily Ast: So, um, I think it's important to understand that large companies are complex.
• 6:13
  Emily Ast: If they do take time and that even though your contact that you are really excited to share this idea with would absolutely love to take care of you and make this the best arrangement overall for everyone.
• 6:26
  Emily Ast: That person may be constrained by other factors in the company.
• 6:30
  Emily Ast: So you also need to be a little flexible, and I think before you go into those conversations, think through.
• 6:36
  Emily Ast: Several different alternative scenarios of what could work for you and what co-development would look like for you.
• 6:43
  Emily Ast: Are you okay not being named on the patent because you're going to assign that IP over to the company.
• 6:49
  Emily Ast: Are you, but you know, are you okay with it?
• 6:52
  Emily Ast: Uh, some sort of compensation of a royalty stream, or are you looking for a lump sum, you know, payment for your intellectual property?
• 7:00
  Emily Ast: Think of different alternatives so that you go into these meetings without just, you know, one frame of mind and you can't deviate from that.
• 7:08
  Emily Ast: You have a few things that would all work for you.
• 7:11
  Emily Ast: That way you can work through best alternatives together.
• 7:14
  Joseph M. Schwab: So as a surgeon innovator is maybe starting to look at a contract with a company.
• 7:21
  Joseph M. Schwab: Is there.
• 7:22
  Joseph M. Schwab: In your experience, any particular clause or contract detail that you see surgeon innovators kind of consistently underestimating, but might have real implications for their, their IP ownership going forward?
• 7:37
  Emily Ast: I do, this would be not appropriately defining the product or the scope of the project because you, you'll see this in the beginning of the contract, and it's going to tell you what the contract is about, right, what the services are going to be.
• 7:52
  Emily Ast: But I often see general definitions, like more of a description, and this ambiguity can cause issues.
• 7:59
  Emily Ast: Down the line.
• 8:00
  Emily Ast: Um, I recommend a very narrow description of the specific product that you'll be working on.
• 8:05
  Emily Ast: If this is for product design agreement and even, you know, product codes, SKUs added later once you have them, because the IP that a company is going to own and you're going to transfer to a company, and also the restrictions that a developer could do, you know, of what they can or cannot do with other companies, are all gonna be tied.
• 8:26
  Emily Ast: Based on the services that are being provided under this agreement.
• 8:30
  Emily Ast: And if the services are written as you're gonna develop this project and this product, and they're, they're pretty broad definitions, you may end up granting too broad of an amount of intellectual property or be too limited in what you can do in your other endeavors, then you intend to be.
• 8:46
  Emily Ast: And the compensation under most product design and development agreements is linked to the actual product that's sold at the end, that's commercialized and sold.
• 8:58
  Emily Ast: That's going to be through a royalty stream typically.
• 9:01
  Emily Ast: And you want to make sure that the definition of the product is narrow so that you are not giving IP on a broader scope project, but you're only getting paid for one specific product underneath that project.
• 9:15
  Emily Ast: And so I do see a bit of a disconnect there sometimes, um, with the description and the definition of the product.
• 9:23
  Joseph M. Schwab: So many surgeon innovators get sort of their first taste in, we'll say entrepreneurship by going into consulting agreements with companies.
• 9:34
  Joseph M. Schwab: When an innovator is, um, starting a consulting agreement safe with a medical device company, what should they understand about their particular rights and responsibilities as they enter into one of those agreements?
• 9:49
  Emily Ast: Well, the first contract that most people get when they want to start working with industry is a general consulting agreement.
• 9:56
  Emily Ast: Like teaching product feedback, maybe testing products to give your feedback on existing products or things that are already in the pipeline.
• 10:05
  Emily Ast: Um, so these would not be for specific new product development, but more of a holistic feedback testing education type agreement.
• 10:13
  Emily Ast: We lump that in under general consulting.
• 10:16
  Emily Ast: These contracts are are not the place for new product design.
• 10:20
  Emily Ast: There will be some IP transfer.
• 10:22
  Emily Ast: You know, you are giving feedback on products and giving your ideas, but this should really be limited very much to the consulting services.
• 10:31
  Emily Ast: The specific consulting services you end up doing for that company.
• 10:35
  Emily Ast: I'm gonna explain what I mean by that.
• 10:37
  Emily Ast: These contracts often have a very general list of the services that you're going to be provided because they're not sure yet, right?
• 10:45
  Emily Ast: They may, you may want to do a lab on this particular hip cup, or you wanna do something on a knee part, and it's a little bit flexible, right?
• 10:52
  Emily Ast: There is gonna be different engagements throughout the year that you'd be invited to participate in.
• 10:58
  Emily Ast: But the issue that I see is that when there's a general description like that, again, very similar to what I just mentioned on a specific product design agreement, these general consulting agreements, there'll be some sort of an intellectual property transfer and ownership rights under the contract that are gonna say anything that is, you know, comes out of the services, is related to the services or something like that.
• 11:22
  Emily Ast: Your description of services is, you know, product feedback in the field of hip arthroplasty.
• 11:27
  Emily Ast: Well, that's a very, very broad category, right?
• 11:31
  Emily Ast: And you may only end up doing one engagement on a very specific hip cup part, but if your contract doesn't say that, it says you're gonna do work on hip arthroplasty, you'll, you'll be obligated, you know, in the, to transfer a lot of ip, and they will have ownership of all of that ip.
• 11:49
  Emily Ast: Even though you only did one specific engagement on something very, very narrow.
• 11:53
  Emily Ast: So what I recommend in these type of general consulting agreements, and a lot of companies do this, so this is, you know, none of this is intended in any way to be, you know, negative.
• 12:02
  Emily Ast: There's a lot of great companies that are doing great things with their industry, um, and their physician partners.
• 12:09
  Emily Ast: And so I see this a lot and I think it's a great practice and I always recommend it, is to have some sort of a work order.
• 12:17
  Emily Ast: Statement of work or engagement order that is actually tied into the contract, into the definition of the services.
• 12:25
  Emily Ast: 'cause most companies need to do this anyway.
• 12:27
  Emily Ast: When they ask a designer, or, or excuse me, a consultant to do a a lab, they're gonna send something that says it's on this particular product, it's gonna be five hours, it's gonna be this location and here's, you know, the amount you'll get paid or whatever it is.
• 12:41
  Emily Ast: It's gonna be a, it'll have a description of the specific item you're doing, so if those can be incorporated by reference into your consulting contracts, that the services under your contract are, what are state stated and included in those work orders, statements of work, engagement orders, whatever.
• 13:00
  Emily Ast: Every company calls in something different.
• 13:02
  Emily Ast: Um, then that will keep the scope of the contract narrowly appropriate to what you're actually doing, which is really the goal is just to have an alignment between the scope of the contract.
• 13:14
  Emily Ast: The actual services you're providing, because that will limit your intellectual property that you're giving to those things that you should be, which are the specific tasks and specific products that you are seeing, and that you are giving input on, you know, on the specific items you're doing.
• 13:30
  Emily Ast: Also when it comes to non-competes, which are often in these contracts, will not unduly prohibit you from doing things for another company.
• 13:37
  Emily Ast: You know, so long as it's not, doesn't have overlap with the very specific services that you have been providing under those work orders.
• 13:45
  Emily Ast: So that's a really good way when you start doing general consulting agreement, which is typically a first step, um, to keep that appropriately narrow and really protect your in intellectual property in those agreements.
• 13:58
  Joseph M. Schwab: So for someone signing their first consulting agreement, um, are there negotiation points that you think are, are realistic or maybe the most realistic and the most important to address?
• 14:10
  Emily Ast: Yeah, I think it's really important to, to do the two things I mentioned where you're gonna narrow the product definition or the project definition, and you're also going to want to look.
• 14:24
  Emily Ast: To, um, to ensure that the, uh, clauses are not, you know, overly general as far as the expectations of you.
• 14:33
  Emily Ast: Um, you really wanna look for the conflicts section.
• 14:39
  Emily Ast: The intellectual property section and I'm, I'm not discounting compensation of course, you know, you should obviously look at the compensation, but I find that, that that's pretty typical and usually within a competitive range, especially if it's an hourly consulting contract.
• 14:54
  Emily Ast: Um, and so I think where people get hung up is getting excited because they are presented with a cool contract to do some great industry work with your industry partners.
• 15:05
  Emily Ast: They sign it without realizing that it's very broad in scope and goes for two years, and that it would, you know, prevent them from doing other work that may come along, down the, you know, down the line or being, you know, giving more ideas than perhaps they're prepared to do or want to do at that point.
• 15:25
  Joseph M. Schwab: So that's a general consulting agreement As we talk maybe a little bit more about an intellectual property development agreement.
• 15:33
  Joseph M. Schwab: Can you tell me a little bit about how those differ in terms of maybe structure, expectations and, and long-term implications for the innovator?
• 15:43
  Emily Ast: Sure if in a specific intellectual property development design agreement, however you wanna call it, these, the.
• 15:52
  Emily Ast: You as the developer are transferring ip, your intellectual property on a particular product design something new.
• 15:59
  Emily Ast: You're gonna co-work with the engineers and the developers to develop this.
• 16:04
  Emily Ast: Now, this is where you typically hear about and get into compensation in the form of royalties or other sorts of compensation.
• 16:12
  Emily Ast: Maybe there's an equity component or.
• 16:15
  Emily Ast: Other sorts of flat rate for IP transfer payments.
• 16:19
  Emily Ast: It's not typically an hourly services agreement.
• 16:23
  Emily Ast: There will typically be an hourly component to these agreements for the time that is spent developing the product.
• 16:29
  Emily Ast: Um, and that's mostly to protect you in case it doesn't get commercialized and it never gets sold.
• 16:35
  Emily Ast: You are, you know, entitled to compensation for the time that you've spent and the ideas that you have provided.
• 16:41
  Emily Ast: However, the intellectual property payment.
• 16:44
  Emily Ast: Typically in the form of a royalty, like I said, or equity or a combination thereof, and there's very specific compliance rules.
• 16:51
  Emily Ast: You have to have made a significant and novel contribution to the design of that product.
• 16:56
  Emily Ast: Those are sort of the buzzwords that you hear, and this is the compensation for the intellectual property.
• 17:03
  Emily Ast: These royalty streams, you know, often go for seven to 10 years, um, after the product is actually commercialized.
• 17:12
  Emily Ast: So you work for a few years, sometimes, you know, two years or something like that on developing a product.
• 17:18
  Emily Ast: It becomes commercialized, it's released into the market, and then you as a developer are paid a percentage of product sales over time, um, except for product sales to your practice or your hospital or anyone affiliated with you for obviously, um, you know, kickback laws.
• 17:35
  Emily Ast: So an important tip with these is to spell out the intellectual property, uh, compensation and what the payment is for.
• 17:44
  Emily Ast: And the reason that I'm actually gonna say this is less so much in the contractual front and actually it can have a tax benefit.
• 17:51
  Emily Ast: I'm not a specific tax attorney, so please consult with your tax attorney.
• 17:55
  Emily Ast: But you want to make sure that a, a contract for product design very clearly ties the payment is for intellectual property.
• 18:05
  Emily Ast: Of, of your intellectual property, not for your development services.
• 18:09
  Emily Ast: And that is because payments for intellectual property can have capital gains treatment rather than ordinary income, which can be a pretty nice difference and a big bonus for people.
• 18:20
  Emily Ast: Um, you know, in the US particularly, there's very complicated ir.
• 18:24
  Emily Ast: IRS rules, but the gist is that certain IP contributions can have capital gains treatment rather than ordinary income.
• 18:31
  Emily Ast: But if it's written as a general fee for service kind of model, that is likely not going to apply.
• 18:38
  Emily Ast: So that's another, a really good tip to, to look at when you are doing a design and development agreement.
• 18:45
  Joseph M. Schwab: Hmm.
• 18:45
  Joseph M. Schwab: Yeah.
• 18:45
  Joseph M. Schwab: So are there other critical elements to these types of agreements that you feel should be really clearly defined?
• 18:53
  Joseph M. Schwab: Specifically to avoid, um, maybe disputes with a company going forward?
• 18:59
  Emily Ast: I do, there's, I'm gonna mention two particular items that I spend a lot of time discussing with companies and, and coming up with the best language for everyone.
• 19:08
  Emily Ast: One is what happens in the future if the same underlying intellectual property is used in a different but related product?
• 19:17
  Emily Ast: So sometimes there may be a project and the developers work on product a.
• 19:23
  Emily Ast: But that product actually turns out that it goes through the all the steps.
• 19:27
  Emily Ast: It goes to commercialization, and it's really not what perfect.
• 19:31
  Emily Ast: It's not what the market needs or you know, there's some issue and the company wants to pivot to product B, which is slightly different and a different variation, but has a lot of the same elements.
• 19:42
  Emily Ast: The development agreement will typically specify that the developers only paid on product A, because that is what was designed and and developed under that agreement, and that the company owns all of the IP related to that product and can do whatever the company wants to do with that intellectual property as it is legally owned by the company.
• 20:01
  Emily Ast: Right?
• 20:01
  Emily Ast: It has been transferred, so I often raise this as a matter of, you know, and I have seen it happen where.
• 20:09
  Emily Ast: Related revised versions of products are released later.
• 20:14
  Emily Ast: The same people are not always included in those design or development projects.
• 20:19
  Emily Ast: And I do see some, you know, issues come up with should that person, is that person deserving of compensation?
• 20:28
  Emily Ast: If it was.
• 20:29
  Emily Ast: Underlying IP from the original project.
• 20:32
  Emily Ast: And so the best way to handle this typically is to have a clause in the contract that says, should this occur, should the company do a revision of this, or a similar variation of it.
• 20:45
  Emily Ast: I mean, if it's a whole new product that incorporates, you know, one tiny element that's gonna be a, you know, a hard, uh, a hard sell that that person needs to be included.
• 20:55
  Emily Ast: But there's, so there's some subjectivity here.
• 20:59
  Emily Ast: You can have a, a clause that says if this is a variation with substantially similar, um, intellectual property, that that same person, you know, who was under that first agreement, will be included in the design or development of a related, you know, variation of the same product as long as that person is still an active consultant for the company.
• 21:21
  Emily Ast: So that way there's some protection there that your idea is not going to end up used in a different but related, you know, variation of the product.
• 21:31
  Emily Ast: Um, but you as a developer will not receive a fair compensation for that.
• 21:36
  Emily Ast: So that's the first one.
• 21:38
  Emily Ast: The second one is to think about if this is going to be something that's sold worldwide, because there's issues that come up with different timelines in different markets around the world.
• 21:48
  Emily Ast: I mentioned that royalty streams on these types of design and development agreements typically go for about seven years or so after the first commercial sale.
• 21:59
  Emily Ast: If the product is sold worldwide, that's the first commercial sale anywhere often.
• 22:05
  Emily Ast: But the timeline for the FDA to approve a product in the United States is a little different than the regulatory authorities in Europe or in Asia or in Australia, which sometimes take a little longer.
• 22:18
  Emily Ast: And so if the royalty stream is seven years from first commercial sale, but it's not actually released in Europe or Asia or Australia or you know, somewhere else for several more years, additional years after that first sale in the US that's missing out.
• 22:35
  Emily Ast: You know, the developer is missing out on several years of.
• 22:39
  Emily Ast: Compensation for that idea.
• 22:41
  Emily Ast: And so I have seen companies handle this in different ways.
• 22:45
  Emily Ast: One is splitting the royalty regions, literally saying that, you know, there'll be a first commercial sale in the us.
• 22:51
  Emily Ast: There'll be a first commercial sale in Asia.
• 22:53
  Emily Ast: There'll be a first commercial sale in Europe, and that the seven year royalty stream will start differently.
• 22:59
  Emily Ast: On each of those regions.
• 23:00
  Emily Ast: Other companies are to simplify it, just increasing the royalty, um, period to a little bit longer.
• 23:07
  Emily Ast: Something like 10 years, um, so that they can account for that or even doing seven year royalty stream, but to be paid out of the best 10 years.
• 23:18
  Emily Ast: Occur after the first sale.
• 23:20
  Emily Ast: Uh, and so you still only get paid for seven years, but if the first two or three years are really slow with sales or they're not, the, the product's not released in another market, you kind of true that up at the end of the term.
• 23:33
  Emily Ast: You use the back three years instead of the first three years, you know, at the end of that 10 year term, so that the benefit of the best years of sales is used for everyone.
• 23:44
  Emily Ast: And so that's another way that sometimes, um, companies are handling that.
• 23:48
  Emily Ast: So I think those two issues, um, similar IP or same, same IP being used in a similar related variation of the product and regional markets around the world and sort of how to handle that are, are two issues that I do see.
• 24:02
  Joseph M. Schwab: So one of the things I've heard from surgeon innovators is, uh, a little bit of concern about working with companies because it feels collaborative, but it sometimes feels like it's, um, you know, a bit of a conflict, right?
• 24:15
  Joseph M. Schwab: Between two different entities who are protecting kind of their own.
• 24:19
  Joseph M. Schwab: Um, uh, what they, what they want to protect.
• 24:23
  Joseph M. Schwab: So what does a healthy, sort of, well-balanced pro, uh, partnership for intellectual property development look like, especially for somebody who's doing this their first time.
• 24:35
  Emily Ast: Sure it really can be a true partnership.
• 24:38
  Emily Ast: And I, I have seen some great arrangements where, you know, all parties are are very happy and it can be well balanced.
• 24:45
  Emily Ast: And I think the important thing is that if the contract is narrow enough in scope, then the, the developer, the consultant can feel like.
• 24:55
  Emily Ast: They are all in on that product or all in on that design, and I think that's really important.
• 25:01
  Emily Ast: And so making sure, as I've mentioned several times, that the scope of the project or the agreement really matches what is being asked, allows people to feel like, okay, I, I can go all in on this because and give all of my ideas.
• 25:16
  Emily Ast: Which is really what we want.
• 25:18
  Emily Ast: We don't want there to be this, um, tension of, I don't wanna give too many ideas to a company because I'm not sure that I'm getting paid for all of them, or I'm giving too much.
• 25:29
  Emily Ast: People get afraid to, you know, give away too much, and if the contract is narrow enough in the scope, then with respect to that one particular.
• 25:38
  Emily Ast: Product or project, the company deservingly should own all of the intellectual property because that is what they are compensating someone for.
• 25:46
  Emily Ast: And the developer, the consultant, should feel free to give all the ideas and brainstorm, you know, freely on that particular product.
• 25:54
  Emily Ast: And so that can help alleviate the tension.
• 25:57
  Emily Ast: There are, you know, situations where.
• 26:00
  Emily Ast: As people progress further down their career, they may be asked to participate in more of a holistic advisory board where they are seeing the whole pipeline of products and, you know, expected to contribute across the board on all products and sort of a more exclusive relationship.
• 26:18
  Emily Ast: But that comes later, you know, that comes later down, I think, in people's career progression.
• 26:23
  Emily Ast: And at that point, as long as the compensation, you know, is appropriate for providing input on.
• 26:28
  Emily Ast: A full spectrum of products, then that can also be a very beneficial relationship as well, where people truly feel, you know, I'm all in, I'm gonna look at all the products for this company and give all of my ip, um, and I know I'm gonna be fairly compensated for it, whether that's through royalty streams or other, you know, equity like I mentioned, or other forms of compensation.
• 26:51
  Emily Ast: Um, but before you get to more of a, you know, full advisory role type, uh, position.
• 26:57
  Emily Ast: Narrowing the scope of those agreements I think is really, really critical, um, to create that truly well-balanced IP alignment where people can freely give all of their ideas, not being afraid that they say one thing that's slightly off topic and suddenly that idea is no longer theirs.
• 27:16
  Joseph M. Schwab: So, we touched on this maybe a little bit at the beginning, but what's the most common mistake that you see innovators make just in their earliest interactions with industry?
• 27:28
  Emily Ast: Mm-hmm.
• 27:29
  Emily Ast: Getting excited.
• 27:30
  Emily Ast: A little too soon.
• 27:31
  Emily Ast: It is exciting, but getting excited and just signing without reading or without asking someone, um, and, and signing very broad, sweeping arrangements when they're being asked to start on something relatively minor.
• 27:46
  Emily Ast: One lab, right?
• 27:47
  Emily Ast: One educational panel.
• 27:49
  Emily Ast: Uh, people should try their best.
• 27:53
  Emily Ast: To be cautious about signing a two year general consulting agreement for all of hip and knee arthroplasty if they're actually being asked to do one product lab on one specific item, or teach a, you know, teach a on a panel on one specific product.
• 28:12
  Emily Ast: Um, I think that's, that's where I see issues,
• 28:15
  Joseph M. Schwab: Is there some specific foundational sort of preparation that you recommend an innovator do before they start meeting with a company?
• 28:25
  Emily Ast: Yeah, I'd say really look around at what else is out there.
• 28:28
  Emily Ast: I mean, obviously not if thing, you're not gonna know if things are still under, you know, being designed and patents have been filed.
• 28:35
  Emily Ast: But if to the extent there are things on the market, see what else is out there and make sure that the product or the idea that you have.
• 28:44
  Emily Ast: Fixes a need in the market, right?
• 28:47
  Emily Ast: So I think people have these great ideas and it legitimately is a great idea, but if they.
• 28:55
  Emily Ast: Think through it, you know, five levels down of, okay, if we had this product, would it create other pipeline products here, or would it actually displace another product that people really like?
• 29:07
  Emily Ast: People don't think through to make sure that there's a true need, you know, in the market for something and that that's not going to cause.
• 29:15
  Emily Ast: Other negative ripple effects, I guess I would say that would dissuade a company from wanting to develop that product.
• 29:21
  Emily Ast: Like it's gonna cannibalize one of their own products or it's going to cause other issues, um, with some of the way that they sell their products or things like that.
• 29:30
  Emily Ast: So I'd say identify the need and ensure there's no negative ripple effects if you were to develop this, um, so that you can articulate that need to, you know, to a company or if you're getting, um.
• 29:44
  Emily Ast: You're trying to get funding or something like that, identify that and then have your NDA in place before you talk to anyone
• 29:52
  Joseph M. Schwab: So if you, and I think I.
• 29:54
  Joseph M. Schwab: Know the answer to this if I've been paying attention to your ques, to the way you've answered these questions.
• 29:59
  Joseph M. Schwab: But if you could give one piece of advice, only one, to someone bringing, let's say, their first idea to industry, what would it be?
• 30:09
  Emily Ast: I think you know the answer'cause I've said it several times.
• 30:12
  Emily Ast: Don't speak too freely too soon and don't write things on the back of a napkin over drinks at midnight and expect that your idea will be protected.
• 30:22
  Joseph M. Schwab: So we'll say back of a napkin idea is a theoretical concept.
• 30:26
  Joseph M. Schwab: It's not a practical business plan.
• 30:28
  Emily Ast: That is exactly right and those are great.
• 30:31
  Emily Ast: That is how great ideas start.
• 30:33
  Emily Ast: But as soon as you get home that night with your idea on the back of a napkin, have an the next day maybe could wait till the next day, uh, send an NDA to everyone who was part of that conversation.
• 30:44
  Emily Ast: Okay.
• 30:44
  Joseph M. Schwab: And just as a practical piece of advice, do you recommend talking to a lawyer who specializes in those types of contracts in order to get an NDA, or is it something I can.
• 30:55
  Joseph M. Schwab: Uh, the two most popular things I see now is people having chat, GPT write one up, or people downloading one off of a a, a free or or cheap internet, uh, law firm website.
• 31:06
  Emily Ast: Yeah, I think for a basic NDA, you probably could use chat GBT or download one and it would be good enough.
• 31:14
  Emily Ast: I do think it helps to have someone who's familiar, you know, with the legal structure maybe to, to do it if you have the time or the resources because you might wanna, there may be terms like, how long did that protection last?
• 31:28
  Emily Ast: What are some exclusions?
• 31:30
  Emily Ast: There's things around that.
• 31:32
  Emily Ast: Around the fringes, but the core of it, if you just need to get something in place fast, I think ChatGPT, you know, that's probably good enough.
• 31:41
  Joseph M. Schwab: So, um, because you have so many clients that are orthopedic surgeons that are surgeon innovators, from your perspective, how do you see the relationship between clinicians, surgeons, and industry evolving, we'll say over the next few years?
• 31:56
  Joseph M. Schwab: It seems like from the conversations we've had, this is a really exciting time to be considering sort of surgeon entrepreneurship.
• 32:06
  Emily Ast: Absolutely it is.
• 32:07
  Emily Ast: And one thing that I do see evolving is that there's a lot of strategic acquisitions, joint ventures, mergers, buying a particular product from one company, but it's gonna be sold by another or there's.
• 32:22
  Emily Ast: Joint partnerships.
• 32:24
  Emily Ast: And so I see a lot of movement around and, and the, the desire for companies to have flexibility to bring in a strategic acquisition of a product, maybe if it fits their, you know, their portfolio rather than develop in house also for speed.
• 32:40
  Emily Ast: Um, there's some smaller companies maybe developing and then selling to larger companies as opposed to bringing those to market themselves.
• 32:48
  Emily Ast: And so that does sometimes change.
• 32:51
  Emily Ast: The structure and in that, companies may be less willing, I think, to do these longer royalty stream contracts for product design in the future because they wanna have the flexibility and not be constrained if they wanna buy something external.
• 33:07
  Emily Ast: Well, but now we're paying these.
• 33:09
  Emily Ast: These people for seven to 10 years and we're not gonna use that product.
• 33:12
  Emily Ast: Or you know, we have to buy them out of that royalty stream because now we're going to sell that and the new company doesn't wanna be obligated to pay along royalty stream.
• 33:23
  Emily Ast: Right.
• 33:23
  Emily Ast: So I, I do see different structures, like some sort of flat rate payments or.
• 33:31
  Emily Ast: Um, milestone payments, I guess you would call it happening as well as far as in terms of, um, compensation instead of a straight royalty stream and just some more creativity around that, right?
• 33:42
  Emily Ast: Around creating these type of roles for people that provide real value to the company while, you know, compensating and, and protecting the, the physicians really well as well.
• 33:54
  Emily Ast: Um.
• 33:55
  Emily Ast: I do see that a lot and I see a lot of companies willing to get flexible and, and want to bring in, you know, great talent and really being very engaging, cooperative and, and thoughtful, you know, moving forward as far as both developing in-house and acquiring things strategically.
• 34:17
  Joseph M. Schwab: And so last question.
• 34:18
  Joseph M. Schwab: Our series is titled From Idea to Market, and so I would just ask you, what does that phrase mean to you based on the work you do with innovators?
• 34:30
  Emily Ast: From Idea to market to me means get your team in place.
• 34:34
  Emily Ast: Your lawyers, your accountants, your advisors, your family, get everyone on board so that you can have the support and guidance along the way, and I think that will lead to great success.