As the recipient of a new NIH grant, GE (NYSE:GE) Healthcare should create and design new innovative features as a way to differentiate its products in the nascent point-of-care portable ultrasound marketplace. Reasons why GE Healthcare should pursue a risk-taking strategy, such as developing a portable solar-powered ultrasound device and background information supportive of this strategy is offered in the following analysis.
The recent announcement that GE has been awarded a $1.2 Million NIH-funded grant to develop a low-cost transducer for portable ultrasound systems is noteworthy -- but not nearly as important as its recently settled patent litigation with SonoSite, Inc (NASDAQ:SONO). that occurred just two weeks ago (http://www.sonosite.com/news/2009/10/sonosite-announces-global-patent-settlement-with-ge/).
With the filing of its first US patent on 28 June 1996 -- (which ultimately issued on 3 Mar 1998 as US Patent 5,722,412), SonoSite, Inc. sought to establish itself as an innovative market leader and developer of light-weight (less than ten pounds) portable ultrasound machines. However, since the issuance of this initial patent (http://www.freepatentsonline.com/XEF5722412.html), only 94 other issued design and / or utility patents have cited the '412 patent as relevant prior art -- which seems relatively few compared with the total number of other patent-related documents associated with other competing medial imaging modalities, such as a computerized axial tomography (CAT) or computerized tomography (CT) scan and Magnetic Resonance Imaging (MRI) scan.
For example, using the http://www.freepatentsonline.com website search engine, a quick search resulted in a large number of documents being found that contained the following keywords or phrases:
The number of references for the words "CT Scan", "CAT Scan", "Computed Tomography", and "Computed Tomography Scan" was in the range of 63, 234 and 26,721.
Likewise, "Magnetic Resonance Imaging", "Magnetic Resonance Imaging Scan", "Magnetic Resonance Imaging Scan", "MRI", and "MRI Scan" produced between 84,646 and 24,879 references.
Finally, the range was between 781,590 and 14,909 references for keywords and phrases like, "US Scan", "Ultrasound device" , "Ultrasound Imaging" , "Ultrasound Scan", "Ultrasound transducer", "Ultrasound machine", and "Ultrasound transducer probe".
Some of these documents may be related to research and development, non-human medical imaging, or be counted more than once in different categories for the same imaging modality -- nonetheless, the fact that GE was willing and agreed to pay SonoSite, Inc. a "$21 million (front payment) and make ongoing royalty payments on US sales and production of hand-carried ultrasound systems weighing less than ten pounds in exchange for a perpetual nontransferable worldwide license to the ‘412 patent family" as part of the settlement agreement is crucial to understanding just how important winning this fight was (and could be) for the long-term survival of GE Healthcare and its ultrasound products.
Given the facts that patent litigation is not cheap, that there are 16 other competitors and 26 competing ultrasound products (ten of which are compact) in this space, and the fact that GE has already expended so much valuable time and resources in pursuing this litigation, it appears that GE had to find a way to gain control and access to this critical '412 patent family -- (even if those patent rights are going to expire in 2016) -- or miss an important window of opportunity.
Perhaps, during the last 10-15 years, GE was so busy making and shipping out more expensive imaging equipment (like CT scanners and MRI machines) as fast as it could that it didn't bother to take a careful look and analysis of the smaller ultrasound market and new upstart businesses, like SonoSite,...