Going for the knockout punch?

Going for the knockout punch?

In the wacky world of diabetes devices intellectual property lawsuits are standard operating procedure and no company is more aggressive at protecting their patent portfolio than insulin pump market leader Medtronic (NYSE:MDT). It’s not an understatement to say that protecting their intellectual property is actually part of Medtronic’s business strategy, and few companies are as successful at doing so.  It wasn’t that long ago that Medtronic using their vast collection of IP basically forced Smith’s Medical to abandon the insulin pump market.

Diabetic Investor is wondering whether history is getting ready to repeat itself. Although Medtronic does not have a patch pump the company has sued OmniPod maker Insulet (NASDAQ:PODD). A lawsuit which is heating up as Diabetic Investor has learned from multiple sources that Medtronic is subpoenaing current and former Insulet employees. Additionally these same sources have indicated that Insulet has offered legal representation for targeted employees and ex-employees; a move which tells Diabetic Investor that the company contrary to all their public statements on this lawsuit is very concerned.

Now Diabetic Investor has yet to learn what the Medtronic attorneys are asking these people but the fact that the company is going this route makes us believe this is not your ordinary patent dispute. It should be noted that Insulet like many companies has gone through their fair share of turnover over the past few years. This really isn’t all that unusual; however the nature of this turnover may come back and haunt Insulet. While no employee likes to get the ax or be forced to resign it’s a fair statement to say that many of Insulet’s former employees left on less than friendly terms. Which makes Diabetic Investor believe Insulet should be very worried as these people can do some serious damage to the company.

More than likely Insulet will attempt to convince everyone that these are just disgruntled ex-employees who have their own ax to grind because they got canned. While there may be some who fall into this category far too many ex-Insulet employees interviewed by Diabetic Investor see management as seriously out of touch with what’s going on in the marketplace. For the record Diabetic Investor has reached out to Insulet for comment but as publication has not heard from the company.

As Diabetic Investor has been reporting the insulin pump market is becoming increasingly competitive and Medtronic while still the market leader hasn’t been doing all that well of late. It’s also true with their new Eros pod Insulet has been gaining traction increasing their share of the overall market. Or put another way Medtronic now sees Insulet as a threat and since they don’t have a patch pump of their own what better way to prevent further share erosion than to use their vast vault of patents. Medtronic also knows that no matter what the outcome of the lawsuit Insulet will have to spend considerable resources on the lawsuit.

Diabetic Investor sense here is that Medtronic sees this lawsuit as a potential knockout blow to Insulet, which is why they are being so aggressive in their approach. They also see that Animas, Johnson and Johnson’s (NYSE:JNJ) insulin pump unit is hurting and with their recent cutbacks less of a threat.  Watching this situation very closely are the folk at Tandem Diabetes whose t:slim insulin pump is garnering attention in the marketplace. Tandem must be aware that they too will likely become a target should the t:slim begin to gain any significant traction in the marketplace.

During the Gulf War Colin Powell once said; “Our strategy to go after this army is very, very simple. First, we’re going to cut it off, and then we’re going to kill it.” Diabetic Investor sees Medtronic pursuing a similar strategy with Insulet. Stay tuned as this is likely to get ugly, very ugly.