What motivates the world’s greatest inventors? How do they commercialize their groundbreaking technologies? There is so much to learn from geniuses like Dr. Gary Michelson, one of the most prolific inventors in the history of medicine. The sole named inventor on every one of his more than 950 issued patents, his development of new implants, surgical procedures, and instruments required to carry out those procedures transformed the field of spinal surgery.
Now his inventions are the most dominant way both common spinal disorders as well as debilitating conditions are treated throughout the world. Millions of people have already benefited from his commitment to improving outcomes for spinal surgery patients and his success as an independent inventor.
In 2005, he became a billionaire when he reached a settlement with Medtronic, one of his licensees, after years of litigation. Today, he spearheads a wide range of philanthropic efforts, including sponsoring cutting-edge medical research, improving access to higher education, creating free educational resources about intellectual property, animal welfare, and more.
If you want to reach the top of a mountain, follow the footprints of others who have climbed the highest peaks. That’s the best advice my father gave me. With that spirit in mind, please enjoy this conversation with a truly remarkable inventor.
Stephen Key: All of the things you’re doing at Michelson Philanthropies, they don’t relate to each other, apart from the sense of helping. From an inventor standpoint, is there a common thread?
Dr. Gary Michelson: Yes, we do have more pies than thumbs. So, your observation is correct. If there’s something that ties together helping people in prison get education or helping preventing them from going back to prison, or saving the cats and dogs that are scheduled to be killed the next day in the so-called shelters, or distributing food in Los Angeles to people who are in need of it, or refurbishing 20,000 laptops so kids can actually attend school remotely — the common factor is these are the people or the animals that are effectively voiceless in society. So, they’re not just in need of help, they’re in need of a voice.
And the second thing is, I think most people are comfortable with what they already know, what they’re used to. It’s the social equivalent of Newton’s first law, that a body at rest will remain at rest. The status quo is generally resistant to change. When change can no longer be fought back, people generally like theirs incremental, preferably with hints of the past.
So, what ties these items together is the snowboarder’s mantra: Go big, go bold, or go home. A substantial part of these endeavors is deliberately to be disruptive, to upturn the status quo.
By definition, improvement patents are incremental in nature. But pioneering patents birth something altogether new into the world, and that is disruptive.
The old saying about how if you build a better mouse-trap, the world will beat a path to your door, is just false. The world’s going to fight like hell to keep things just the way they are.
Key: We all have 24 hours in the day, right? How did you accomplish so much in such a short period of time?
Dr. Michelson: I made choices in my life that very few people would care to make. Many people have what I believe is a mistaken notion of prioritizing. They think that they should just make a list of all the things that they would like to do, and then arrange them in the order in which they would like to do them. But this is the heart of Frost’s great poem, The Road Not Taken, where he wrote, “Yet, knowing how way leads on to way, I doubted if I should ever come back.”
A young lawyer cannot choose to put in countless hours at the office to become the youngest person to ever make senior partner, and have as a second item on their list, “spend more time with the family,” and vice versa. The two are simply incompatible.
I had no balance. I had no wife. I had no children. I owned a television set for one day. I realized that if I had it, I would watch it, so I gave it away to my friend. For 20 years, I didn’t own a television set. I went to work. I got up at 5 in the morning. I went to the hospital. I saw my patients. I did my surgeries. I went to the office. I came home. I worked on my inventions. I went to bed.
That’s not much of a balance.
Key: Would you do it differently today?
Dr. Michelson: No. I am the most blessed person I have ever encountered because I defied Frost’s great poem. I took this path, which is a pretty crazy assed path. Then, later in life, I got to take the other path, which few people ever get to do. I met an incredible woman. I have a family and I’m at a place in my life where I can be around to be a good father. So, I am literally the most blessed person I know.
Key: Do you believe that to achieve that level of success, that type of focus is required?
Dr. Michelson: You need to be obsessed. College swimmers today swim three hours in the morning, three hours in the afternoon, and few of them even make the Olympics.
Key: How did you test the prototypes you built?
Dr. Michelson: I invented the original spinal implants that are now being put in people. I never put one in a human being who was alive because that had the potential to do harm. But I think the very essence of inventing is to see with meaning. And not infrequently, the steps of inventing, particularly with devices, are iterative.
Inventors possess a certain boldness. You have to. It’s a willingness to deliberately reject what your mother and the teacher said and to both color outside the lines and think outside the box.
Inventors also possess, and I think this is the single most important word, perseverance. It is that single quality that makes all the difference. In inventing, if one attempts a thing and does not initially succeed, it is only a failure if they give up and stop there.
For me, prototyping was the essence of the iterative process. And by seeing with understanding, there’s a learning process by which the object that I created informs the inventor about what works, what doesn’t work, why. Each next iteration, each next prototype, becomes the teacher.
Now, if you’re prototyping an instrument, it doesn’t endanger a patient in any way. If you’re prototyping an implant, you probably should put it into a cadaver and not a living person, because that would be abusive.
Key: Let’s talk about how the patent system is working today. Given that patent rights for independent inventors are weaker today than in the past, do you believe that you would have been as successful with your litigation?
Dr. Michelson: It would be more than fair to say that the United States patent system has worked very well for me. I see that constitutional provision for inventors as a contract between the individual and society. There has been scientific analysis of the effects of some of my inventions in the field of surgery. One of the most comprehensive analyses demonstrated consistently far superior patient outcomes in what had previously been considered a rather high-risk surgery, and this was accompanied by substantially reduced cost to all parties.
So, to me, that is the patent system working exactly as it should. Of course, how the system might work for another independent inventor might well depend on the field of invention or the route they decide to take in attempting to monetize that invention.
I think all independent inventors will fare worse because of the Patent Trial and Appeal Board and other changes. This idea that you can combine 17 references and it becomes obvious, even if the references contradict the combination, I think that’s what people have called the “Googlization” of the United States Patent and Trademark Office. It’s not good.
Key: Tell me about your experience with the licensing business model.
Dr. Michelson: I licensed a great deal of intellectual property. We did a count once; I had 20 different licensees. Some of them were the largest orthopedic companies in the world. Some of them were the largest spine companies in the world and a couple of them were just startups that had no other product but the single product I licensed to them. One of those companies got sold several years later for $600 million with no product other than the one thing I licensed to them.
I think I was very egalitarian in my licensing. Some deals were exclusive, some were co-exclusive. The system worked very, very well for me.
Key: How did you learn so much about the licensing business model? Did you bring in licensing attorneys?
Dr. Michelson: Here’s an anecdote for you. One time, I went out to see Ron Pickard, who was the president at the time of Sofamor Danek. Sofamor Danek wasn’t the largest orthopedic company, but it was certainly the largest spine implant company in the world at that time. I came by myself and when I showed him some of my inventions, he said, “Well, we really would like these threaded cages that allow people to do a very simple interbody spinal fusion.”
“Great,” I said. Then he said, “What do you think a business agreement might look like?” And I replied, “Well, let’s see. I’d like a 10% royalty, guaranteed minimum.”
I began going down this list of things and when I was done, he looked at me and said, “Doctor, the most successful product that we’ve ever had is called the TSRH system of pedicle screws. We pay them a 5% royalty. There are no guaranteed minimums and there’s no upfront money.”
When I said, “Okay. So what?” he just kind of looked at me. “Well, I’m telling you, we’ve never paid people upfront money, guaranteed minimums, and a 10% royalty,” he said again.
I told him, “You can do whatever you like with everybody else, but that’s what I would like. And if we don’t come to an agreement today, tomorrow I’m meeting with Richards.”
That was the largest orthopedic company in the world, and a block away.
He said, “We’ll do the deal.”
Key: You did all the negotiations yourself?
Dr. Michelson: Yes.
Key: You were willing to walk away so quickly by leveraging someone else.
Dr. Michelson: Well, if you play poker, you don’t always get dealt the best hand. You have to know when to bluff. And the bluff better be very credible.
Key: Just so I’m really clear on this. All of the business terms in a licensing agreement, like royalty rates, minimum guarantees, maybe performance clauses — you negotiated those yourself?
Dr. Michelson: Yes.
Key: Oh, geez. Was there a particular clause that was always difficult to negotiate?
Dr. Michelson: Yes. The most difficult thing to ever negotiate is getting an entity to commit to use their best efforts, because that’s blah, blah, blah. They’ll always say, “You should give us your technology and we’re going to do this and we’re going to do that. It’s all going to be wonderful.” But try to get them to put in writing that they’ll use their best efforts? No chance.
Key: So, you got them on minimum sales?
Dr. Michelson: Well, if they’re paying you a lot of money upfront and they have a minimum that they’re going to have to pay you no matter what, they’re going to say to their salespeople, “Forget the other stuff. We have to pay him the money whether we sell or not. You better go out and sell this.”
In the courting phase, when they’re trying to get you to give them your technology, they’re painting you this wonderful picture. You know, we have the largest salesforce in the world and we blah, blah, blah. And you go, “So, what would you expect that to look like in dollars?” They go, “Well, we could sell $10 million a year.” “Great. Give me the million dollars, which is 10%.”
So, you’re basically just giving them back their own blah-blah-blah.
Key: It’s always easier to get that information upfront than later, isn’t it?
Dr. Michelson: Oh, yeah. You’re not getting anything later.
Key: This is priceless. It’s so much fun to hear about your strategy, because this is what everyone worries about. But sometimes, you bring in the right people to represent you and the deal never happens, so I’m a big believer in negotiating everything yourself, especially the business terms. I’m also a big believer in when they start to brag about themselves, you use that information later.
Dr. Michelson: That’s when you boomerang. “Tell me more. Tell me how great you are.” What are they going to say later? “No, we don’t believe our own stuff.”
Key: What about improvement clauses?
Dr. Michelson: Well, that was really what the Medtronic lawsuit was about. I licensed Medtronic technology, well, it was really Sofamor Danek, but Sofamor Danek got acquired by Medtronic. When I licensed them technology in 1993 and 1994, it was supposed to be exclusive. Later on, we were negotiating a much larger agreement because they were already using other of my technology, which they said they were intending to acquire.
But they took a crazy position. They sued me for some ungodly amount of money and took the position that well, in essence, if I invented anything else and didn’t give it to them, I would be competing unfairly against the technology they had already acquired. So, they would have the rights to everything I ever invented until the day I died. It was a pretty crazy position and it didn’t add up in court.
It was an exclusive agreement, but they were taking the position that I was not allowed to compete against them. And anything else I would invent in the field of spine, if they didn’t own it, would be competing against them.
Key: Wow. That’s pretty far-reaching. Why are you so passionate about IP education, leading to you founding The Michelson Institute for Intellectual Property?
Dr. Michelson: We have a debt to pay, people like myself and you. We were given the greatest intellectual property system on the face of the earth. And, but for that, some Goliath company could have just crushed us and taken [our inventions] for nothing. I mean, this is the only shield that we had and, at least for me, it worked and it seems to have worked for others. I think it’s a debt. We need to pay that debt.