Two competitors in the fast-growing field of telehealth are engaged in a legal dispute about intellectual property, as each aims to become the country’s leading provider of remote patient-doctor encounters.
American Well Corp. of Boston and Teladoc Inc. of Lewisville, Texas, are battling over technology that enables patients to connect online with doctors and other health care providers.
American Well has secured more than two dozen patents to protect what it considers proprietary technology — complicated software that took several years and millions of dollars to develop, executives say. But Teladoc claims American Well is trying to quash competition with patents that are too broad and cover processes too obvious to be patented.
The fight comes as the telehealth industry is poised to boom as more employers, health care providers, and insurers embrace it as a way to provide basic care to patients in a more convenient, less expensive way.
Analysts at the Los Angeles research firm IBISWorld Inc. expect telehealth revenues to grow 40 percent a year, to $3.5 billion in 2020.
“The industry has clearly hit an inflection point where consumers are demanding it, employers see it as a cost savings, and insurers are more and more pushing it as a benefit,” said Ryan Daniels, an analyst at the investment bank William Blair & Co. in Chicago. “We think it’s going to grow tremendously.”
Telehealth refers to health care delivered remotely, through such means as the telephone or online video chats. Most consumers who use Teladoc’s services talk to doctors by phone, while most of American Well’s customers use video.
But Teladoc, which says it will host more than 525,000 telehealth patient visits of the 800,000 total in the industry this year, also offers a video chat product similar to American Well’s.
The companies have gone to court to seek dominance in the emerging market. In March, Teladoc asked the US Patent and Trademark Office to invalidate one of American Well’s patents on its system of connecting consumers and health care providers. The company secured a small victory this month when patent judges agreed to hear the case and said there’s “a reasonable likelihood” Teladoc will prevail in challenging some of the patent language.
A final ruling is expected next year.
American Well, meanwhile, has sued Teladoc for willfully infringing on its patents. The suit, now pending in federal court in Massachusetts, was filed in June, shortly before Teladoc went public on the New York Stock Exchange on July 1. Teladoc’s share price climbed 50 percent to $28.50 a share in the first day of trading. It closed Wednesday at $24.46.
American Well chief executive Dr. Roy Schoenberg said in an interview that Teladoc is “walking all over” American Well’s intellectual property and the infringement will only worsen as Teladoc expands its video-chat business.
“They are clearly walking into the area where we have a lot of intellectual property,” Schoenberg said. “We essentially had to go to court.”
He said American Well has spent $200 million to develop its technology, which creates a “brokerage” for connecting patients and doctors. For example, a patient who wants to video chat with a doctor can go online to see which doctors are available in real time.
But Teladoc chief executive Jason Gorevic said American Well is claiming far too much as intellectual property.
“Connecting a doctor and a patient are patented — that’s so broad as to be quite frankly ridiculous,” Gorevic said. “It’s not valid to patent a process just by saying it goes through a computer. It’s not a patentable thing.”
Teladoc, founded in 2002, reported that its 2014 revenues more than doubled from the prior year to $43.5 million.
American Well also said its revenues doubled in 2014, but the privately held company declined to disclose figures. Founded in 2006, the Boston company said it partners with employers and health insurers to offer its service to 25 million people.
The companies’ patent dispute could stretch for many months or even years, but Daniels, the analyst, does not expect the fight to hamper either company’s growth because of the potential size of the market.
“A lot of companies can be very successful for a long time without having to compete with each other for market share,” he said. “It’s a huge opportunity. They can all double many times over before really bumping into each other.”