When Patent Office Director Michelle Lee gave that speech, Theranos appeared to be one of the most impressive companies in Silicon Valley. But later that year, the public learned that Holmes hadn’t “proven” anything. Whistleblowers told The Wall Street Journal that Theranos wasn’t even using its own devices for most of its blood testing. Holmes had apparently spent more than a decade building a company based on unrealistic or outright false claims about its revolutionary technology.
For any disaster as large as Theranos, there’s plenty of blame to go around, of course. Both Holmes and former COO Sunny Balwani now face federal fraud charges. Theranos’ star-studded board of directors failed to do adequate oversight. Walgreens ignored warning signs before launching its in-store partnership. Some VCs and journalists were too eager to believe Theranos’ unproven claims.
But the patent system also played an important, and often overlooked, role in the situation. The USPTO gave out patents much too easily, giving Theranos early credibility it didn’t deserve. Theranos then used these patents to attract staff, investors, and business partners. The company would last for 10+ years and burn through half a billion dollars before the truth finally emerged.
A company “built around patents”
In 2002, an eager Stanford undergraduate named Elizabeth Holmes told a professor about an idea. (New ABC podcast “The Dropout” covers the story in its opening episode.) Holmes approached Professor Phyllis Gardner of Stanford Medical School with a radical suggestion. She wanted to make a microfluidic patch that could test blood for infectious organisms and could deliver antibiotics through the same microfluidic channels. The professor replied that this idea was not remotely viable.
But Holmes found a more receptive audience at the USPTO. She says she spent five straight days at her computer drafting a patent application. The provisional application, filed in September 2003 when Holmes was just 19 years old, describes “medical devices and methods capable of real-time detection of biological activity and the controlled and localized release of appropriate therapeutic agents.” This provisional application would mature into many issued patents. In fact, there are patent applications still being prosecuted that claim priority back to Holmes’ 2003 submission.
But Holmes’ 2003 application was not a “real” invention in any meaningful sense. We know that Theranos spent years and hundreds of millions of dollars trying to develop working diagnostic devices. The tabletop machines Theranos focused on were much less ambitious than Holmes’ original vision of a patch. Indeed, it’s fair to say that Holmes’ first patent application was little more than aspirational science fiction written by an eager undergraduate.