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Bio-Rad Gets Its Wish as Applera Agrees to Return to IP Infringement Settlement Talks

Nearly four months after a US District Court in Connecticut issued an injunction preventing Bio-Rad Laboratories' MJ Research division from selling thermal cycler products, Applied Biosystems parent Applera and Bio-Rad Laboratories announced last week that they had resumed settlement talks to resolve outstanding issues between the firms.

The case between the two market-leading sellers of thermal cyclers has been costly to Bio-Rad, not only because of lost revenue but also because of more than $35 million in damages awarded to Applera earlier this year. The firm had prepared for the possibility of losing the case by setting aside $50 million in a contingency settlement fund in the fourth quarter of 2004 to cover legal expenses related to the case.

The discussions are the latest in a series of twists in the dispute, which began in 1998 when Applera and PCR partner Roche filed suit against MJ Research — which was acquired by Bio-Rad in August 2004 for $32 million in cash. Bio-Rad has maintained for months that it wished to settle the dispute, which it is expected to cost the firm $10 million to $15 million in lost revenue in the fourth quarter.

"If the injunction remains in place through the remainder of the fourth quarter, our life science business could be negatively impacted with sales being reduced as much as $10 million to $15 million and pre-tax operating profits reduced as much as $8 million to $10 million versus our prior expectations."

In April 2004, a US District Court jury in New Haven, Conn., decided that MJ Research must pay $19.8 million in damages to Applied Biosystems and Roche Molecular Systems for infringing a number of PCR-related patents. The court increased that amount earlier this year by $15.6 million, finding that MJ's infringement was willful (see BioCommerce Week 4/7/2005).

The same court granted Applera's request for an injunction on Aug. 30, the same day that Bio-Rad officials claimed they had reached a settlement with Applera (see BioCommerce Week 9/8/2005). Bio-Rad said in a company statement that it was "dismayed" by the injunction, since it believed the settlement had been communicated to the court by both parties. However, an ABI spokeswoman disputed Bio-Rad's claim, telling BioCommerce Week by e-mail that the two companies "were in settlement discussions, however a formal settlement was not reached prior to the court issuance of the injunction."

The injunction prohibits MJ Research from making, using, offering, or selling thermal cyclers in the US that infringe certain claims of Applera's US patents 5,333,675 and 5,475,610. In issuing the injunction, Judge Janet Bond Arterton wrote, "Applera will suffer irreparable harm if defendants' infringement is not enjoined."

In addition, MJ Research is banned from servicing, repairing, advertising, instructing, or otherwise promoting the use of thermal cyclers for PCR that infringe the '675 and '610 patents, as well as Applera's US Patent 5,656,493.

Three Applera-held PCR process patents that expired in late March — US patent 4,683,195; 4,683,202; and 4,965,188 — were explicitly excluded from the ruling.

This week, Ron Hutton, Bio-Rad's treasurer, told BioCommerce Week that the firm had filed an appeal of the injunction, though it is unknown when the court would rule on the appeal.

ABI officials did not return a call seeking comment on the settlement negotiations.

As a result of the injunction, Bio-Rad is almost certain to fall short of its fourth-quarter sales and profit goals. During the company's third-quarter conference call in early November, CFO Christine Tsingos said, "If the injunction remains in place through the remainder of the fourth quarter, our life science business could be negatively impacted with sales being reduced as much as $10 million to $15 million and pre-tax operating profits reduced as much as $8 million to $10 million versus our prior expectations." (see BioCommerce Week 11/10/2005)

She also said that legal fees associated with the Applera litigation are "substantial," which would make the firm's SG&A goal difficult to achieve. The company reported fiscal 2004 SG&A costs of $378.3 million, or roughly 34.4 percent of total revenue of $1.1 billion. Tsingos said early this year that Bio-Rad's long-term goal was to reduce its SG&A spending to 30 percent of revenue, though it did not expect to reach that goal in 2005 (see BioCommerce Week 2/24/2005).

If Applera completes a settlement with Bio-Rad, it would be the second dispute to be cleared up by the company recently. Two weeks ago, the firm settled a patent dispute with Australian firm Genetic Technologies, allowing ABI to continue selling certain products containing non-coding DNA technology that is covered by Genetic Technologies' patents (see BioCommerce Week 12/15/2005).

Neither company would disclose the financial terms of the settlement, which ends a dispute dating back to March 2003, but Genetic Technologies said that as part of the agreement Applera has licensed its patents. The settlement will allow ABI and sister company Celera to continue selling a variety of products incorporating non-coding DNA.

Applera is still involved in several legal disputes including a patent-infringement suit filed by rival Beckman Coulter in 2002, which includes a countersuit filed by Applera in 2003. It also has ongoing litigation with Stratagene, Molecular Diagnostics Laboratories, Enzo Biochem, Thermo Finnigan, and Promega.

— Edward Winnick ([email protected])

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