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Caltech's 'Junior' Status in Sequencing Patent-Interference Case Could Hurt ABI

Applied Biosystems has been put at a big disadvantage in an important sequencing patent issue after a key licensing partner was recently named the junior party in a patent interference review triggered by the allowance of an Enzo Biochem patent on DNA sequencing technology.
 
According to a patent attorney with experience in the interference review process, statistics show that companies named a junior party have little chance of winning the US patent office’s designation as original inventor.
 
ABI exclusively licensed the sequencing patent from the California Institute of Technology several years ago, and although ABI is at a distinct disadvantage by Caltech’s status in the review, these cases are often settled before the patent office makes its determination.
 
On Nov. 8, the US Patent and Trademark Office declared an interference between a patent issued to the California Institute of Technology in 1998 and a patent application filed in 1982 by Enzo and accepted by the patent office late last year. Though Enzo’s patent application has not been made public yet, Enzo and the US Patent Office believe the patent application covers virtually the same invention patented by Caltech.
 
In such cases, the patent office designates a senior party – the party that filed first – and a junior party. Enzo filed its application first, but the patent filing was delayed and amended over the years before being accepted by the patent office late last year. Caltech filed its application in 1994. According to patent experts, this ruling puts Caltech, and by extension ABI, at a distinct disadvantage.
 
“My understanding is that the senior party wins 97 percent of the time,” said Richard Warburg, an intellectual property attorney with Foley and Lardner. “It’s a huge disadvantage to be the junior party … because you have the burden to prove you had the invention beforehand. You have to prove you actually made the invention, or that you had a full concept of the invention prior to the other person,” he told BioCommerce Week.
 
“From the early 1980s, Enzo was … the pioneering company in labeling nucleic acids and its application in the life sciences,” said Elazar Rabbani, chairman and CEO of Enzo, in an interview last week.
 
“Essentially, [Enzo’s patent] is the same as the Caltech patent,” he said. Though he said that Enzo’s patent had broader claims, “at least it covers the area that the Caltech patent” covers. “I believe the technique in general has been described to generate sequencing fragments — that means if you identify a fragment you can reconstruct the sequence of nucleic acid,” said Rabbani. “That is really the breadth and scope of the true electrophoretic system, which is really the standard technique.”
 
The Caltech patent, No. 5,821,058, is entitled “Automated DNA sequencing technology,” and expires in 2015. According to the patent’s abstract, it covers “a process for the electrophoretic analysis of DNA fragments produced in DNA sequencing operations wherein chromophores or fluorophores are used to tag the DNA fragments produced by the sequencing chemistry and permit the detection and characterization of the fragments as they are resolved by electrophoresis through a gel.”
 
Caltech licensed the rights to that patent years ago to ABI, which derives more than a quarter of its revenue from the sales of DNA sequencing machines and reagents. For the first quarter of its fiscal year 2007, which ended Sept. 30, the firm reported total revenue of $476.3 million, of which $131.5 million came from sequencing products.
 
ABI officials have predicted that DNA sequencing revenues would remain flat in 2007. Anticipating that the market for traditional Sanger sequencing instruments will decline as newer technologies come on the market, the firm has made a series of moves intended to ensure its participation in the next-generation sequencing market. Those efforts include a collaboration and investment in VisiGen, and its $120-million acquisition earlier this year of Agencourt Personal Genomics (see BioCommerce Week 11/3/2005 and 5/31/2006).
 
The firm’s migration into the next-generation sequencing market also could mitigate any potential damage to future revenues should Enzo be declared the rightful inventor of the DNA sequencing technology.
 
Settlement Possibility
 
Though being named the senior party would seem to favor Enzo, it is possible the parties could reach a settlement before a final designation is made by the Board of Patent Appeals and Interferences. According to Warburg, the interference review process usually takes about two years.
 
“In the interferences that we’ve been involved in … it usually rolls along pretty quickly,” said Ron Fedus, Enzo’s corporation and patent counsel. “In about 18 months or two years we should have a pretty good answer, [but] I don’t know if that will be the final answer,” he told BioCommerce Week.
 
“The first part is the preliminary motion phase, where you define what you’re going to fight over, and you decide whether anything is patentable as well,” Warburg explained. “In one circumstance, everybody could lose the patents, or one person might lose the patent at that point. If it gets past that, then you go into the priority phase, which is where you say, ‘This is my proof that I was first.’”
 
He said it is very common for parties to settle the issue before the patent office makes a decision — and if that happens, the agreement would be sent to the patent office for approval.
 
Rabbani agreed, saying that settlement talks are a “normal procedure” during a patent interference investigation. “They do ask the parties to discuss a possible settlement,” he told BioCommerce Week.
 

“My understanding is that the senior party wins 97 percent of the time. It’s a huge disadvantage to be the junior party.”

Officials from ABI declined to comment last week on the patent interference. A Caltech spokesperson said that the school could not comment at this time because officials were still reviewing Enzo’s patent claims.
 
Rabbani said that if Enzo is declared the rightful owner of the invention, the firm’s business options are broad, though he did not say whether a lawsuit would be part of the firm’s plans. “The options range from alliances with one or several companies, or Enzo would develop such a system itself, or broadly cooperate with everybody to make that technology accessible for the industry,” he said.
 
Warburg noted that “until they actually get a patent issued, [Enzo] can’t file a suit. If the patent issues, and if anybody’s infringing that patent at the time it issues, then they can bring a lawsuit,” he said.
 
“If [Enzo’s] claims are broad and they cover all modern technology, then it could be a huge issue, [but] there’s no harm for the past activities,” Warburg said.
 
Enzo is already embroiled in litigation with ABI and several other firms including Amersham (now part of GE Healthcare), Molecular Probes (now part of Invitrogen), PerkinElmer, Orchid Biosciences, Affymetrix, and Roche Diagnostics, in which it alleges that these firms infringe certain of its issued patents related to detecting nucleic acid sequences.
 
Last month, a US District Court in Connecticut ruled in Enzo’s favor in the claims construction phase of its suit against ABI (see BioCommerce Week 10/18/2006). The other firms are involved in an ongoing case with Enzo in New York (see BioCommerce Week 7/26/2006).

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