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Jury Says Illumina Infringed Five Affy Patents; Awards $16.7M in Damages

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
One week after a patent infringement trial filed by Affymetrix against Illumina began, a jury for the US District Court for the District of Delaware has said that Illumina infringed all five Affymetrix patents at issue in the case and has awarded Affymetrix $16.7 million in damages.
 
The jury’s award is based solely on a 15 percent royalty on sales of Illumina’s infringing products, but did not include any compensation for lost profits. Affymetrix originally had asked the jury to award $12.2 million in damages based on a 12 percent royalty rate on sales of infringing products sold by Illumina through 2005.
 
Illumina countered that “Affymetrix’s reasonable royalty analysis … is not supported by legally sufficient evidence.”
 
Affymetrix also asked the jury to award it $24.2 million in lost profits, but the jury decided the firm was not entitled to such damages.
 
In a statement this week, Illumina said it would appeal the verdict and would continue selling the products that are the subject of the suit.
 
With the appeals and other matters the court has said it would address in this case, it could be years before the dispute is concluded. Among the issues the court has yet to decide are Illumina’s claims that Affymetrix’s patents are invalid and that Affymetrix engaged in antitrust activity, as well as Affymetrix’s request for an injunction on Illumina’s infringing products.
 
Affymetrix initially sued Illumina on July 26, 2004, for allegedly infringing six patents in the DNA microarray field and related technology. Affy subsequently dropped one of the patents, No. 6,607,887, from the suit.
 
Following a Markman ruling in the case last August, both sides claimed that the district judge's interpretation of key terms in the patent-infringement case favored their respective positions. Judge Joseph Farnan issued the Markman order to interpret 15 disputed claim terms in the five patents in contention — Nos. 5,795,716; 5,545,531; 6,355,432; 6,399,365; and 6,646,243.
 
Illumina tried to have patent No. 5,795,716 dismissed, but the motion was denied by the court last month.
 
The case before the jury began on March 5 and lasted one week, with the jury returning the verdict in favor of Affymetrix.
 
In its closing motion for judgment this week, Illumina wrote, “No reasonable jury could find that Illumina or its customers infringed any of the claims of the patents-in-suit, or if they did, Affymetrix is entitled to any lost profits or the 12 percent royalty it seeks.”
 
In turn, Affymetrix argued that “the jury could not reasonably find that Affymetrix is not entitled to lost profits. It is not disputed that Affymetrix and Illumina are head-to-head competitors, and in many cases are the only competitors in a ‘two-player’ market,” it said in the court documents.
 
In addition, Affymetrix said that Illumina’s damages expert “admitted that Illumina took sales from Affymetrix … yet opined that no lost profits were owed due to these lost sales.”
 
Though Affymetrix also asked the jury to award $12.2 million in damages based on a 12 percent royalty rate on sales of infringing products, the jury awarded Affymetrix $16.7 million in damages based on a 15 percent royalty rate.
 
An Appeal Amid Ongoing Litigation
 
Illumina said in a statement that it would appeal the verdict, a process that could take years to complete.
 
“We disagree with and plan to appeal the present finding of infringement in this lawsuit, and note that this finding was made without consideration of the validity and enforceability of any of the patents asserted by Affymetrix,” Jay Flatley, president and CEO of Illumina, said in the statement.
 
“The case will now proceed to the next phase, during which we will have the opportunity to demonstrate that the jury’s infringement verdict should not stand because these claims are invalid and unenforceable,” he added.
 
Flatley also noted that Illumina would continue to sell the products that are the subject of the suit and that “no damages will be payable to Affymetrix until all appropriate appeals have been taken.”
 

“We disagree with and plan to appeal the present finding of infringement in this lawsuit, and note that this finding was made without consideration of the validity and enforceability of any of the patents asserted by Affymetrix.”

The firm, however, will be required to post a bond to secure the judgment, which will remain in place until either the appeal is ruled upon or a settlement is reached. Illumina finished 2006 with $130.7 million in cash, cash equivalents, and short-term investments, so financing the bond should not be a problem.
 
Illumina and Affymetrix officials did not return calls seeking comment. Kevin King, president of Affymetrix’s life science business, said in a statement that the firm was “gratified with the jury’s decision.”
 
Though such a verdict usually puts pressure on the parties to settle the case and avoid additional litigation expense, the acrimony between Illumina and Affymetrix and other disputes may make it harder to reach such a conclusion.
 
Judge Joseph Farnan, who is overseeing the case, said last month that the court would rule on Illumina’s defenses of invalidity and enforceability of the patents at the center of the case in subsequent trials, which are expected later this year. He also said that the court would address Illumina’s allegations against Affymetrix of unfair competition and antitrust violations.
 
“We continue to feel very strongly about our position that Affymetrix’s allegations are without merit, and we look forward to presenting our invalidity defenses, in addition to our counterclaims including Affymetrix’s inequitable conduct in this case, and ultimately to obtaining favorable results to that effect,” said Flatley.
 
Affymetrix’s King said, “We remain confident of our position in the next phase of the trial.”
 
In addition to the ongoing litigation related to the five Affymetrix patents, two weeks ago the US Patent and Trademark Office decided that a patent tied to a technology sold by Affymetrix interferes with an Illumina patent application because Illumina’s application was filed ahead of Affy’s. The USPTO’s designation of Illumina as senior party in the interference proceeding puts the firm at a distinct advantage in that dispute.
 
According to Illumina, the interference relates to Affymetrix’s molecular inversion probe genotyping technology, which is protected by US Patent No. 6,858,412, “Direct multiplex characterization of genomic DNA.“
 
The patent was filed in 2001 by Stanford University inventors and later used by ParAllele BioScience to protect its flagship molecular inversion probe technology. Affymetrix acquired the technology through its purchase of ParAllele BioScience in October 2005, and Illumina asked the USPTO the very same day to investigate the IP for a possible interference.

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