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Roche Files Arbitration Against Cepheid Regarding Real-Time PCR Patent Royalties

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By Ben Butkus

Roche has initiated an arbitration hearing against Cepheid in response to Cepheid's decision to terminate its real-time PCR license with Roche, PCR Insider has learned.

A Roche spokesperson confirmed recently that the company in August filed an arbitration request with the International Chamber of Commerce to resolve an ongoing dispute with Cepheid over the payment of royalties under a previously signed licensing agreement between the companies.

Under that agreement, Cepheid acquired a worldwide license from Roche under certain of Roche’s patents for the purpose of developing and commercializing PCR-based in vitro human diagnostic products for use in clinical diagnostic testing.

However, in October, Cepheid disclosed in a statement accompanying its third-quarter 2011 financial release that it was terminating the remainder of its PCR license with Roche "after determining that any patents remaining under the license are not pertinent to Cepheid's future business plans." (PCR Insider, 10/20/11)

The company also noted at that time that it had made royalty payments to Roche associated with certain TaqMan PCR process patents through August 2010 in the US and through August 2011 outside of the US, but that those patents had expired.

"As a result of our ongoing review of our test menu and development pipeline, we have determined that any patents remaining under the license are no longer pertinent to Cepheid's business plans," Bishop said during a conference call in August discussing the company's Q3 financial results.

A Roche spokesperson later told PCR Insider that Cepheid's actions were "a surprise" to Roche's legal team, and that Roche was actively investigating the matter (PCR Insider, 11/10/11).

The Roche spokesperson did not at that time disclose that the company had filed arbitration against Cepheid, which the spokesperson last week told PCR Insider was due to continuing uncertainty around the matter.

Further, the spokesperson said that the International Chamber of Commerce in December "confirmed that it had jurisdiction over the arbitration," and that arbitration proceedings had commenced.

"Cepheid publicly stated that it didn't have to pay [Roche] PCR royalties under its PCR license, and that was very big," the spokesperson said. "They came out and said they would ultimately be profitable because they'd no longer be paying the royalties."

In response to a question regarding the choice to pursue arbitration rather than a patent-infringement lawsuit, the spokesperson noted that "there is an agreed-upon mechanism for dealing with disputes that is contained within the license agreement," and that Roche was following that protocol.

Cepheid has previously declined comment on the matter. The company did not immediately return calls today seeking comment.

In November, Vern Norviel, a partner who specializes in life sciences-related patenting for the law firm of Wilson Sonsini Goodrich & Rossi, told PCR Insider that Cepheid's motivation for terminating its license with Roche may have stemmed from a perception that Roche has only a single real-time PCR patent in its portfolio that is valid through 2017, but may be rendered invalid because it is linked to another PCR patent that is owned by Life Technologies and is currently undergoing third-party reexamination by the US Patent and Trademark Office.

The Roche spokesperson told PCR Insider that Roche believes Norviel provided "an inappropriate characterization of the portfolio. He seemed to be offering opinion on one aspect of the portfolio, but there are many aspects to the portfolio that still remain."

"Even if his analysis were correct … [the patent reexamination] would have very limited impact on the remainder of the PCR portfolio," the spokesperson added.


Have topics you'd like to see covered in PCR Insider? Contact the editor at bbutkus [at] genomeweb [.] com.

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