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Stratagene to Appeal Latest Award of Triple Damages to Third Wave

Calling a jury's decision "not supported by the facts of the case or the law," Stratagene this week said it would appeal the tripling of damages — to $15.9 million — awarded to Third Wave Technologies in a suit against Stratagene that claimed infringement of two patents covering Third Wave's Invader technology.

Stratagene has maintained all along that it has the money to pay the damages award, even though it listed cash holdings of $9 million as of Sep. 30, and just last week it used funds from a $14.6 million settlement with Cambridge Antibody Technology to issue a $.25 dividend to shareholders. Based on its roughly 22.2 million shares outstanding, the dividend cost the company around $5.5 million. In addition, a company spokesman said this week that the firm has a $9 million line of credit in place.

Stratagene's plan to appeal the award could drag the case out for months, buying the company time to add to its reserves. It also expects to post an appeal bond with the court to forestall payment of the judge's award until the appeal is heard, the spokesperson told BioCommerce Week.

The damages award was increased by a federal judge overseeing the case to $15.9 million from the $5.3 million originally awarded in September. In addition, Stratagene was ordered to pay Third Wave's attorney fees — an amount not yet disclosed by either party to the case.

Stratagene said it "believes that the jury's verdict and the damages awarded were not supported by the facts of the case or the law," and that it intends to appeal the decision in the Court of Appeals for the Federal Circuit in Washington, DC, once a final judgment has been entered by the District Court. In addition to appealing the verdict, Stratagene said it will seek to have the damages amount reduced or eliminated.

Among the issues Stratagene said it will raise on appeal are "the District Court's decisions to prevent the jury from hearing evidence that Stratagene had obtained patents on its FullVelocity technology and that the Patent Office had concluded and informed Stratagene that Stratagene's patents were free and clear of the prior art (including Third Wave's patents)."

Stratagene also said it will challenge the court's rejection of its position that Third Wave's patents are invalid if they are interpreted as broadly as the District Court had interpreted them, as well as the $15.9 million in damages, considering there was only approximately $400,000 in allegedly infringing sales.

In September, a jury for the United States District Court for the Western District of Wisconsin found Stratagene liable for willful patent infringement and awarded Third Wave $5.3 million in damages. The court, which is located in Third Wave's home base of Madison, subsequently issued an injunction that prohibits Stratagene from making, selling, or offering to sell its FullVelocity QPCR and QRT-PCR products (see BioCommerce Week 10/6/2005).

After the jury's verdict was handed down, Stratagene immediately served Third Wave with a countersuit it had filed in May with the US District Court for the District of Delaware claiming that some of Third Wave's Invader products infringe its 6,528,254 and 5,548,250 patents. Stratagene is seeking monetary damages as well as a permanent injunction against further infringement by Third Wave.

At the UBS Global Life Sciences conference held in New York in late September, Sorge called the award "disproportionate" to the alleged damage done to Third Wave. He explained that the jury was instructed to determine a damage amount based on a theoretical negotiation between the firms that would yield an 18-month non-exclusive license to the infringed patents. It is "beyond our comprehension" how the jury came up with the $5.29 million in damages, he said.

Stratagene reiterated this week that sales of the infringing products have totaled $400,000 since their launch in early 2004. The firm said it has other embodiments of its FullVelocity technology that it believes does not infringe Third Wave's patents and are at the heart of its molecular diagnostics strategy.

Stratagene has moved forward with its plans to hit the molecular diagnostics market this year, inking a deal earlier this month with reference lab Focus Diagnostics (see BioCommerce Week 12/8/2005). Up to this point, Stratagene's FullVelocity quantitative PCR technology had been used solely for research applications. But the agreement with Focus is the first of several molecular diagnostic collaborations the firm is planning, according to Stratagene officials.

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The company has been in negotiations for most of this year with an unnamed partner to further develop its MX3005 QPCR instrument for molecular diagnostic applications. Steve Martin, Stratagene's CFO, recently wrote in a response via e-mail to questions from BioCommerce Week that Stratagene "continues to expect to enter into an arrangement for a long-term opportunity, but is not able to indicate when a deal may be announced.

"The arrangement with Focus is the formal initiation of the development process to commercialize molecular diagnostic assays for in vitro diagnostic applications," Martin said. "The intent is to develop, obtain [US Food and Drug Administration] approval, and commercialize … diagnostic test kits." He could not, however, provide a timeframe for when the firm would seek regulatory approval for any products.

Despite the recurring legal setbacks, Stratagene's shares have not suffered much (see graph). Since announcing the jury's decision on Sept. 1, Stratagene's stock has climbed steadily, hitting a 52-week high of $10.93 on Monday — just before news of the court's latest decision was announced by Third Wave. Its shares pulled back 3.7 percent to close at $10.17 on Tuesday.

— Edward Winnick ([email protected])


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