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Stratagene to Pay Third Wave $10.75M to Settle Wisconsin Case, Seeks Stay in Other Litigation

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
Stratagene and Third Wave have reached a $10.75 million settlement in one of the cases between the firms, which had been decided in Third Wave’s favor by a Wisconsin jury.
The $10.75 million payment from Stratagene is far less than the roughly $21 million, including attorneys’ fees and costs, awarded to Third Wave by the US District Court for the Western District of Wisconsin, but it enables both firms to avoid further litigation costs.
Although this settlement would put an end to this particular case, Stratagene still has a suit pending against Third Wave in the US District Court in Delaware, which the firms said they would seek to have dismissed or extended so they could resolve that case.
“Stratagene and Third Wave have also agreed to a process to resolve that case or any other disputes through an agreement that enables either company to elect to arbitrate a patent dispute or to resolve it through a royalty-bearing license,” the firms said in a joint statement issued this week.
In addition to the payment, the firms agreed to stay any further litigation for nine months.
“The settlement has the dual benefit of increasing Third Wave’s cash balance to more than $50 million and allowing us to avoid the multi-million-dollar expense of ongoing litigation,” said Third Wave President and CEO Kevin Conroy in the statement. “The settlement also gives Third Wave the freedom to expand our molecular diagnostic product menu and enables us to focus on” bringing molecular diagnostic products to market.
It is unclear what constraints Third Wave was under in regard to its molecular diagnostic products before this settlement. Third Wave officials did not return a call seeking comment by press time.
The firms make competing PCR and RT-PCR technologies that they and their partners are using in developing molecular diagnostic products. Stratagene’s reagents and assays are based on its FullVelocity technology, while Third Wave’s products are based on its own Invader technology.
Clearing Up Two Years of Litigation
Third Wave filed the suit in September 2004 alleging that Stratagene infringed its patents covering quantitative PCR and real-time PCR reagents. In September 2005, 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 (see BioCommerce Week 9/8/2005).
At the UBS Global Life Sciences conference held in New York that month, Stratagene Chairman and CEO Joe 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 at the time.
Stratagene claimed that sales of the infringing products totaled $400,000 since their launch in early 2004. In addition, Stratagene officials have maintained that the jury’s award was “not supported by the facts of the case or the law.”
After the jury's verdict was handed down, Stratagene immediately served Third Wave with a countersuit it had filed in May 2005 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.
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 certain of its FullVelocity QPCR and QRT-PCR products (see BioCommerce Week 10/6/2005). Stratagene has asserted all along that it has non-infringing embodiments of its FullVelocity technology on which to base its molecular diagnostic products.
In December 2005, the judge overseeing the case awarded triple damages to Third Wave, citing willful infringement by Stratagene (see BioCommerce Week 12/22/2005). Including attorneys’ fees and other costs, Stratagene was ordered to pay roughly $21 million to Third Wave.
Stratagene subsequently appealed the verdict to the Federal Circuit in Washington, DC, and began negotiating a settlement with Third Wave last year. In addition, Stratagene posted a $21 million bond to secure the damages while it appealed the ruling.
“With this settlement, we will be able to redeem our $21 million appeal bond and strengthen our balance sheet by $10.25 million,” Sorge said in the statement issued this week. “In addition, the resolution of this issue will also enable our management team to focus more resources on executing our long-term growth strategy in molecular diagnostics, including the pursuit of additional partnerships and product development opportunities.”
Stratagene signed several deals in 2005 and 2006 aimed at rapidly expanding its footprint in the molecular diagnostics space. The largest of these was a collaboration with Bayer signed last March, under which the German diagnostics giant will sell customized versions of Stratagene’s Mx3005p instruments to clinical labs for molecular diagnostics testing worldwide (see BioCommerce Week 3/8/2006).
During the firm’s third-quarter conference call in November, Sorge said Bayer, whose diagnostics business was recently purchased by Siemens, would begin to purchase development instruments in late 2006 and early 2007 (see BioCommerce Week 11/15/2006).

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