Affymetrix and Incyte have decided to end what was a tumultuous year for both companies by settling their four-year patent infringement battle December 21 and entertaining the idea of commercial collaborations.
The companies have agreed to cross-license the patents that were at issue in this case, Affymetrix’s microarray patents and Incyte’s RNA amplification patents. Incyte’s license to Affymetrix’s patent is limited to internal use, while Affymetrix has a full license to Incyte’s technologies. Additionally, Affymetrix gained licenses to Incyte’s genomic database-related patents. The parties did not disclose the financial terms of the settlement.
This settlement is somewhat of a Pyrrhic victory for Incyte, as it comes just seven weeks after Incyte announced it was exiting the microarray manufacturing business, effectively removing itself as a direct competitor to Affymetrix. But as Affymetrix competitors Agilent and Motorola still use Incyte’s content for their arrays, the Palo Alto genomics and pharmaceutical company was still a thorn in Affymetrix’s side.
The settlement also allows Affymetrix,which has so far only used publicly available sequence on its arrays, to consider licensing Incyte’s genomic content for its arrays. This license wouldremove any potential edge its current competitors could gain over the microarray leader, and the ensuing use of Incyte’s proprietary content would also give Affymetrix the protection of using genomic sequence that has been previously vetted for errors and has been more clearly annotated, avoiding the problem that the company ran into early in the year when it discovered its U74 Murine arrays contained sequence incorrectly read from the Unigene database.
Affymetrix is not yet speaking publicly about its plans for collaboration with Incyte, other than in general terms.
“We’ve got a tremendous amount of respect for Incyte, and we are always open to new creative ways of working with people, said Affymetrix spokesperson Anne Bowdidge.
Affymetrix first filed a patent infringement suit against Incyte in January 1998, alleging that Incyte was infringing on its patent number 5,445,934, which covers an “array of oligonucleotides on a solid substrate.” Then in September 1998 Affymetrix added patent infringement claims for numbers 5,800,992, which outlines a “method of detecting nucleic acids,” and 5,744,305, which refers to “arrays of materials attached to a substrate.” Additional patents in the suit included 5,871,928 and 6,040,193.
Incyte countersued Affymetrix in August, 2000 for infringing patents numbers 5,716,785 and 5,891,636, which cover the so-called Eberwine protocols for linear amplification of RNA and to which Incyte has been granted the exclusive license. In the suite Incyte alleged that Affymetrix recommended that its customers to use this amplification method in their standard sample preparation.
The Incyte settlement is the last of several legal fires that Affymetrix extinguished in 2001. In March, the company settled its patent infringement suit with Oxford Gene Technologies, taking a charge of $19 million and legal fees on its first-quarter earnings statement. Then in October came Affymetrix’s surprising settlement of its four-year litigation battle with Hyseq over the microarray-related patents at issue in the Incyte litigation. In that settlement, the two former adversaries entered into a joint venture, N-Mer, to use Hyseq’s Sequencing by Hybridization technology to develop GeneChips for sequencing. Hyseq is also using Affymetrix chips in its pharmaceutical development work.
Bowdidge cited this example of turning an opponent into a collaborator and customer as a possible paradigm for the future direction of the Incyte-Affymetrix relationship. Indeed, as Incyte has indicated that it intends to head in the same direction that Hyseq is moving into — pharmaceutical development, the company will now have the flexibility to use Affymetrix chips in addition to its own internally produced cDNA or oligo chips — a step that could save time and manpower costs.
But even if Affymetrix does not win over Incyte as a customer, the company is likely to see benefits on the balance sheet as a result of this settlement. In a conference call last November to discuss third-quarter results, the company indicated that it would see litigation-related expenses increase in the fourth quarter of 2001 and first quarter of 2002, as the company prepared to go to court with Incyte in the spring. Now these expenses will be reduced to zero for the first quarter of 2002, giving Affymetrix a boost in its drive toward profitability, which the company is expecting in the second half of this coming year.