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One Year After Settling Illumina Litigation, Other Suits Facing Affy Inch Toward Resolution

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One year after Illumina agreed to pay Affymetrix $90 million to settle a number of patent-infringement law suits pending in the US and Europe, Affymetrix is still embroiled in a number of legal challenges.

At the same time, court documents obtained by BioArray News reveal that, during the past few weeks, progress has made toward resolving the three remaining civil cases in which Affy is named as a defendant.

According to Affy’s most recent annual filing with the US Securities and Exchange Commission, the firm remains a defendant in three cases: E8 Pharmaceuticals LLC et al. vs. Affymetrix, a patent-infringement suit filed against Affy last year; In Re: Affymetrix Derivative Litigation, a suit brought by Affymetrix shareholders in 2006 that accuses 12 current and former Affy officials of pocketing close to $115 million by backdating stock option grants; and Enzo Life Sciences vs. Affymetrix, a pair of 6-year-old suits brought against Affy for alleged infringement following a contract dispute.

Though Affy has not commented publicly on the possibility of settlement in any of these cases, recent court documents show that each is moving closer towards resolution.

E8 Pharmaceuticals

In the case of E8 Pharmaceuticals' suit against Affy, attorneys for both companies appear to be sticking to an Oct. 9, 2008, order to hold a Markman hearing for claim construction in August.

E8 Pharmaceuticals, a Cambridge, Mass.-based firm co-founded by Massachusetts Institute of Technology Professor David Housman, and MIT sued Affy in July 2008 for allegedly infringing a patent they jointly own covering a genotyping method.

The suit, which was filed in US District Court for the District of Massachusetts, claims that by using, manufacturing, and selling its GeneChip products for certain applications, Affy infringes the IP, US Patent No. 6,703,228.

According to court documents, the ‘228 patent covers technology that “enables users to perform accurate, reproducible and cost-effective genetic analysis, using minute amounts of sample DNA and a small number of reactants to generate results that were previously impossible, even in specialized high-throughput centers using many thousands of different reactants” (see BAN 7/8/2008).

In their original complaint, MIT and E8 asked the court to rule that Affy infringes the ‘228 patent, and sought triple damages because they said that the alleged infringement had been willful. In addition, they asked the court to award them ongoing royalties or otherwise permanently bar Affy from “continued unlicensed infringement.”

According to the court’s Oct. 9 scheduling order, E8 and MIT had until Dec. 5, 2008, to file a preliminary disclosure of the claims infringed and the accused products or methods that allegedly infringe those claims, while Affy has until Feb. 6 to file its preliminary invalidity and non-infringement contentions.

The parties have also been ordered to exchange claims by May in preparation for an August Markman hearing and a fact-discovery period that is scheduled to end by Aug 30.

On Dec. 29, the court entered a stipulated protective order to govern the “handling and treatment of all confidential, trade secret, or proprietary documents, materials and other information, including deposition testimony and deposition transcripts, that are produced or provided in the course of pre-trial discovery and preparation for trial in the litigation.” The order was entered at the request of E8, MIT, and Affy.

Attorneys for E8 and MIT did not respond to e-mails and phone calls seeking comment in time for this publication. An Affymetrix spokesperson said the firm does not comment on ongoing litigation.

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Derivatives

In the second ongoing suit facing Affymetrix, recent court documents show that attorneys representing the plaintiffs and defendants are in mediation, and that a case-management conference scheduled for this month has been postponed until March to give the parties more time to iron out a possible settlement.

The case took shape in November 2006 after shareholders consolidated two law suits filed against Affy in September of that year (see BAN 11/21/2006).

The first suit, which was pending in the US District Court for the Northern District of California as of Sept. 12, accused Affy and more than a dozen of its current and former officials of backdating grants of stock options; taking tax deductions based on those stock options; and making false statements related to the granting of those options.

The second suit, filed the following day in the same court, accused 12 Affy officials of diverting “hundreds of millions of dollars of corporate assets to themselves via the manipulation of grant dates associated with hundreds of thousands of stock options granted to Affymetrix insiders (see BAN 9/26/2006).”

According to an amended version of the consolidated case, filed in January 2007, the plaintiffs are demanding that the accused officials “disgorge” all proceeds of the back-dated grants received as a result of their alleged misconduct; that Affymetrix reform its internal control procedures, including a proposal that the position of chairman of Affy’s board and the position of CEO be held by different, “independent,” individuals; that the company rotate independent auditing firms every five years; that the defendants pay damages equaling plaintiffs’ attorney fees and other costs associated with the case; and other relief as the court “deems just and proper.”

Though the plaintiffs demanded a jury trial, court documents show that the litigation could be resolved soon. On Dec. 19, the parties participated in a mediation session “at which time certain agreements were reached regarding a resolution of this matter.” The parties are “in the process of drafting appropriate documents to confirm such agreements,” the documents state, without elaborating.

On Jan. 21, a court order that moved a pre-scheduled Jan. 26 management conference to March similarly noted that “the parties represent that they have made progress toward a mediated resolution of this action.” The court did not elaborate.

Attorneys for the plaintiffs did not return phone calls and e-mails seeking comment in time for this publication.

Enzo

Last week the case of Enzo Life Sciences vs. Affymetrix was reassigned to Judge Richard Sullivan in the US District Court in the Southern District of New York. It was the first activity in the 6-year-old case since defendants filed a motion for summary judgment in October 2007.

The case was born in 2002 when Enzo sued Affy, GE Healthcare, PerkinElmer, Sigma Aldrich, Orchid Biosciences, Molecular Probes, and Roche for allegedly selling its reagent kits improperly and infringing 15 claims supporting eight different patents owned by Enzo.

In July 2006, the court settled the interpretations of the eight patents following a Markman hearing (see BAN 7/25/2006).

According to Affymetrix’s most recent annual filing with the SEC, Enzo filed a second suit against the company in the same US District Court in October 2003 for breach of contract, injunctive relief, and declaratory judgment after Affy allegedly violated a 1998 distribution agreement by improperly selling Enzo’s reagent kits. Enzo is also seeking to have some of Affy’s patents transferred into its own IP portfolio. Enzo terminated the distribution agreement in November 2003.

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Affy filed a complaint a month later, alleging that “Enzo has engaged in a pattern of wrongful conduct against it and other Enzo labeling reagent customers by … asserting improperly broad rights in its patent portfolio, improperly using the 1998 agreement and distributorship agreements with others in order to corner the market for non-radioactive labeling reagents, and improperly using the 1998 agreement to claim ownership rights to [Affymetrix’s] proprietary technology.”

Affy also filed a notice of related case stating that its complaint against Enzo is related to the complaints against the other former Enzo distributors.

According to an Enzo spokesperson, the company had hoped that a trial date could be set in the case sometime this year. It is now awaiting word from the new judge on when the cases will proceed.

Cases Closed

Over the past few years, Affy has made strides towards wrapping up its involvement in outstanding lawsuits. In November 2006, the US District Court for the District of Massachusetts dismissed a wrongful-termination suit filed by former employee Eric Lawson, who had been seeking monetary damages in excess of $100,000 from the company (see BAN 12/5/2006).

Last June, the US District Court for the Northern District of California entered judgment in favor of Affymetrix after Agilent Technologies sought to reverse a US Patent and Trademark Office ruling following a patent-interference case that had upheld an Affy patent.

And in January 2008, Illumina agreed to pay Affy a $90 million one-time payment to settle three and a half years worth of litigation (see BAN 1/15/2008).

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