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Life Tech Defeats VisiGen Stakeholders in Arbitration of Breach-of-Contract, Fraud Suit


By Julia Karow

Stakeholders of VisiGen Biotechnologies, a Houston-based company developing a single-molecule DNA sequencing technology that was acquired by Life Technologies' predecessor Invitrogen in 2008, have lost in arbitration of a breach-of-contract and fraud suit they brought against Life Tech two years ago.

According to court documents filed earlier this month, the district court of Harris County, Texas, issued a final judgment on Nov. 3, in which it upheld an arbitrator's award from June that denied all claims against Life Tech.

The arbitrator ordered the plaintiffs — Susan Hardin, VisiGen co-founder and former CEO, and James Briggs, a representative of VisiGen's stakeholders — to pay Life Tech $30,138 in arbitration costs, an award the plaintiffs had sought to vacate.

The legal quarrel started in late 2009, when Hardin, on behalf of VisiGen scientists and investors, sued Life Tech for breach of contract, fraud, negligent representation, and breach of fiduciary duty regarding Invitrogen's acquisition of VisiGen, asking for more than $300 million in total damages (IS 1/19/2011). After terminating her employment with Life Tech, she was later joined as plaintiff by Briggs.

VisiGen had been working on a single-molecule sequencing technology that uses fluorescent resonance energy transfer to measure the incorporation of nucleotides into a growing DNA strand in real time (IS 5/8/2007).

Invitrogen acquired the company in 2008 for $20 million and, as Life Tech disclosed in a court document, up to $15 million in milestone payments, mainly for its intellectual property portfolio as well as to complement its own work in real-time single-molecule sequencing (IS 10/28/2008).

Life Tech, which resulted from the merger of Invitrogen and Applied Biosystems in late 2008, first publicly presented its single-molecule sequencing technology, dubbed "Starlight," in early 2010 (IS 3/2/2010), but reduced its investment in the development of the platform after it acquired Ion Torrent last year (IS 9/28/2010).

In April of 2010, the court referred the suit brought by the VisiGen stakeholders to arbitration before the American Arbitration Association, as required by a provision in the merger agreement, and stayed the court proceedings.

Last November, the parties submitted their positions to the arbitrator, who is chair of the intellectual property department of Foley Hoag, a Boston-based law firm.

In June of 2011, the arbitrator sided with Life Tech, denying all claims by the VisiGen stakeholders, and concluded that Life Tech satisfied all its obligations under the merger agreement.

Shortly afterwards, the plaintiffs asked the court to vacate the arbitration, arguing that the arbitrator did not play by the rules of so-called "baseball arbitration," in which each party submits a proposed monetary award that the arbitrator chooses from after the final hearing. Life Tech, in its response, contended that the arbitrator found that the plaintiffs "were not harmed and Life did nothing wrong." The court denied the plaintiffs' request in its recent final judgment.

Court documents related to the arbitration award shed some light on the origins of the dispute.

According to the plaintiffs, Life Tech had promised VisiGen as part of the merger agreement that "it could provide special technological materials central to making VisiGen's sequencing technique a more robust technology and market leader."

In return, VisiGen agreed "to defer a significant portion of the merger agreement's value until the accomplishment of certain milestones," which the plaintiffs said depended on the promised materials. The dispute started, they said, because Life Tech "failed to deliver the materials," which Life Tech said were so-called "sDots."

According to Life Tech, the arbitrator found that the "plaintiffs' characterization of the contract and the merger negotiations were 'conceived by [plaintiffs] in hindsight, sometime after both the merger discussions and the execution of the merger agreement.'"

Have topics you'd like to see covered in In Sequence? Contact the editor at jkarow [at] genomeweb [.] com.

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