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Third Wave Sued EraGen and Won; Will Stratagene Case End That Way?

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In a legal strike against another rival that might be tacking too closely to its intellectual property, Third Wave Technologies sued Stratagene this week for allegedly infringing two patents related to its flagship Invader product.

The lawsuit comes about a year and a half after EraGen settled out of court after a similar suit brought by Third Wave. In that case — which revolved around the same IP, was filed in the same court, and handled by the same legal team — EraGen agreed to stop selling its Gene Code products or use technologies employing invasive cleavage.

In its case against Stratagene, Third Wave asked the US District Court in Madison, Wis., to prohibit Stratagene from selling its FullVelocity products, and an award of unspecified damages for each of the patents.

The suit, filed on Sept. 15, ”is part of our ongoing effort to aggressively protect the value of our patent portfolio on behalf of our share holders,” said John Puisis, Third Wave CEO, in a statement.

Third Wave contends in its suit that the FullVelocity products made by La Jolla, Calif.-based Stratagene infringe upon US patents 6,348,314 and 6,090,543, entitled “Invasive cleavage of nucleic acids” and “Cleavage of nucleic acids,” respectively. Third Wave’s Invader and Stratagene’s FullVelocity both depend on the cleavage of a nucleic acid for assay signal production.

Sales of Invader products count for “essentially all” of Third Wave’s revenue, said Pacific Growth Equities analyst Adam Chazan.

In a response to the lawsuit, Stratagene CEO Joseph Sorge said in a statement that the filing of this action by Third Wave indicates that Third Wave views Stratagene’s new technology as “a serious competitive threat.” FullVelocity was launched in June.

Stratagene cited three US patents granted to the company in 2003 covering its FullVelocity technology: 6,350,580; 6,528,254; and 6,548,250.

Invader products account for the lion’s share of Third Wave’s total revenue, which the company reported as $36.3 million for the year ended Dec. 31, 2003. Stratagene’s stake in FullVelocity is comparatively tiny: Real-time PCR technology accounts for approximately 25 percent of Stratagene’s total revenue, and perhaps only 5 percent of revenue comes from real-time PCR reagents. FullVelocity products make up only a fraction of all the company’s real-time PCR reagents, said Chazan.

Stratagene reported $19.7 million in second-quarter revenue, a figure that includes receipts resulting from its acquisition of Hycor. The acquisition added $2.1 million to Stratagene’s top-line, according to a company statement. In the year-ago period, Stratagene’s revenue was $17 million for the quarter ended June 30.

A Strategene spokesperson would not comment on FullVelocity customers or revenue.

Third Wave spokesperson Rod Hise and Stratagene spokesperson Sheryl Seapy declined to comment on the specifics of the case, as did attorneys for the companies.

Invasive cleavage technology is a nucleic acid-detection and signaling system that forms the basis of Third Wave’s Invader products. It relies on the enzymatic recognition and cleavage of the structure formed by a one-base overlap between two strands of probe DNA hybridized to the same nucleic acid target. In a second step, a DNA hairpin “cassette” hybridizes to probe fragments cut loose in the reaction, and another overlap-related cleavage of the cassette causes it to release a fluorescent molecule.

In Stratagene’s FullVelocity products, an enzyme in the reagent mixture cuts proximal bases from a hybridized probe as the elongating DNA strand approaches the probe during PCR. Cleavage of the probe results in fluorescence.

“Stratagene does not include overlapping DNA molecules in its kits,” said Sorge. FullVelocity depends on the use of PCR, while Invader does not, he added.

Pacific Growth’s Chazan said he did not expect the suit to significantly impact the business of either company.

Not Like EraGen

For all its similarity to the current suit against Stratagene, Third Wave’s move against EraGen may have targeted conflicts of interest that are not at issue in its case against Stratagene, according to Chazan. “Several members of EraGen are former employees of Nanogen and Third Wave — they devised a cleavage-based detection-amplification system that was very similar to what Invader is,” he said.

The Third Wave suit forced EraGen to scuttle its Gene Code product, which never went to market. The company now focuses on a nucleic acid detection system that uses synthetic bases.

There is at least one other company with a technology that relies on probe cleavage to spark a fluorescent signal: Vancouver, Canada-based ID Biomedical, which licenses its “cycling probe” technology to Japan-based Takara Bio and other firms. The PCR-based cycling probe system requires the cleavage of an RNA probe to fluoresce.

But Third Wave won’t be suing ID Biomedical or Takara anytime soon — four years ago, IDB sued Third Wave claiming that the Invader technology infringed its US patent 5,403,711. By the time IDB actually filed suit, Third Wave had already put on the market “several thousand” Invader assay products, according to an IBD press release. To ward off IDB, Third Wave challenged the validity of IDB’s patents.

In the end, Third Wave paid IDB $4 million and issued $6 million common stock as part of a settlement. For its part, IDB dismissed its patent infringement lawsuit. Third Wave dropped its challenge of IDB’s patents.

— CW

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