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Stratagene and Ariadne Face Arbitration to Settle Spat Over Pathway Assist Distribution Agreement


Stratagene and Ariadne Genomics have had a falling out over a 2002 distribution agreement for Ariadne's Pathway Assist software that is due to expire in mid-December.

According to SEC filings and documents filed with the US District Court of the Southern District of California, the companies have each filed a request with the American Arbitration Association in San Diego to settle the dispute, which began in February when Ariadne first accused Stratagene of violating a number of terms of the original agreement.

Court documents state that arbitration was scheduled to begin on Sept. 26, but the current status of the discussion is unclear. Stratagene officials declined to comment on the case, Ariadne management did not respond to BioInform's requests for comment, and an AAA spokesperson said that the organization as a rule does not share information about open cases.

In Stratagene's most recent quarterly report, for the period ended June 30, the company said it filed a request for arbitration in March "for declaratory relief and damages" related to the marketing and distribution agreement that the firms signed in 2002. In particular, Stratagene "seeks to confirm that it holds the exclusive right to market, sell, and distribute the software products covered by the agreement and all upgrades thereof in any country or territory in the world, except Japan, for the duration of the term of the agreement."

The district court ruled that "the parties failed to show there is any urgency necessitating interim injunctive relief for the brief period before the commencement of arbitration," and dismissed the case without prejudice.

According to the SEC filing, Stratagene is also seeking "to confirm that it is the party entitled to ownership and use of the trademark 'Pathway Assist' or, alternatively, that neither party may use that name." Stratagene notes that Ariadne has filed counterclaims in the AAA proceeding, "seeking a declaration that it is the sole owner of the Pathway Assist trademark and for other relief."

But complaints that the companies filed with the US District Court shed a bit more light on the matter. Both firms sought "injunctive relief, but no damages," with the district court, which ruled in August that "the parties failed to show there is any urgency necessitating interim injunctive relief for the brief period before the commencement of arbitration," and dismissed the case without prejudice.

According to the court documents, Ariadne sent a letter to Stratagene dated Feb. 17, 2005, outlining a number of violations of the marketing agreement. The letter stated that Stratagene was offering customers client-server versions of the software, while the agreement only authorized the firm to distribute the desktop version; that Stratagene was offering an "unlimited license" to customers at "heavily discounted prices … ten times below industry standards;" and that Stratagene's recent positioning of Pathway Assist as a "module" of Stratagene's Interaction Explorer product without Ariadne's permission to do so contradicts the terms of the agreement that require the product to be sold "under joint labels."

In addition, Ariadne noted in a counter-claim for injunctive relief filed with the court that Stratagene filed an application to register the mark "Pathway Assist" with the US Patent and Trademark Office on April 15, 2003 — barely a month after Ariadne filed an application with the USPTO for the same mark. In October 2004, Stratagene filed a notice of opposition against Ariadne's application to register "Pathway Assist," based on "likelihood of confusion, non-ownership, and non-use in commerce."

Stratagene then filed to register the mark "Interaction Explorer" with the USPTO on Feb. 4, 2005, and in May began positioning its pathway informatics offering as "Interaction Explorer Software (Pathway Assist)" on its website and marketing materials — a move that Ariadne claimed as "reverse passing off," or an attempt to sell Ariadne's proprietary software under Stratagene's mark in violation of the companies' agreement and US trademark law.

According to Ariadne, Stratagene "has either bought or obtained access to, or created another product which directly competes with Ariadne's Pathway Assist software and intends to begin selling said software under the Interaction Explorer mark after the expiration of the 2002 agreement," which is scheduled to end on Dec. 12.

Stratagene, however, countered in its complaint that Ariadne participated in "wrongful conduct" by attempting to sell Pathway Assist directly to Stratagene's customers, by misrepresenting the scope of Stratagene's exclusivity rights to customers, and by claiming that Stratagene "may not market or sell certain versions of the products covered by the agreement, which … Ariadne had previously allowed Stratagene to market and sell."

Under the terms of the 2002 marketing agreement, Stratagene agreed to pay Ariadne an up-front fee of $20,000 and 50 percent of net software revenues in exchange for exclusive rights to distribute Pathway Assist. Stratagene stated in the court records that sales of Ariadne's products generated more than $1 million of its total revenues of $80 million in 2004, and that "the opportunity and ability of Stratagene to receive further profits from the sale of the products is a substantial prospective economic advantage for Stratagene with which Ariadne seeks to interfere and disrupt, and has already done so, and will continue to do so unless enjoined, thereby causing irreparable harm to Stratagene.

— Bernadette Toner ([email protected])

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