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Cepheid Joins Attack on Roche PCR Patents with Lawsuit; Roche Expects Arbitration to Play Out

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Cepheid last week filed suit against Roche seeking to invalidate a pair of PCR patents owned by Roche.

The suit continues a legal row that began in 2010 when Cepheid terminated a licensing agreement between the companies related to one of the patents and covering Cepheid's Xpert molecular diagnostic kits.

By filing the complaint, Cepheid becomes the second party to challenge the validity of one of the patents, US No. 5,804,375, which covers a key element of the real-time PCR process. The patent is also currently under re-examination at the US Patent and Trademark Office at the behest of intellectual property watchdog firm Troll Busters.

Despite the new lawsuit, however, Roche "fully expects" arbitration proceedings initiated earlier this year between the companies to move forward, and continues to maintain that its patents are valid and enforceable, a member of Roche's legal team told PCR Insider this week.

According to the new complaint, filed in the US District Court for the Northern District of California, Cepheid seeks a judgment of invalidity, expiration, and non-infringement of the '375 patent, entitled "Reaction mixtures for detection of target nucleic acids."

Cepheid also seeks a judgment of invalidity, unenforceability, expiration, and non-infringement of US Patent No. 6,127,155, entitled "Stabilized thermostable nucleic acid polymerase compositions containing non-ionic polymeric detergents."

According to the complaint, Roche and Cepheid inked an agreement in 2004 granting Cepheid a license to a number of US patents, including the '375 patent but not the '155 patent. This agreement was amended in 2005, Cepheid claims, to cover a number of other patents, still including the '375 but not the '155 patent.

Cepheid claims that in May 2010 Roche informed its licensees, including Cepheid, that while some patents would expire in August 2010, others — including the '375 patent and the '155 patent — were valid and would continue to be enforced.

In July 2010, Cepheid informed Roche that it was terminating its license to the '375 patent within a week, and that it would stop paying royalties stipulated under the agreement, according to the complaint. Roche allegedly subsequently informed Cepheid that the '375 patent remained enforceable until its expiration in 2015, and that Cepheid would be infringing upon the patent by continuing to sell products covered by the patent, which includes Xpert diagnostic kits.

Further, Cepheid alleges that Roche later informed Cepheid that the second patent, No. '155, was also "necessary" for certain of Cepheid's products.

Cepheid first publicly disclosed the termination of its licensing agreement with Roche during an earnings call in October, with CEO John Bishop noting during the call that the last pertinent patent under the licensing agreement with Roche had expired, and that the remaining patents covered by the agreement were "not pertinent" to Cepheid's future business plans (PCR Insider, 10/20/2011).

A Roche legal representative responded in November that the company was "surprised" at Cepheid's actions, and was investigating whether the act constituted infringement — although by that point Roche had already sent Cepheid notice that it was infringing upon the '375 and '155 patents, according to the complaint. Roche also noted at the time that its core real-time PCR patents, particularly those broadly covering use of the method in molecular diagnostics, remained enforceable until 2017 (PCR Insider, 11/10/2011).

Finally, in February, Roche disclosed that in December it had initiated an arbitration hearing against Cepheid in the International Chamber of Commerce over the payment of royalties agreed to in the original licensing agreement (PCR Insider, 2/9/2012).

This week, Roche's legal representative told PCR Insider that the arbitration "regarding very similar subject matter is still pending before the ICC," and that Roche "fully expects the arbitration to go forward." The representative also noted that the '375 patent was included in the arbitration hearing but not the '155 patent.

Roche may have confidence that the US District Court for the Northern District of California will stay the new lawsuit in light of the ongoing arbitration due to the fact that it was recently embroiled in a similar lawsuit that followed that tack: In January 2011, transplant diagnostics firm One Lambda filed a lawsuit against Roche in the US District Court for the Central District of California seeking invalidation of US Patent No. 5,110,920, entitled "HLA typing method and DNA probes used therein."

However, in May 2011, the USDC for the Central District of California denied a request by Roche to dismiss the case, but granted Roche's request to stay the proceedings, citing stipulations under the Federal Arbitration Act that the parties first complete their arbitration hearing.

One Lambda and Roche agreed earlier this month to dismiss the case for undisclosed reasons. The decision came approximately three weeks after Thermo Fisher Scientific disclosed its intention to acquire One Lambda for $925 million in cash.

Cepheid's motivation for filing its suit against Roche in light of the ongoing arbitration proceedings is unclear. The company did not return e-mails or calls seeking comment.

Regarding the '155 patent, in its complaint Cepheid noted that one or more claims of the patent are obvious in light of prior art or are invalid under double patenting laws; and that the patent is unenforceable because it is a descendant of another patent, US No. 4,889,818, that was previously found by a district court to have been procured through inequitable conduct. Cepheid also alleges in its complaint that the '155 patent was procured through the same inequitable conduct (namely false declarations) as the '818 patent.

Regarding the '375 patent, Cepheid alleges that claims of the patent are expired and invalid, and notes that in May 2011 a third party not affiliated with Cepheid nor solicited to act by Cepheid filed an ex-parte re-examination request with the USPTO relating to the '375 patent — a request that the USPTO granted.

The third party referenced in Cepheid's claim is IP watchdog group Troll Busters led by Jeff Oster, who asked that the patent be found invalid under 35 USC 102 and 35 USC 103, which cover novelty and loss of right to patent and non-obvious conditions for patentability; and under the equitable doctrine of obviousness-type double patenting (PCR Insider, 6/23/2011).

That re-examination is ongoing, and Cepheid alleges in its complaint that in January, the USPTO issued an office action rejecting several of the claims of the '375 patent as unpatentable in view of prior art; and rejecting all of the claims as unpatentable due to non-statutory double patenting.

Cepheid also alleges in its complaint that Roche in May filed an amendment and response that added limitations to the independent claims of the '375 patent; and filed a preliminary amendment in an application for reissuance of the patent.

Roche's legal representative confirmed this week that the re-examination proceedings are still ongoing and have been merged with Roche's request for re-issuance of the '375 patent.

The representative added that Roche believes that, "at the resolution of these proceedings, that both the '375 and '155 [patents] will continue to be valid and enforceable;" and that "overall we continue to believe in the strength of our PCR portfolio."

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