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Agilent Adds Breach of Contract to Counterclaims in PerkinElmer Mass Spec Suit

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PerkinElmer and Agilent Technologies continue to wage their mass spec patent dispute, with defendant Agilent this month winning approval for a motion to expand its counterclaims against PerkinElmer.

Agilent moved to amend its counterclaims to add a count for breach of contract after learning in discovery that in 2010 PerkinElmer granted licenses to its mass spec IP to three other firms on terms, Agilent claimed, that were more favorable than those of Agilent's license to that same IP.

This, Agilent said, constituted a breach of its license agreement with Perkin Elmer, asserting in its motion that "PerkinElmer did not notify Agilent of these licenses, and Agilent had no opportunity to substitute the more favorable terms in those licenses for the terms of Agilent's license."

Agilent's breach of contract claim refers to license agreements to mass spec IP between PerkinElmer and Shimadzu, Jeol, and Leco. The US District Court for the District of Massachusetts approved Agilent's motion to amend its counterclaims on Feb. 13.

Agilent previously filed counterclaims asserting that it had overpaid royalties on the sales of certain mass spectrometers that were not used in a manner covered by patents it had licensed from PerkinElmer. As such, the company argued that it is owed restitution by PerkinElmer of any money the latter company unlawfully received via this overpayment.

Agilent additionally claimed that PerkinElmer violated certain terms of its contract with Varian, which Agilent acquired in 2010, and that it is therefore entitled to compensation for PerkinElmer's breach of this agreement.

These counterclaims are the latest in a dispute that began in April 2012 when PerkinElmer filed a complaint alleging that Agilent mass spectrometry systems — including the company's 6100 series quadrupole, 6200 series TOF, 6300 series ion trap, 6400 series triple quadrupole, and 6500 series Q-TOF instruments – infringed two of its patents, US Patent Nos. 5,686,726 and 5,581,080, entitled "Composition of Matter of a Population of Multiply Charged Ions Derived from Polyatomic Parent Molecular Species" and "A Method for Determining Molecular Weight Using Multiply Charged Ions," respectively.

Both patents were issued to inventors John Fenn, Chin-Kai Meng, and Matthias Mann, and were subsequently assigned to Yale University, which granted an exclusive license to the patents to Analytica of Branford, which PerkinElmer acquired in 2009.

Analytica entered into an agreement with Agilent in March 1997 granting Agilent a license to the patents. According to PerkinElmer's complaint, Agilent stopped making royalty payments required by this agreement after June 30, 2011, breaching the contract and leading to termination of the licensing agreement.

According to a June 28, 2011 letter written by Agilent General Manager of LC/MS John Fjeldsted to PerkinElmer IP Licensing Counsel John Hamilton, Agilent ceased making royalty payments upon expiration of the PerkinElmer-held US Patent Nos. 5,130,530 and 6,188,120, claiming that the '726 and '080 patents were "remarkably similar to the expired patents."

Therefore, Fjeldsted wrote, "Agilent owes no further royalties under the license."

Despite initially encompassing the matter of Agilent's alleged patent infringement, the case has recently narrowed to focus solely on questions of breaches of the two company's license agreement. This shift stems from two US Patent and Trademark Office actions issued in May 2013 regarding the re-examination of the disputed patents.

On May 14, 2013, the USPTO issued an office action for the '080 patent in which it rejected all but two of the claims of the patent for double patenting. On May 24, it issued an office action for the '726 patent in which it rejected all of the claims of the patent for double patenting and being anticipated and/or obvious.

PerkinElmer is entitled to respond to these USPTO rulings, but in the meantime, the companies have agreed to narrow the proceedings' scope, jointly submitting a motion in July 2013 to limit the litigation to PerkinElmer's breach of contract count encompassing only damages relating to the period before July 1, 2011.

Perhaps anticipating the USPTO's ruling, PerkinElmer added that breach of contract count to its initial patent infringement complaint in an Oct. 2, 2012 filing.

Both firms have moved for summary judgment on Agilent's breach of contract claims, with PerkinElmer arguing that Agilent cannot prove damages resulting from the allegedly more favorable Shimadzu, Jeol, and Leco licensing deals, and that PerkinElmer no longer had any obligation to disclose to Agilent the three third-party licenses due to Agilent's alleged prior breach of the two companies' contract.

PerkinElmer has also moved for summary judgment in its breach of contract claim, asserting that Agilent breached the agreement when it failed to pay certain royalties prior to July 1, 2011 and royalties on certain software sales.

Central to this portion of the dispute is the question of whether Agilent owed royalties to PerkinElmer only on sales of electrospray mass spectrometers used for production or analysis of "multiply charged ions" as described in the '530 and '120 patents. This description, Agilent has argued, should be interpreted to cover only ions with more than two charges, which could exclude from royalty payments ESI mass spec instruments sold by the company for use in analysis of small molecules.

Also in dispute is whether Agilent owed royalties on certain software sales – specifically "second seat" copies of deconvolution software sold for use with mass specs already equipped with such software on which royalties were paid.

With regard to the software issue, Agilent has filed a motion to compel PerkinElmer to more fully respond to two questions it made during discovery regarding PerkinElmer's understanding of the terms "average algorithm" and "deconvolution algorithm" as used in the '726 and '080 patents. The understandings of these terms, Agilent asserted, is required to determine whether the software products in dispute fall under the two firm's licensing deal.

Agilent has also requested depositions from prior cases concerning infringement and ownership of the mass spec patents.

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