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Ciphergen, Bio-Rad Sued Over SELDI Sale, Suit Alleges Violation of 2003 Settlement

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Fresh from settling one lawsuit, Ciphergen Biosystems last week was hit with another alleging it is in breach of a licensing agreement with its former parent company.
 
The suit, filed last week in California Superior Court in Santa Clara by Molecular Analytical Systems, stems from Ciphergen’s sale in November of its surface enhanced laser desorption ionization platform to Bio-Rad Laboratories, which is also named as a defendant.
 
The salvo from Molecular Analytical, based in Los Altos, Calif., comes two weeks after Ciphergen agreed to pay $600,000 to settle a patent dispute with Health Discovery Corp. [See PM 07/12/07]
 
Ciphergen, who will change its name to Vermillion next month, was once a subsidiary of Molecular Analytical, whose founder, William Hutchens, developed the SELDI technology. In 2000, Ciphergen sued Molecular Analytical and LumiCyte, which Hutchens formed after leaving Ciphergen, over rights to the SELDI technology.
 
In 2003, Ciphergen settled with the two companies. Last week’s lawsuit alleges Ciphergen and Bio-Rad are in breach of the terms of that settlement.
 
Officials at Molecular Analytical could not be reached for comment, but according to Steven Ellenberg, a company lawyer, when Ciphergen and Bio-Rad agreed to the $20 sale of the SELDI technology, the firms were supposed to get consent from Molecular Analytical as stipulated by the 2003 settlement.
 
Specifically, Molecular Analytical had to sign off on the terms of the Ciphergen/Bio-Rad deal relating to how Bio-Rad “would exploit the [SELDI] technology, which was licensed to Ciphergen” by Molecular Analytical, Ellenberg told ProteoMonitor this week.
 
Molecular Analytical never gave consent, however, and while it has received at least one royalty payment from Bio-Rad, Molecular Analytical isn’t exactly sure what it’s for, because neither Ciphergen nor Bio-Rad have revealed the full terms of their deal to Molecular Analytical, aside from what has been publicly disclosed, Ellenberg said.
 
“In the one royalty payment, the enclosure letter [said] ‘pursuant to contract between MAS and Bio-Rad.’ It seemed a little odd since MAS doesn’t have a contract with Bio-Rad,” Ellenberg said. “The only way [that] MAS would have a contract with Bio-Rad is if Ciphergen assigned its contract — its rights — to Bio-Rad, which, of course, requires MAS’s consent.”
 
Ciphergen declined to comment for this story. Bio-Rad also declined comment, saying it doesn’t discuss “potential or existing litigation.”
 
Legal Antecedent
 
Last week’s lawsuit is not the first legal confrontation between Molecular Analytical and Ciphergen. In 2000 Ciphergen sued Molecular Analytical in a dispute over who had what rights to which parts of the SELDI technology
 

“The only way [that] MAS would have a contract with Bio-Rad is if Ciphergen assigned its contract, its rights to Bio-Rad, which, of course, requires MAS’s consent.”

After founding Molecular Analytical, Hutchens was employed by Ciphergen until 1999, when he left to form LumiCyte. At the time, Hutchens was the chief scientific officer at Ciphergen.
 
After founding LumiCyte, he licensed SELDI-based services from Molecular Analytical. Ciphergen, however, said that it owned those rights. LumiCyte and Hutchens said not so: Ciphergen had only the rights to the SELDI products.
 
Ciphergen proceeded to sue Molecular Analytical, LumiCyte, and Hutchens. Three years later, Ciphergen settled the case by agreeing to pay LumiCyte $3 million in cash and issuing 1.25 million shares of Ciphergen stock to the company. Ciphergen also agreed to pay royalty payments of up to $10 million over a 10-year period to Molecular Analytical.
 
In return Ciphergen was granted an exclusive worldwide license to the SELDI technology, the right to sublicense it and to commercialize any and all products, information, and services [See PM 06/06/03]. Since then, Molecular Analytical had largely stayed out of Ciphergen’s picture, until last week.
 
In addition to royalty payments from Bio-Rad, Molecular Analytical believes it is entitled to royalty payments from Ciphergen on the payments it receives from Bio-Rad, Ellenberg said.
 
Molecular Analytical is seeking an undetermined amount in damages.
 
“Until we know all the facts, it’s hard for MAS to be able to determine what it wants or what it’s entitled to,” Ellenberg said. “We think we’re entitled to damages for sure. We think we’re entitled to a court order that our consent was required and a declaration regarding that.”

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