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LumiCyte and Ciphergen Settle Their Lawsuit; Ciphergen to Be Exclusive Provider of SELDI

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The clouds have cleared over the future of Ciphergen’s SELDI technology, after the settlement of a multi-pronged battle between the Fremont, Calif.-based maker of the ProteinChip and its estranged sister company LumiCyte.

The settlement, which Ciphergen announced May 29, grants the company an exclusive worldwide license to the SELDI (Surface Enhanced Laser Desorption/Ionization) technology, as well as the right to sublicense the technology and to commercialize any and all products, information, and services.

LumiCyte has assigned to Ciphergen all of its rights to this technology, which were assigned to it from a patent held by Baylor College of Medicine, according to John Storella, Ciphergen’s vice president for intellectual property.

Ciphergen has also agreed to pay approximately $3 million in cash and issue approximately 1.25 million shares of Ciphergen stock to LumiCyte. It will additionally provide royalty payments, based on revenues, of up to $10 million over a 10-year period to Molecular Analytical Systems, which is the progenitor of both Ciphergen and LumiCyte.

The settlement means “the end of any potential competition from LumiCyte” for the SELDI technology, said Storella. Ciphergen, he said, “now has all the licensed rights that Molecular Analytical Systems got from Baylor” and can “use, sell, or otherwise exploit the technology in the commercial arena.”

LumiCyte could not be reached for comment on the settlement as of press time.

Ciphergen will continue with its business plan, which involves sale of its ProteinChip systems and arrays, and its BioSepra products, as well as service activities, according to Storella. In the first quarter, the company had $12.8 million in revenues from these businesses, nearly double that of the $6.8 million it had in the first quarter of 2002 — a surge which company executives attributed to increased sales of the ProteinChip systems and arrays.

“We really have not put our business plan on hold as a result of the lawsuit, in part because it was our original position that we had these rights to begin with, so we were going to continue commercializing our technology in all areas, including the service area. But now there will be no cloud ... concerning these rights,” Storella said.

The stormy weather started back in 1999, when William Hutchens, then chief scientific officer of Ciphergen, left to start LumiCyte. Hutchens, a former researcher at Baylor College of Medicine who developed the SELDI technology, had started Molecular Analytical Systems along with members of his lab, and this company had in turn licensed certain aspects of the technology to its subsidiary, Ciphergen Biosystems. Hutchens later claimed that these rights covered SELDI-based products but not services. He then licensed the rights to SELDI services from MAS in 1999. “LumiCyte holds the exclusive right to use the SELDI technology and to sell SELDI-based services and information to the life sciences industry,” Hutchens told ProteoMonitor’s sister publication BioArray News last year.

Ciphergen disagreed with Hutchens’ view, and filed suit against LumiCyte and Molecular Analytical Systems in July 2000, asking for a declaration that it did have these rights and that the license to LumiCyte was void and unenforceable. The company also sued Hutchens for breach of fiduciary duty to Ciphergen — where he served on the board until early 2000 — and alleged that he misappropriated trade secrets.

This settlement effectively ends all claims against not only LumiCyte, but Hutchens as well. When asked whether Hutchens will receive any of the $3 million that LumiCyte is collecting, however, Storella diplomatically responded, “That’s up for LumiCyte to decide.”

— MMJ

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