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Benitec Asks Court to Dismiss Lawsuit Against Nucleonics, But Nucleonics Wants to Fight


Benitec has filed a motion with the US District Court for the District of Delaware to dismiss a patent infringement lawsuit the company filed against rival Nucleonics, according to court documents obtained by RNAi News.

But Nucleonics has rebuffed Benitec's truce offer and has instead opted to fight.

Benitec stated in the legal filings that it made the motion because of the recent Supreme Court decision in the Merck v. Integra LifeSciences case, which gave drug makers the go-ahead to use other's patented technology to develop new medicines.

"In view of the Supreme Court's recent decision in the Integra case, Benitec asked Nucleonics to stipulate to the voluntary dismissal which would result from the reconsideration of its prior motion," Benitec states in its motion to dismiss. "However, Nucleonics has refused to do so, necessitating the filing of [the] motion [to dismiss]. The lack of a present case or controversy, as well as the interests of judicial economy, require dismissal without prejudice to the underlying merits of the case."

According to Benitec, Nucleonics said it refused the offer because a dismissal would "only be a temporary solution." Robert Towarnicki, president and CEO of Nucleonics, told RNAi News this week that "we're confident their [US] patent is invalid and we want our day in court to invalidate it."

"We're confident their [US] patent is invalid and we want our day in court to invalidate it. We think the EPO just confirmed that for us and we want … to invalid the [US] patent now. We will oppose this motion" to dismiss.

However, he left open the possibility of settling the case out of court, but noted that "without a settlement, we will continue to attack." A Benitec official said the company is willing to talk.

Benitec's move to end the dispute also is partly motivated by efforts that began with the resignation of former Chairman and CEO John McKinley, who was the driving force behind a series of lawsuits that mired the company in legal disputes and tarnished Benitec's image.

McKinley, a one-time patent lawyer, had made out-licensing Benitec's intellectual property a key part of the company's strategy early on, telling RNAi News in January 2004 that he had bought IP insurance from Lloyd's of London and had identified several companies that would be sued for patent infringement if licensing deals could not be struck (see RNAi News, 1/30/2004).

Shortly thereafter, Benitec sued Nucleonics, GenScript, and Ambion (see RNAi News, 4/2/2004). While GenScript and Ambion eventually settled the matter by taking licenses to Benitec's technology, Nucleonics fought back with a countersuit and requests for reviews of Benitec's patents and patent applications worldwide (see RNAi News, 7/9/2004, 8/13/2004, 9/3/2004, 9/10/2004, 10/8/2004, 11/5/2004, 1/14/2005, and 3/11/2005).

Adding to the legal morass, Benitec last year sued one-time partner Promega over a dispute about royalty payments (see RNAi News, 7/30/2004). That case has been referred to mediation (see RNAi News, 4/22/2005).

Amid investor and board member concerns over how the lawsuits were affecting the company's image and pocketbook, McKinley eventually stepped down, setting up COO Sara Cunningham -who joined Benitec when it acquired her startup Avocel — to assume the helm early this year (see RNAi News, 1/21/2005).

From the start, Cunningham worked to refocus Benitec on drug development. During a conference call with investors held shortly after she took the CEO position, she stated that the company intended to "resolve [its] intellectual property disputes" within two years (see RNAi News, 2/4/2005). Additionally, Benitec has since moved forward with a number of technology cross-licensing and collaborative deals, including ones with CombiMatrix (see RNAi News, 2/25/2005), Alnylam Pharmaceuticals (see RNAi News, 4/15/2005), and Calando Pharmaceuticals (see RNAi News, 6/24/2005).

And now, Benitec has taken a perhaps its biggest step towards putting an end to its battle with Nucleonics by asking for a dismissal of its case based on the so-called 35 U.S.C. 271 (e)(1) exemption that was at the heart of the Merck v. Integra case.

However, it seems Benitec, in suing its rival, may have opened a Pandora's box that it cannot close. Nucleonics had previously asked the court to dismiss Benitec's suit because of the exemption, but court documents show that the judge overseeing the case refused the request pending the outcome of the Supreme Court case.

Now, although the Merck v. Integra decision supports Nucleonics' original request, the company has declined to accept Benitec's voluntary motion to dismiss and wants a court decision on the merits of the case.

"Nucleonics is now overreaching," Benitec said in the filing.

Maybe not. Already, the Australian patent office has begun moving forward on proceedings that could invalidate two of Benitec's patents after conducting reviews of the IP at Nucleonics' request (see RNAi News, 12/3/2004). Most recently, the European Patent Office has refused to grant Benitec a patent after conducting a review of one of the company's patent application with the help of examples of prior art submitted by Nucleonics (see related story in this issue).

"We do not want to have this delayed for a later date. They have interfered with our business and have cost us money. We will pursue whatever opportunities are available to us to rectify what has been done."

"We think the EPO [decision] just confirmed [the invalidity of Benitec's IP] for us and we want … to invalid the [US] patent now. We will oppose this motion" to dismiss, Towarnicki said.

Another reason for Nucleonics' desire to see the case carried through to the end is the terms Benitec has offered for its dismissal. If dismissed without prejudice, the door is left open for Benitec to bring the suit against Nucleonics in the future. Furthermore, Benitec has asked the court to rule that each company bear its own costs associated with the litigation.

"We do not want to have this delayed for a later date," Towarnicki told RNAi News. "They have interfered with our business and have cost us money. We will pursue whatever opportunities are available to us to rectify what has been done."

Despite this stance, Towarnicki said the Nucleonics remains open to settling the dispute with Benitec out of court.

"If they want to find a way to settle this, we're certainly willing to find an amicable settlement," he said. "But there's never been a negotiation that has made any sense whatsoever. We must have freedom to operate — no restrictions on indications, or any other restrictions."

Sally Brashears, vice president of intellectual property for Benitec, told RNAi News that Benitec is interested in settling its suit against Nucleonics out of court. When asked if an out-of-court settlement agreeable to Benitec would require limitations on the indications Nucleonics could pursue, she said "you never know."

Brashears added that Benitec has had "difficulties communicating with Nucleonics. Whenever we get into communications with them, it doesn't go very far. We're stuck." She said that Benitec is open to any overtures Nucleonics might make, but has no plans to initiate contact at this stage.

However, she noted, "nothing is off the table at this point."

— Doug Macron ([email protected])

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