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Benitec Sues Promega Over Failure to Make Payments Under Technology Licensing Deal

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An agreement signed last year under which Benitec granted the exclusive rights to use and sublicense its DNA-directed RNAi technology in areas outside human therapeutics to Promega might be coming apart, RNAi News has learned. According to court documents, Benitec has sued Promega for allegedly failing to meet its payment requirements under the companies’ arrangement.

Benitec has been planning to become a publicly traded US-based RNAi drug developer for some time, and the deal with Promega was touted as the first step toward that goal. Under the licensing agreement, Benitec is to receive royalties on the sale of any Promega products using the ddRNAi technology, as well as a portion of the revenues derived from sublicences that Promega grants.

Benitec chairman and CEO John McKinley told RNAi News in August last year that the arrangement allowed Benitec to introduce the ddRNAi technology into the US in order to build a portfolio of independent research validating the technology, while at the same time providing a revenue stream that would help offset the cost of doing business.

According to the complaint filed on July 22 by Benitec against Promega in the US District Court for the District of Delaware, that revenue stream has been more of a trickle.

“The license agreement … requires that Promega must pay to Benitec a minimum of $50,000 in royalties by March 31, 2004,” the Benitec lawsuit states. “For the year ending March 31, 2004, Promega paid only $9,719 in minimum royalties.”

Benitec added in its legal claim that while Promega was required by the companies’ agreement to pay the remaining minimum royalty by the end of April, it had failed to do so.

“Promega informed Benitec that it withheld certain sums from payments due … claiming that those sums were deductions or withholding for required tax payments,” the lawsuit states. However, the suit cites the companies’ agreement as indicating that “all amounts payable … by [the] licensee shall be paid without deduction or withholding for or on account of any present or future tax, levy, imposed, fee, assessment, deduction, or charge by any taxing authority.”

The suit further cites the licensing agreement as stating that “the amounts payable by [the] licensee … shall be increased as may be necessary so that, after [the] licensee makes all required deductions or withholdings, [the] licensor shall receive amounts equal to the amounts it would have received had no such deductions or withholdings been required.”

Benitec’s suit claims that Promega has asserted that it may deduct certain sums related to tax payments from the money owed to Benitec.

In its lawsuit, Benitec states that under the terms of the companies’ agreement, Promega’s failure to pay the minimum $50,000 royalty payment has resulted in the conversion of its exclusive ddRNAi license to a non-exclusive one. “Consequently, Promega also no longer has any right to manage any licensing,” the suit states, and “any sublicenses granted by Promega shall be immediately transferred to Benitec, along with the right to receive all future sublicensee income.”

The suit notes that Promega has disputed this conversion.

Benitec’s lawsuit is seeking a judgment that Promega “improperly withheld certain sums, in an amount to be determined at trial, from payments due Benitec … and that Promega was obligated … to increase the amounts payable to Benitec.”

It further seeks a judgment that Promega’s license rights to the ddRNAi technology have become non-exclusive, and that the company has no right to sublicense, manage any licensing, or receive future income from the sublicenses.

Finally, Benitec is seeking the amount of Promega’s alleged underpayment, attorney’s fees, and “other … relief as [the] court may deem proper and just.”

It remains unclear whether the companies are pursuing settlement talks or not.

Officials from Promega were not available for comment as of press time. McKinley told RNAi News that he had no comment on the situation.

— DM

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