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Court OKs Benitec Motion to Dismiss Patent Suit Against Nucleonics; Nucleonics to Appeal

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When Sara Cunningham took Benitec's helm as CEO early this year, she held a conference call with investors and assured them that the company would resolve its ongoing legal battles within two years (see RNAi News, 2/4/2005). As of last week, when the US District Court for the District of Delaware granted a Benitec motion to dismiss its patent-infringement case against Nucleonics, she apparently has fulfilled her promise.

According to the court, "any threat of litigation that may have existed now lacks sufficient immediacy and reality to support" continuance of the case. "Accordingly, the court will grant Benitec's motion for voluntary dismissal without prejudice."

"We are pleased with the ruling in this case and look forward to focusing our attention, efforts, and resources toward developing RNAi therapeutics," Cunningham said in a statement coinciding with the court decision.

However, Benitec may not be out of the woods just yet; Nucleonics said this week that it will appeal the court decision in hopes of forcing a ruling on the validity and enforceability of Benitec's core US patent, No. 6,573,099.

"Benitec should not now be allowed to level the playing field, keeping its [IP] safe from scrutiny with regard to invalidity or unenforceability, which continuing to taint Nucleonics' current and future business and technology with the threat of another lawsuit," according to a summary of Nucleonics' position written in a court filing obtained by RNAi News this week.


"We're not going to spend the time any money that we have to have Benitec walk away and hold over us the potential to come back in five or six or seven years and start this whole episode all over again."

Benitec's legal woes date back to April 2004 when the company, under the direction of then-CEO and Chairman John McKinley, sued Nucleonics, GenScript, and Ambion for allegedly infringing the '099 patent (see RNAi News, 4/2/2004). A few months later, Benitec then sued Promega, which one year earlier signed a deal to handle the sublicensing duties for Benitec's expressed RNAi technology, for allegedly failing to meet royalty payment requirements (see RNAi News, 7/30/2004).

While GenScript and Ambion quickly licensed Benitec's IP in order to settle the litigation, Benitec faced stiff resistance from Nucleonics and Promega, both of which chose to fight in court. Amidst the legal wrangling, Benitec saw both its reputation and bankroll decline, and by January this year McKinley was ousted and replaced by Cunningham (see RNAi News, 1/21/2005).

From the start, Cunningham worked to put Benitec back on track as a drug developer. In June, Benitec and Promega began mediation talks that ultimately led to a settlement of their dispute (see RNAi News, 8/26/2005).

The Nucleonics situation, however, was proving a tougher nut to crack for Benitec. Early in the lawsuit, Nucleonics had asked the court to dismiss Benitec's suit based on a statutory patent exemption termed 35 U.S.C. 271 (e)(1), which gives drug makers the right to use other companies' patented technology to develop new human therapeutics.

At the time of Nucleonics' request, the scope of 35 U.S.C. 271 (e)(1) was still being disputed in a Supreme Court case between Merck and Integra LifeSciences. When the Supreme Court made its ruling on that case, giving drug firms the go-ahead to use patented technology in their development efforts, Benitec moved to have its case against Nucleonics dismissed (see RNAi News, 8/5/2005). But Nucleonics wanted the case to proceed in order to have its counterclaims ruled upon — namely that the Benitec intellectual property at the heart of the case is invalid and unenforcable.

However, according to the court document obtained last week, the court determined that "dismissing Benitec's [legal] action would not cause substantial prejudice to Nucleonics because no actual controversy supports jurisdiction … for Nucleonics' … claims against Benitec." In other words, the court ruled that dismissing Benitec's suit would have no adverse impact on Nucleonics because the company is currently operating under the safe harbor of 35 U.S.C. 271 (e)(1), which was upheld by the Supreme Court.

According to the court, "Nucleonics [objected] to dismissing Benitec's action without prejudice because [it] contends that Benitec's action 'brought a public cloud of uncertainty' over" Nucleonics' ability to commercialize products.

But, the court said, Nucleonics has not "demonstrated that it has produced or is prepared to produce a product that would be the target of [another] infringement lawsuit by Benitec. At the time the lawsuit was filed, Nucleonics was several years away from obtaining FDA approval," the court states in its filing. "Further, as argued by Benitec, there is no certainty that any product approved by the FDA would be the same product that was in clinical trials at the time this lawsuit was filed. And finally, Nucleonics has adduced no evidence that it has undertaken sales or marketing activity with regard to any product."

Unsatisfied with the court decision, Nucleonics said that it is preparing to appeal the ruling to the Court of Appeals for the Federal Circuit.

"When we were first sued, we thought it was ridiculously early in the development of this technology, and we truly believed we were in safe harbor {under 35 U.S.C. 271 (e)(1)] in the work we were doing, so we filed for an early dismissal of the case," Nucleonics President and CEO Robert Towarnicki told RNAi News this week.

When this request was refused, and the judge "refused to limit discovery to just the information required for a safe harbor defense, we were forced to expend significant amounts of time and money to prepare our defense," he added. "In doing so, we learned more and more about the weakness of [Benitec's] IP estate."

Since the time it was first sued, Towarnicki said, Nucleonics began working in areas that don't fall under the safe harbor provision upheld in the Merck vs. Integra decision. As reported by RNAi News last month, Nucleonics has disclosed an interest in using its technology in the animal health field (see RNAi News, 9/23/2005).


"We're just pleased to be free of litigation having settled [the] Promega [dispute] and now getting out of this. We're happy to just put our resources on drug development."

According to Towarnicki, the dismissal of the Benitec suit stemmed from the court's determination "that there is no controversy because [Nucleonics] is not making a product. [But the Benitec] patent doesn't just cover products — it covers activities and research and everything else, and that is what we're doing," he said.

"More importantly, we're not going to spend the time any money that we have to have Benitec walk away and hold over us the potential to come back in five or six or seven years and start this whole episode all over again," Towarnicki added.

On that score, though, Nucleonics' appeal might be moot. Last month the US Patent and Trademark Office issued a preliminary ruling on its re-examination of the '099 patent, which was done at Nucelonics' request, finding that all the claims in the IP were invalid (see RNAi News, 9/9/2005).

Benitec said it will appeal the USPTO decision, but Towarnicki said that he is confident the patent office will uphold its invalidity ruling and do so "in a timeframe that will move faster than the [court] appeal process.

"But we are filing the [legal] appeal … to protect all of our options in our attempts to invalidate [Benitec's] patent," he said. Nucleonics has 30 days to file its appeal from the date the court granted Benitec's motion to dismiss the case.

Cunningham told RNAi News this week that a Nucleonics appeal "is absolutely their right in our court system. We're just pleased to be free of litigation having settled [the] Promega [dispute] and now getting out of this. We're happy to just put our resources on drug development."

— Doug Macron ([email protected])

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