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MIT Alleges Stonewalling by Dharmacon, Fisher In Breach-of-Contract Dispute; Seeks Court Orders


The Massachusetts Institute of Technology has accused Dharmacon and its parent corporation Fisher Scientific of stonewalling in their ongoing license-agreement dispute by failing to provide requested discovery materials in a timely fashion, according to a court document obtained by RNAi News.

MIT has therefore submitted to the court on Nov. 15 a request to compel discovery from Dharmacon and Fisher. Earlier this week, Dharmacon and Fisher asked the court to give the companies until Dec. 16 to file an opposition to MIT's motion.

"Over the past several months, MIT has spent tens of hours trying to work with Dharmacon in order to obtain the requested discovery," MIT stated in the court filing. "Unfortunately, MIT's requests have been met with a stone … wall, and although Dharmacon will likely respond to this motion [to compel discovery] by telling the court it 'may' or 'intends to' produce some [of the material] sometime in the future, MIT simply cannot wait any longer on vague promises."

MIT noted that the deadline for fact discovery is the end of this year, and that a bench trial has been scheduled for February. As such, the institute said in the filing that it needs the discovery materials "as soon as possible … in order to move forward expeditiously with preparing for trial," adding that it has advised Dharmacon "that to the extent it produces any of this discovery prior to its opposition to [the motion to compel], MIT will withdraw that portion of the motion."

"Although Dharmacon will likely respond to this motion [to compel discovery] by telling the court it 'may' or 'intends to' produce some [of the material] sometime in the future, MIT simply cannot wait any longer on vague promises."

In January, MIT sued Dharmacon for allegedly failing to meet its 7-percent royalty obligations under a December 2001 licensing deal for a portfolio of siRNA-related intellectual property (see RNAi News, 2/11/2005). The suit also named Fisher Scientific as a defendant.

That IP • which has been co-exclusively licensed to Dharmacon, Ambion, Qiagen, and Proligo • relates to the use of short pieces of double-stranded RNA to mediate RNAi. It includes US patent application no. 09/821,832; US patent application no. 10/255,568; and PCT application no. US01/10188. The IP estate is jointly owned by MIT, the Whitehead Institute, the Max-Planck Institute, and the University of Massachusetts, but MIT is authorized to act as licensing agent on behalf of all the institutes.

The question at the center of the dispute is whether Dharmacon is obligated to pay royalties on the full sale price of its siRNA products, which the company agrees are royalty-bearing, or whether it should be permitted to pay a reduced royalty on products that incorporate its proprietary technologies and components by deducting amounts reflecting the additions from the price used to calculate the royalties.

As the case has progressed, MIT said in its November court filing that it has requested from Dharmacon certain discovery materials including: documents related to its acquisition by Fisher that are pertinent to the arrangement with MIT such as internal correspondence concerning the value of the MIT-Dharmacon license; "documents and interrogatory responses concerning what Dharmacon claims to be non-royalty-bearing components of its siRNA products, and the method of calculating royalties by assessing and deducting the 'value' of these components from net sales;" documents related to how Dharmacon markets and sells its siRNA products; and an "inspection of the facility in which Dharmacon manufactures [the] allegedly 'value-added' products."

The Discovery

According to MIT, the companies have not produced documents related to the dispute that would have been created or exchanged when Fisher acquired Dharmacon. "As Dharmacon's siRNA products (and its MIT license) were clearly a major factor in Fisher's decision to acquire Dharmacon, documents must exist related to the acquisition which pertain to MIT, the license agreement, and/or Dharmacon's siRNA products," MIT stated in the court filing. "These documents would likely include at least projected earnings documents, business plans, [and] discussions between the parties of Dharmacon's royalty obligations and projections."

MIT alleged in its November filing that Dharmacon has based its argument for the reduced-royalty structure on methods it has developed to create final siRNA products, such as purification, desalting, and duplexing, which "should offset a portion of the value of the product; as well as on unpatented components it adds to the siRNA products, such as buffers or transfection reagents, which should not be included in the royalty calculation if they could be packaged and sold separately.

"Dharmacon has failed to provide evidence related to these claims, either in interrogatory responses or in their document productions," MIT stated.

MIT further alleges that Dharmacon has not produced any documents detailing how it markets and sells its siRNA products, which would reflect whether the company describes and sells the products as one product or whether it sells the siRNAs separate from its proprietary value-added components and technologies.

"MIT now has serious concerns that its efforts to schedule … depositions with opposing counsel have been a wasted effort."

"Such documents would also reflect whether the customer approaches Dharmacon because of the siRNA they sell, or because of these other 'services' or 'bundled' products," MIT noted, adding that the company has also failed to produce information on "the manufacturing cost per unit" of its siRNA products.

Finally, MIT alleges that Dharmacon has said it will "not allow" an inspection of its manufacturing facilities to go forward "absent court order."

MIT asked the court in its November filing to issue orders for Dharmacon and Fisher to provide all the requested discovery materials within five business days of the order, as well as an order allowing the institute to conduct its inspection of Dharmacon's manufacturing site.

Officials from Dharmacon declined comment, but the request for a Dec. 16 deadline for an opposition file indicates that they intend to dispute MIT's claims.

The Depositions

MIT stated in the court filing that it has also been "attempting to work" with Dharmacon since August to arrange depositions of people "with knowledge of issues such as negotiation and interpretation of the license agreement, Dharmacon's 'proprietary' technology, and its siRNA products." These people include Steven Scaringe, the founder of Dharmacon who left the company after the acquisition by Fisher; William Marshall, vice president of technology and business development at Fisher, who oversees Dharmacon; and Steven Fuhrman, Dharmacon's controller.

While Dharmacon agreed to hold the depositions between Nov. 29 and Dec. 1 in Colorado, MIT said, the company had not provided an order of the witnesses as of Nov. 11. Further, Dharmacon said that it was checking Marshall's "availability" for depositions in November and December even though he had already been confirmed as attending on one of the three days agreed upon, the institute added.

"As such, MIT now has serious concerns that its efforts to schedule these depositions with opposing counsel have been a wasted effort," MIT said in the court filing.

MIT has asked the court to order Marshall and Fuhrman to appear for depositions between Nov. 29 and Dec. 1, as well as to order Dharmacon to provide good faith dates for depositions of additional Dharmacon employees including Anastasia Khvorova, director of biology research and development.

Scaringe, MIT noted in the filing, was being represented by outside counsel since he is no longer an employee of Dharmacon, and therefore he was not included in MIT's deposition order request.

A call seeking comment from Scaringe was not returned by press time.

Reverse Transfection

The legal battle between MIT and the companies had also included a patent infringement claim the institute lodged in April related to reverse-transfection technology (see RNAi News, 4/15/2005).

The US patent • number 6,544,790, and entitled "Reverse Transfection Method" • covers "a reverse transfection method of introducing DNA of interest into cells and arrays, including microarrays, of reverse transfected cells." It had been exclusively licensed to microarray developer Akceli, which formed a collaboration with Dharmacon in late 2003 to develop the technology for RNAi applications but went out of business shortly thereafter (see RNAi News, 3/19/2004).

This dispute was set to be decided by a jury trial, but in October MIT dropped its patent infringement allegations without prejudice.

• Doug Macron ([email protected])

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