This story has been updated to include comments from 10x Genomics.
NEW YORK – A German regional court last week issued an injunction, preventing 10x Genomics from selling its older GEM microfluidic chips, certain of its Chromium Controller instruments, and certain accessories in that country.
According to a filing by 10x with the US Securities and Exchange Commission today, the Munich regional court issued the injunction Nov. 20, along with a ruling that those products had infringed German Utility Model No. DE 20 2011 110 979, held by Bio-Rad Laboratories. The court said 10x must compensate Bio-Rad for "unspecified damages" and must recall the products from distribution channels in Germany. The injunction also prohibits the import of those products to Germany.
A spokesperson for 10x said the firm plans to appeal and added that it believes it will not have to recall its legacy products. "Since we sell 100 percent direct in Germany, this has no impact on us," the spokesperson said.
"The Court's ruling did not address the company's Next GEM products, which were not accused in this action and which constitute the majority of the company's sales in Germany," 10x said in the filing.
"As most of our German customers have already transitioned to Next GEM, we believe that disruption to ongoing research will be minimal," the 10x spokesperson added. However, until 10x converts its Linked-Read sequencing and Single Cell CNV kits to Next GEM Chips, customers in Germany will not be able to purchase those products.
A utility model is a type of intellectual property similar to a patent, though there is no examination of novelty, inventive step, or industrial applications during the application process. It usually offers a shorter term of protection and protects only products, not methods or processes. Bio-Rad initially sued 10x in the Munich court on Feb. 13, 2018, alleging infringement of the utility model. Hearings were held Nov. 28, 2018 and May 14, 2019.
10x said it filed an action with the German Patent and Trademark office on Sept. 4, 2018, to cancel the utility model, but those proceedings have not yet been scheduled.
Germany is just one of several fronts in an ongoing intellectual property battle between Bio-Rad and 10x. Though the country is 10x's second-biggest market outside North America, after China, several Wall Street analysts said 10x's development of Next GEM tech would help limit the fallout from the decision.
"Digging in, we do not think the news to be as bad as it reads for two main reasons," Evercore ISI analyst Luke Sergott wrote in a note. "[10x] stopped selling legacy GEM as it moved to Next GEM technology and the ruling does not address this tech, and [10x] sells direct in Germany."
"[W]e believe 10x is relatively less exposed in Germany to GEM patent litigation relative to other geographies," added Cowen analyst Doug Schenkel. "More than half of German customers have already switched over to the Next GEM approach (products that are not in the scope of this ruling). This compares favorably to other countries such as the US, where only ~20 percent of consumables sales in Q3 [2019] were for Next GEM products. Further, all instruments shipped in Germany now are Next GEM only. Accordingly, exposure as a [percentage] of sales to this development is likely quite low."
In afternoon trading on the Nasdaq, shares of 10x were up less than 3 percent at $65.58.
The German court further held that 10x must bear the statutory costs of the legal dispute, an amount of at least €61,000 ($67,000.) "The remedies, including the injunction, will take effect once enforced upon the posting of a bond," 10x said in its SEC filing.
10x is also awaiting a final determination from the US International Trade Commission on whether it infringed US patents held by Bio-Rad.